Documentary credits

Delivery and payment security in international trade

A documentary credit is a proven payment and processing instrument frequently used in cross-border transactions.

Documentary credits at a glance

Tried and trusted worldwide

A standard and secure payment instrument that can also be used for short-term credit

Security

Payment security for the seller and delivery security for the buyer

Various types of documentary credit

The type of credit will depend on the country of export and import, the business relationship and the risk tolerance

What documentary credit is right for you?

Documentary credit in export

The documentary credit protects you, as an exporter, from delivering goods without getting paid. The importer’s bank (and UBS in the case of a confirmed documentary credit) is obligated to make payment when you submit the agreed delivery documents.

Documentary credit in import

You as an importer obtain the desired security of supply because your business partner receives the money owed only after demonstrating that the goods have been shipped by submitting the documents set out in the documentary credit.

Documentary credit in transit trade

At least three parties are involved in transit transactions. Supplier, intermediary and buyer have different requirements regarding security and liquidity. These can be met as needed with special documentary credits.

The unconfirmed sight documentary credit is one of the most frequently used documentary credits.

Security criterion: unconfirmed

Only the buyer’s bank is liable to the beneficiary, i.e., the seller, for the payment; the advising bank of the seller is not liable for payment.

Terms of payment: on sight

Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

The confirmed sight documentary credit offers a higher assurance of payment than its unconfirmed equivalent.

Security criterion: confirmed

Both of the banks named in the documentary credit assume a payment obligation to the seller.

Terms of payment: on sight

Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

In the simplest case, a transferable documentary credit involves a supplier, an intermediary and a buyer. For business security between buyer and intermediary, a confirmed documentary credit payable to the intermediary is opened, with the comment “transferable.”

The intermediary can use this basic documentary credit to secure their business with the supplier. To do so, they transfer it as payment to the supplier. Additional credit limits are not required.

Usage criterion: transferable

This type of documentary credit can normally be transferred once. For partial deliveries, parts of the documentary credit can be transferred to multiple suppliers.

Security criterion: confirmed

Two banks named on the documentary credit assume a payment obligation.

Terms of payment: on sight

Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

Documentary credits in a nutshell

Advice for your international business

  • Comprehensive advice from experienced corporate client advisors and product specialists
  • Digital solutions tailored to corporate clients
  • Access and assistance from our global network of experts

Our experts are here for you – we look forward to speaking with you.

Manage all of your trade financing in E-Banking

With UBS Trade Finance Access you open and process documentary credits, documentary collections and bank guarantees easily via E-Banking.