Documentary credit Comprehensive delivery and payment security in international trade

A documentary credit is a proven payment and processing instrument that is frequently used in cross-border transactions. It offers important benefits for both parties: payment security for the seller and delivery security for the buyer. We would be glad to advise you on which of the numerous types of documentary credit is the most suitable for your specific transaction.

Documentary credits

As an exporter, you want assurance that you will be paid the agreed purchase price for your delivery; as an importer, you must be sure that you receive the goods you ordered for the money you paid. A documentary credit offers you both types of security: the importer's bank is obligated to pay the exporter an agreed amount if the exporter submits the documents defined in the purchase agreement on time.

Documentary credits come in all possible forms

Documentary credits exist in a wide variety of forms. There are transferable and revolving documentary credits; there are documentary credits that must be paid "on sight" (i.e. immediately), while others require payment only at a later date. In addition, you as an exporter can increase your payment security even further by having your documentary credit confirmed by UBS – in that case both banks are liable to you, and, in contrast to an unconfirmed documentary credit, a confirmed documentary credit also covers credit and country risks.

Which documentary credit is right for you? 

Several factors affect the choice of the right documentary credit – for example, the export or import country, the business relationship between the parties, the willingness of the buyer and the seller to take risks, or their liquidity needs. As a result, there is no such thing as a universal documentary credit, rather a different form is suitable for each transaction and each situation. Talk to us about your needs. Our specialists in trade finance would be happy to show you which documentary credit is right for you.

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 if you submit the agreed delivery documents.

You as an importer obtain the desired delivery security 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.

At least three parties are involved in transit transactions. Suppliers, middleman and buyers have different requirements regarding security and liquidity. These can be covered as needed with special documentary credits.

Also of interest to you

Got questions about a product?

Newsletter for companies

Overdraft facility or leasing