Documentary letters of credit
Documentary letters of credit as a means of payment and non-cash payment instrument in international business, besides other rules and national laws which regulate this, are subject to general rules and publications: Uniform Customs and Practice for Documentary Credits, Revision 2007, Publication of the International Chamber of Commerce, No.600.
Letter of credit is a commitment – arrangement, which is irrevocable and in which the issuing bank (bank that issues a letter of credit) acting upon the request and in accordance with client’s instructions – applicant (importer, buyer) is to pay the beneficiary of the letter of credit (exporter, seller in whose favor the L/C was opened) for the goods once the required documents were submitted.
Payment by means of a letter of credit eliminates the risk of non-delivery of goods (service) and non-payment, i.e. it ensures:
- The exporter that the exported goods (service) will be charged as specified in the letter of credit, provided the required documents are timely submitted and in accordance with the conditions of the letter of credit
- The importer that the ordered goods (service) shall not be paid until the required documents (in accordance with the conditions stipulated under the letter of credit and in due time) regarding the shipment are delivered and submitted to the Bank
There are different types of letters of credit in practice, and we hereby specify some of them which you can use in your business through our Bank:
According to the movement of goods – import – export:
- Nostro (import) letter of credit
- Loro (export) letter of credit
According to the obligation of the advising bank, or added guarantee:
- Unconfirmed
- Confirmed
According to the time of payment and manner of use:
- Sight payment
- With delayed deadline
- With acceptance
- With negotiation
Special types of letters of credit:
- Standby letter of credit regulated under the International Standby Practice ISP98