What Is Documentary Credit?

Documentary Credit refers to a letter of credit that is paid by a bill of exchange with a shipping document or only by a shipping document. Most documents used in international trade settlement are documentary credits. ^[1]

Documentary Credits

Documentary Credit refers to a letter of credit that is paid by a bill of exchange with a shipping document or only by a shipping document. Most documents used in international trade settlement are documentary credits. ^[1]

Letter of credit is used by the bank to ensure that the buyer or importer has

First, the letter of credit is not attached to the sales contract.

The Commercial Press's "English-Chinese Dictionary of Securities Investment" explains : Letter of Credit in English: letter of credit. Abbreviations: l / c or LOC. During the bond issuance process, a commitment issued by the bank to guarantee that the debtor will repay the principal and interest on time. If the bond issuer is unable to perform its repayment obligations, the bank issuing the letter of credit will perform its repayment obligations. In international trade, the bank of the importing

Documentary Credits, sometimes called "Banker's

(1) Parties in the documentary credit business

The parties to a letter of credit are the parties involved in the letter of credit transaction. The main parties are

See Sun Tianhong's "Dispute over International Settlement and Financing and Its Settlement"; the book is the book with the most cases and the widest.

Related categories

Divided by whether the bill of exchange under the letter of credit is accompanied by freight documents:

Documentary Letter of Credit and Light Ticket Letter of Credit.

Documentary Credit is a letter of credit that is paid by documentary draft or only by document. The document here refers to the document representing the ownership of the goods (such as a sea bill of lading, etc.), or a document that proves that the goods have been delivered (such as a railway waybill, air waybill, postal receipt).

Clean Credit is a letter of credit to be paid by a Clean Draft without shipping documents. The bank can also pay by light letter of credit, and can also require the beneficiary to attach a non-freight document, such as an invoice or a list of advances.

In international trade payment settlement, documentary letters of credit are mostly used.

Taking the responsibility of the issuing bank as the standard, it can be divided into:

Irrevocable Letter of Credit. It means that once the L / C is issued, within the validity period, the issuing bank cannot modify and revoke it without the consent of the beneficiary and the relevant parties. As long as the documents provided by the beneficiary meet the requirements of the L / C, the issuing bank must fulfill the payment obligations.

Revocable L / C. The issuing bank does not need to obtain the letter of credit with which the beneficiary or the parties concerned have the right to revoke it at any time, and the letter of credit shall be marked with "Cancellable". However, "UCP500" stipulates that as long as the beneficiary has obtained the guarantee for negotiation, acceptance or deferred payment according to the terms of the letter of credit, the letter of credit cannot be revoked or modified. It also provides that if the letter of credit does not indicate whether it is revocable, it shall be considered as an irrevocable letter of credit.

The latest << UCP600 >>; stipulates that banks cannot open revocable letters of credit!

(3) Based on whether another bank guarantees payment, it can be divided into:

Confirmed Letter of Credit. Refers to a letter of credit issued by an issuing bank, which is guaranteed by another bank to fulfill payment obligations for documents that meet the terms of the letter of credit. A bank that confirms a letter of credit is called a confirming bank.

The letter of credit is not confirmed. The letter of credit issued by the issuing bank was not confirmed by another bank.

According to different payment time, it can be divided into

Letter of Credit at sight. Refers to a letter of credit in which the issuing bank or paying bank immediately fulfills its payment obligations upon receipt of a documentary draft or shipping document that complies with the terms of the credit.

Forward Letter of Credit. Refers to a letter of credit that fulfills the payment obligations within a specified period when the issuing bank or the paying bank receives the documents of the letter of credit.

fake forward letter of credit. The L / C stipulates that the beneficiary issues a forward bill, and the paying bank is responsible for discounting, and stipulates that all interest and expenses shall be borne by the issuer. As far as the beneficiary is concerned, this letter of credit is actually still a collection at sight, and there is a "usance L / C payable at sight" clause in the credit.

According to whether the beneficiary's right to the credit can be transferred, it can be divided into:

Transferable Letter of Credit. Means that the beneficiary (first beneficiary) of the letter of credit can require payment authorization, postponement of payment obligations, acceptance or negotiation of the bank (collectively referred to as the "transfer bank"), or when the letter of credit is freely negotiated, the letter of credit can be requested The transfer bank specially authorized by China transfers the letter of credit in whole or in part to one or more beneficiaries (secondary beneficiaries). The issuing bank must clearly indicate "transferable" in the letter of credit and can only be transferred once.

Non-transferable letter of credit. Refers to a letter of credit where the beneficiary cannot transfer the rights of the letter of credit to others. Where the letter of credit indicates "transferable" at the end, it is a non-transferable letter of credit.

Circular Letter of Credit

It means that after the letter of credit is used in whole or in part, its amount is restored to the original amount and can be used again until it reaches the prescribed number of times or the prescribed total amount. It is usually used in batches with even delivery. Under the condition of the letter of credit revolving according to the amount, the specific methods to restore the original amount are:

Automatic cycle. A certain amount is used up in each period, and the original amount can be automatically restored without waiting for the issuing bank's notice.

Non-automatic cycle. After using up a certain amount of money in each period, you must wait for the notice of the issuing bank to arrive before the letter of credit can be restored to the original amount.

Semi-automatic circulation. That is, within a few days after a certain amount of money is used up, the bank issuing bank at the end of the notice will stop recycling, and it will automatically recover to the original amount from the × day.

Foot Letter of Credit

Refers to a letter of credit issued by two applicants for a letter of credit with each other as the beneficiary. The two letters of credit are equal or substantially equal, and can be opened at the same time or they can be opened one after the other. It is mostly used for barter trade or processing of incoming materials and compensation trade business.

Back to back letter of credit

Also known as reopening a letter of credit, it means that the beneficiary requires the advising bank of the original certificate or other bank to open a new letter of credit with similar content based on the original certificate. Certificate to be issued. The establishment of a back-to-back letter of credit is usually used by middlemen to resell other people's goods, or when the two countries cannot directly handle import and export trade. The amount (unit price) of the original letter of credit should be higher than the amount (unit price) of the backing letter of credit, and the shipping period for the backing letter of credit should be earlier than the original letter of credit.

Advance Letter of Credit

Refers to the issuing bank authorizing the issuing bank (notifying bank) to prepay all or part of the amount of the letter of credit to the beneficiary, and the issuing bank guarantees repayment and bears the interest, that is, the issuing bank pays first, the beneficiary pays the bill, and The forward letter of credit is the opposite. The advance L / C is paid by the exporter's bare ticket. There is also a requirement that the beneficiary attach a description of the document required to supplement the letter of credit. After the delivery document is delivered, the payment bank will deduct the interest on the advance payment when the remaining payment is paid. .

Standby Letter of Credit

Also known as commercial paper letter of credit, guarantee letter of credit. Refers to the certificate issued by the issuing bank to the beneficiary's commitment to assume certain obligations at the request of the issuing applicant. That is, the issuing bank guarantees that when the issuing applicant fails to fulfill its obligations, the beneficiary can obtain the reimbursement of the issuing bank as long as the beneficiary submits the issuer's certificate of breach of contract with the provisions of the standby letter of credit. It is bank credit, and it is a way for beneficiaries to obtain compensation when an issuer defaults.