November 21, 2009

Definition of a Documentary Letter of Credit:
The Documentary Letter of Credit is an undertaking issued by a bank for the account of the buyer (the Applicant) or for its own account, to pay the Beneficiary the value of the Draft and/or documents provided that the terms and conditions of the Documentary Letter of Credit are complied with.
Purpose of a Documentary Letter of Credit:
The purpose of the Documentary Letter of Credit is to provide a specific transaction with an independent credit backing and a clear promise of payment. The Documentary Letter of Credit is a facility provided by banks in order to facilitate international trade transactions. It assures all the contracting parties that the Issuing Bank or a Confirming Bank, if any, will honor its obligation to make payment provided the terms, conditions and documentary requirements of the Credit are complied with.
Process for Documentary Letter of Credit:
The Documentary Letter of Credit is issued by to Beneficiary.
The Beneficiary accepts, ships, generates documents, and negotiates the Credit.
Fields for a documentary letter of credit:
Name of issuing bank
Documentary credit number
Place and date of issue
Place of presentation of documents
Advising bank
Reference no
Expire date
Beneficiary
Partial shipments
Transhipments
Insurance
Amount in figures & words
Shipment as defined in UCP 500
Credit available with nominated bank
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