How it works
By issuing the documentary credit, the importer’s bank assumes the payment obligation of the importer. Once the terms of the documentary credit have been met, the exporter has a claim against the issuing bank rather than against the importer. Usually, the documents and payment are handled by the exporter’s banking partner.

Documentary credits can also be used as a financing method, where the terms of the individual documentary credit may stipulate that the importer be granted a credit. This is a method securing the exporter payment on a fixed future date.

Requirement in some countries
In some countries, it is a statutory requirement that payment of imported goods takes place through a documentary credit. The reason for this can be that import licences and access to foreign currency are managed by the central bank of the country in question.

If you want to discuss your options on documentary credits, please contact us.