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Documentary credits

Delivery and payment security in international trade

A documentary credit is a proven payment and processing instrument frequently used in cross-border transactions.


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What documentary credit is right for you?

    Documentary credit in export

  • The documentary credit protects you, as an exporter, from delivering goods without getting paid. The importer’s bank (and East Pacific Bank in the case of a confirmed documentary credit) is obligated to make payment when you submit the agreed delivery documents.



    Documentary credit in import

  • You as an importer obtain the desired security of supply 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.



    Documentary credit in transit trade

  • At least three parties are involved in transit transactions. Supplier, intermediary and buyer have different requirements regarding security and liquidity. These can be met as needed with special documentary credits.



Unconfirmed sight documentary credit

  • The unconfirmed sight documentary credit is one of the most frequently used documentary credits.

  • Security criterion: unconfirmed

  • Only the buyer’s bank is liable to the beneficiary, i.e., the seller, for the payment; the advising bank of the seller is not liable for payment.

  • Terms of payment: on sight

  • Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

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Confirmed sight documentary credit

The confirmed sight documentary credit offers a higher assurance of payment than its unconfirmed equivalent.

Security criterion:confirmed

Both of the banks named in the documentary credit assume a payment obligation to the seller.

Terms of payment: on sight

Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

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Transferable, confirmed sight documentary credit

In the simplest case, a transferable documentary credit involves a supplier, an intermediary and a buyer. For business security between buyer and intermediary, a confirmed documentary credit payable to the intermediary is opened, with the comment “transferable.”

The intermediary can use this basic documentary credit to secure their business with the supplier. To do so, they transfer it as payment to the supplier. Additional credit limits are not required.

Usage criterion: transferable

This type of documentary credit can normally be transferred once. For partial deliveries, parts of the documentary credit can be transferred to multiple suppliers.

Security criterion: confirmed

Two banks named on the documentary credit assume a payment obligation.

Terms of payment: on sight

Payment must be made “on sight,” i.e., immediately after presenting the relevant documents.

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