Here we understand the importance of writing compliant documents. This compliance depends the ideal course of the operation. Thus, the exporter is withdrawn from a commodity before being paid but knows guaranteed by the documentary credit which ensures the regulation as soon as the presentation of its compliant documents.

For its part, the importer pays before removing the goods but knows that all deadlines and documents he had imposed and which are necessary for the successful completion of importation have been met. Adding a certificate of inspection to the requested documents can even make it to receive a commodity consistent in quantity and quality to its original order.

Types of documentary credit

– The Irrevocable Documentary Credit: commitment of the issuing bank can not be changed or canceled without the agreement of all parties to the credit including the beneficiary

– The confirmed irrevocable documentary credit: the seller may require the credit in his favor is confirmed; the advising bank becomes the confirming bank.

 Essentials of Documentary Credit

There are four essentials inherent in documentary credit:

– The credit achievable by sight payment: the seller receives payment of its documents by the designated bank as soon as it found them consistent.

– The realizable deferred payment credit: upon receipt of the appropriate documents, the nominated bank will give its firm commitment in writing to pay the beneficiary the due date in the credit.

– The credit achievable by milking acceptance: more representative shipping documents of the goods or the provision, there is presentation of a draft drawn by the seller on the issuing or confirming bank (as directed by the documentary credit)

– The credit achievable by negotiation: credit payable at the issuing bank but allow a bank designated to “negotiate” that is to say, to advance to the beneficiary of the value of the documents that call into use of documentary credit .

Again, draft – drawn on the issuing bank only this time forth is usually added to the shipping documents.

From a legal point of view, the documentary credit has adopted in 1933 under the auspices of the International Chamber of Commerce (ICC), an international codification said. Thus, the Uniform Customs and Practice for Documentary Credits (UCP or  Uniform Customs and Practices) are a set of rules, universally accepted by banks from 160 countries, which govern the rights and obligations of parties involved in a credit documentary.

These rules are updated regularly: the publication of the ICC’s currently valid marked No. 600, hence the name of RUU600 or UCP600.