The Use Of Documentary Credit In Real Life

By: Wade Henderson


Documentary credit has been criticized by users due to the complexity of its operations, the number of participants involved in the process, the burden in the administrative chain because of failures, the rigidity of the processes, and the low levels of automation of the tasks.
An operation of export credit is prepared in advance starting with the trade negotiation with the client. Remember that the bank will refuse payment if the terms and conditions of documentary credit are not met.
In order to avoid misunderstandings and inconveniences, let us now present some recommendations to make documentary credit work for you instead of the opposite.
Negotiate, negotiate, negotiate. Make sure that you agree with the importer of what conditions to set for the deal from the very beginning. Remember to look for realistic and convenient banks, deadlines, costs and forms of payment.
Shipment of an instructions model for opening. The terms and conditions of documentary credit should appear on this model. You should also receive a sample of opening.
Reception of the documentary credit file. When the bank informs you that your credit has been approved, you must read the terms and conditions of the document. Pay special attention to any restriction you find.
Find out how and when you should make changes to the documentary credit. Life happens and some exporters are not able to fulfill the importers expectations. Ask your client when and how modifications can be made.
Needles too say, read the terms and conditions of the documentary credit. This document will determine how the trade is done. Make sure that you read it thoroughly and understand all your obligations and responsibilities. If you agree with it, you may proceed to ship the merchandise.
Collection and verification of documents: After their collection from participants, the documents must be checked once more before opening and changes.
If you were to underline something, pay attention to deadlines, amounts, currencies, exchange rates and of course to the content of the document itself.
If the bank were to find a problem in the shipment or the product, it will refuse to send payment. If you find there are errors in the document, make sure you talk with the issuing bank to solve this.

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Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com Letter of Payment SBLC Advance

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