The documentary credit process

The process of a documentary credit

1. The contract is made between the importer and the exporter.
2. The importer asks its bank to issue a documentary credit to the exporter.
3. The importer's bank sends the documentary credit to the exporter's bank (advising bank).
4. The exporter's bank advises the exporter of the issue of the documentary credit.
5. After dispatch of the goods, the exporter delivers the required documents to its bank. The documents are examined against the terms and conditions stipulated in the documentary credit. If the requirements have been complied with, the exporter will be able to obtain payment.
6. The exporter's bank sends the documents to the importer's bank and receives payment either at sight or term.
7. The importer's bank delivers the documents to the importer upon reimbursement, after which the goods may be handed over.

What to look out for in every document involved in the documentary credit process:

Select checklist Drafts/bills of exchange Invoice Bill of lading Air waybill CMR Insurance Packing list Certificate of origin Certificates/declarations General Legalising documents