Documentary Credit
Documentary credit or letter of credit is the written undertaking of the bank on the instructions of the applicant to pay a definite amount to the beneficiary against commercial documents, provided the documents comply with the terms and conditions of the letter of credit.
Documentary credits are subject to “Uniform Customs and Practice for Documentary Credits”, ICC Publication No. 600.
Documentary credit offers several advantages to importers:
The bank will make payment under the documentary credit only against the documents which comply with the terms and conditions of the documentary credit.
Prompt shipment of goods.
Using deferred payment documentary credits may be an alternative to traditional form of bank finance such as overdraft.
The documentary credit may be an alternative for advance payment.
Documentary credit gives the following advantages to exporters:
Payment guaranteed by the importer’s bank
The documentary credit can be confirmed by Danske Banka. When adding confirmation, Danske Banka undertakes, in addition to the issuing bank, to make payment against the documents complying with the terms and conditions of the letter of credit.
Danske Banka can offer financing under deferred payment documentary credit.
If the documentary credit is issued as transferable documentary credit, the beneficiary can have it transferred, completely or in part, to a third party.
More information on +371 67 959 599.