Documentary credit

Documentary credit

Documentary credit

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If you work in the field of export or import, contracting a Letter of Credit shall be an aid to the proper conduct of your business relationships with your foreign partners.
 

  • It renders the commitments under international business contracts more secure
  • Reliable and safe services thanks to the BRD team of professionals and its extended network of bank correspondents in over 80 countries
  • A product subjected to international regulatory standards.


The documentary letter of credit is the ideal solution for your business if...
 

  • you are an importer 
    BRD shall ensure the receipt of the merchandise and/or the provision of the services in accordance with the documents requested within the Letter of Credit
  • you are an exporter
    BRD guarantees the collection of the equivalent value of the merchandise/services delivered/provided in accordance with the documents requested within the Letter of Credit
 

What is the Documentary Letter of Credit?

 
The Documentary Letter of Credit is a payment commitment, against documents, undertaken by the bank for the proper conduct of the company’s relationship with third parties. 
 
The parties involved in carrying out a Documentary Letter of Credit are: the releasing party, the issuing bank, the beneficiary’s bank and the beneficiary.
 
How does the Documentary Letter of Credit work?
 
Step 1. The buyer (importer) and the seller (exporter) perform the business operation and agree on the terms of the operation under the contract and choose the Documentary Letter of Credit as a method of payment.
Step 2. Upon the request of the importer (releasing party), the bank thereof (the issuing bank) accredits the Documentary Letter of Credit in favour of the exporter (the beneficiary) in accordance with the terms of the business contract. The issuing bank sends the text of the Documentary Letter of Credit to the correspondent bank in the exporter’s country (the beneficiary’s bank). 
Step 3. The correspondent bank endorses the accrediting of the exporter’s Documentary Letter of Credit.
Step 4. The exporter sends the merchandise to the importer and also presents the delivery documents stipulated in the Letter of Credit to the bank thereof.
Step 5. The correspondent bank checks the documents and makes the payment (if it is the paying or confirming bank) or sends the payment documents to the issuing bank.
Step 6. The correspondent bank sends the documents to the issuing bank.
Step 7. The issuing bank checks the documents and makes the payment (or reimburses the paying bank) and issues the documents to the importer for a fee.
Step 8. Based on the documents received from the bank, the importer makes the payment of the customs duty and acceptance of the merchandise.

 

Types of Documentary Letters of Credit
 
  • Irrevocable Letter of Credit – ensuring the coverage of business risks.
  • Confirmed irrevocable Letter of Credit – ensuring the coverage of the insolvency risk of the issuing bank and the country – political and transfer – risks in addition to the coverage of business risks if the correspondent bank is in a different country than that of the issuing bank.
 
Types of payment within a Documentary Letter of Credit
 
You may opt for the following forms of payment within the Documentary Letter of Credit, depending on the contract terms between the company and the business correspondent: payments on demand, time payments, payments by acceptance or by negotiation.

 

Is there a list of correspondent banks?

 

Yes, you may find below the list of correspondent banks, as well as certain documents that are useful for the company’s international relationships.

 

Correpondent banks list
Anti-money laundering questionnaire
Patriot Act