WnetLink Trade Support

WnetLink Trade Support

Documentary Letter of Credit

A documentary letter of credit is a guarantee that provides assurance to the beneficiary that he will get the payment which has been mentioned in the documentary letter of credit. There is a condition that the compliant presentation should be under the documentary letter of credit. This documentary letter of credit is commonly used for international transactions where both the buyer and the supplier have a new relationship and operate from different countries.

A documentary letter of credit is a really crucial financial instrument for meeting the short-term needs. It enables the recipients for obtaining the important credit for financing the project. The recipients hope of getting sufficient return for settling the due amount in the provided time frame.

The documentary letter of credit showcases the documents and information that are needed by the beneficiary on presentation which includes the expiry information like date and time of the letter. The compliant presentation is a kind of guarantee given to the beneficiary by the documentary letter of credit for in order to get paid. The only criterion is that the delivery conditions should be met.

It is the responsibility of the bank that writes the letter of credit on the applicant’s behalf to ensure that the terms and conditions which are required for documentation purposes under the credit are met duly before any amount is paid to the supplier. Documentary letter of credits come under the governance of the International Chamber of Commerce (ICC) rules. These rules for the letter of credit are known as Uniform Customs and practice for documentary Credit (UCP). The current version which is in effect is the UCP600 from July 1st, 2007. The concerned parties to a documentary letter of credit are the issuing bank and the beneficiary.

In these cases the credit worthiness of the issuer stands in place of the credit worthiness of the buyer – giving the supplier greater comfort that he will be paid.

We need the following documents/ information for finalising the draft –

Filled in application form

  1. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC (If available)
  2. Trade license of your company
  3. Share Holders List
  4. Passport copy of main applicant
  5. Last Three years audited balance sheet
  6. Last Six months latest bank statements
  1. We receive application from client and review it and when we are happy to proceed.
  2. We will arrange a meeting with the client to discuss the terms of the transaction.
  3. We will select the Bank who is ready and willing to transact.
  4. We will send out an offer letter for the client to review, and when the client accepts it, we will create the draft of the instrument for the client to review along with their lender / bank / supplier.
  5. Once the lender / bank / supplier approved the draft, the client or the lender/bank/supplier should sign and stamp the draft, and send it back to us.
  6. We will send an agreement/contract for the client to sign and send back to us.
  7. We will send the client the invoices along with an indemnity document to sign.
  8. When we received the signed counter indemnity document back from the client and the payment for the issuing fee is confirmed,
  9. We will SWIFT the instrument to the beneficiary’s bank immediately.
  10. We will then send the client the relayed copy of the instrument via email within 10 working days.

 

Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.