Documentary letter of credit is sometimes referred to as "banker's commercial letter of credit (to keep scommercialcredits)" and "commercial bank l/c (commerciallettersofcredit)"，Provide guarantees for sellers in international sales of goods，Make sure he gets paid for the goods after they are shipped，Even if the buyer fails to pay or the buyer's bill is dishonoured。
International sales of goods involving documentary credits usually involve the following processes:
The buyer of the goods opens a letter of credit in his home country with his bank (issuing bank) in favour of the seller in another country in accordance with the standard form of that bank。An undertaking by the issuing bank to pay the contract price of the goods or to accept or negotiate a seller's draft (e.g., cheque) drawn for that amount。The issuing bank may require the buyer to provide a security deposit for its expected payment obligations to the seller, or it may rely on the good standing of the Buyer。The standard condition for opening a letter of credit is usually payment of a fee to the bank for the goods and the shipping documents relating to the goods。Once the issuing bank has agreed to open the credit, it requires the advising bank in the seller's country to advise the seller of the opening of the credit in its favour。The advising bank may also assume an obligation to pay the seller, in which case the credit is "confirmed" (as opposed to "unconfirmed").。The seller then presents the shipping documents to the advising bank (including goods invoice, bill of lading or sea waybill, Marine insurance policy on CIF terms, etc.)。If documents are available, the advising bank makes payment to the Seller by paying, accepting or negotiating a draft drawn by the buyer。The advising bank will then deliver the shipping documents to the issuing bank, which will then deliver the documents to the Buyer to enable the buyer to accept the goods at the port of discharge。There is a charge for the issuing bank to issue the L/C, but of course the final charge is borne by the buyer。
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