documentary letter of credit


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documentary letter of credit

Used somewhat like cashier's checks,but with more safeguards.The typical documentary letter of credit will allow payment to a vendor upon the vendor's presentation of the letter and certain documents, such as proof the goods were placed on board a vessel for shipment to the United States.

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Unfortunately, many bankers who--as a standard practice--will not issue without requiring an OBL as evidentiary documentation, will, at the same time, counsel their applicant clients that it is perfectly fine to issue a documentary LC in "F" term or "E" term format--which essentially does violence to the intention of the documentary Letter of Credit in the first place.
Ask this new customer to arrange for its bank to issue a documentary letter of credit.
Trade creditors seeking protection from the credit risk of a Chapter 11 debtor or financially troubled customer could push for third party protection, such as the posting of a standby or documentary letter of credit.
In this regard, both EX-IM Bank and SBA often require the export sale to be covered by a documentary letter of credit or export credit insurance, particularly when buyers reside in a developing country.

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