Documentary Letter of Credit at Sight

The Documentary LC (DLC) at Sight is a banking instrument and payment mechanism which ensures that the delivery and payment terms of both the exporter and the importer are met through their respective financial institutions. It is a form of economic guarantee that is widely used during cross-border transactions between two parties who are working together for the first-time. The “document” referred here will include all the necessary details such as obligations which the importer has to fulfill. Usually, this document is sent by the importer’s bank to the exporter’s bank through a secure interbank transmission method known as SWIFT. “At Sight” stipulates and demands that the buyer bank should disburse the necessary payments after the seller has fulfilled all the criterions mentioned in the LC document.

At Credico Capital, we seek to help businesses worldwide and within the UAE which are hoping to acquire a documentary letter of credit. With a highly experienced team, we can expedite the process of obtaining a Documentary LC with ease. On the whole, we can ensure that foreign transactions are conducted in a safe and timely manner. For more information about such LCs, get in touch with our trade finance desk today.

*Note: Documentary LC’s are subject to the ‘Uniform Customs and Practice for Documentary Credits’ and the ICC delivery terms publication N0.600.

For Documentary LC’s offering credit terms, refer to ‘USANCE LC.’

 

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Documentary Letter of Credit at Sight

How to Acquire a Documentary Letter of Credit

Prior to obtaining a Documentary LC, the buyer and the seller will need to enter into a sales contract. In addition to listing LC as the preferred mode of payment, the contract should also mention all the relevant payment terms. Once the agreement has been drafted, the importer is required to apply to his/her for the appropriate LC. At Credico Capital, we enable clients to free themselves from such hassles by assisting them throughout the procedure.

The financial institution that issues a DLC is referred to as the “issuing bank” while the institution that authenticates it is known as the “advising bank.” Once the exporter has completed the project as per the contract, he/she is required to provide the necessary documentation to the advising bank. The advising bank on behalf of the exporter shall submit the same document to the issuing bank. The latter will cross-check and verify if all the conditions have been met and release payment to the advising bank. While the importer makes the payment to the issuing bank, the advising bank will make the payment to the exporter.

Advantages of a DLC at Sight

In Letter of Credit terminology, the exporter is generally referred to as the “beneficiary.” In reality, however, both the exporter and importer stand to benefit from a Documentary LC. We’ll be examining the most noteworthy advantages of a Documentary Letter of Credit at Sight for both parties in the below section.

For the Importer

  • While using a Documentary Letter of Credit at Sight, the importer does not have to send the payment right away. It allows them to allocate additional funds to the day-to-day running of their business.
  • Such an LC protects the importer in case some delay occurs due to shipping. They also will not lose any money if the goods they receive are not up to the requirements of the initial agreement.
  • In some cases, a Documentary LC can be used to dictate the date of delivery. It allows the importer to schedule the arrival of the goods for a period that is convenient for their business.

For the Exporter

  • With a DLC at Sight, the issuing bank is obligated to send payment to the seller. It allows the exporter the freedom to ship his goods, knowing that he/she will receive the necessary compensation.
  • The exporter is protected in the event of the importer canceling or otherwise altering their order.
  • A DLC is the fastest form of LC. An exporter can expect to receive a payment within five to ten days after fulfilling the required obligations.
  • An importer must obtain a Documentary LC. An exporter must do minimal work outside of shipping and providing the requested documents.
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