Documentary USANCE Letter of Credit

A Documentary USANCE LC is a banking instrument that ensures delivery and payment terms of both the buyer and the seller are met through their respective financial institutions. A USANCE LC is more so similar to an ‘At Sight LC,’ however, the Documentary USANCE LC brings with it a predefined and mutually agreed upon contractual credit payment term. The credit term can vary from deal to deal but is typically defined for a period of 60,90, or 120 days. USANCE LC is a necessity for business owners within the United Arab Emirates, where international trade is infamously risky. Delivery may sometimes get delayed and outright canceled. In other cases, goods may be damaged while shipping. For such reasons, all import-export businesses within the UAE must protect themselves with a DLC before any foreign transaction.

An LC is a trade finance tool that is used to reduce the risks associated with importing and exporting. It allows the buyer to defer payments up and until he receives all the necessary trade documents. The exporter also benefits from an LC, as he/she will receive a guarantee from the buyer’s bank. The USANCE LC is one of the most popular types of LC and is commonly used when the importer and exporter already has a healthy working relationship. To know more about our services, or to receive a customized quote against your requirement, reach out to our team by dialing +971-4-521-7560.

*Note: Documentary USANCE LC are subject to the Uniform Customers and Practice for documentary credits and the ‘ICC Delivery Terms Publication #600.’

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Documentary USANCE Letter of Credit

How Does a Documentary USANCE Letter of Credit Work?

As mentioned, a documentary USANCE letter of credit is similar to an “At Sight Letter of Credit.” With an At Sight LC, the importer asks their bank to promise payment to the exporter on their behalf. This bank - dubbed the “issuing bank” - nominates an advising bank to act as a middle-man between them and the exporter. Once the exporter has processed the buyer’s order, they pass the confirmation documents onto the advising bank. The advising bank subsequently passes these documents onto the issuing bank for inspection and payment. A USANCE letter of credit follows this pattern almost exactly. Unlike a letter of credit at sight, however, a USANCE LC does not require the importer to pay upon receipt. Instead, the importer is afforded the privilege of paying at a later day.

Securing a USANCE letter of credit is challenging. Consequently, any UAE business owner or any business owner globally, applying for a USANCE LC is advised to enlist the help of Credico Capital. As the leading trade finance agency in Dubai, we have helped countless companies obtain USANCE LCs. Our specialists will streamline the application process, virtually ensuring swift approval and funding.

Advantages of USANCE Letter of Credit

A USANCE letter of credit boasts most of the advantages associated with a traditional LC. For example, it allows the importer to purchase goods without immediate payment. Additionally, it assures the exporter that they will receive compensation for their products. However, the USANCE letter of credit also has its own set of unique advantages.

  • A USANCE LC allows the importer to defer payments for longer than a traditional LC. In many cases, the buyer may not have to pay for a full 120 days after receipt of trade documents.
  • A buyer will usually receive their order before they must pay their USANCE LC. It provides ample time to inspect the goods to make sure they are of high quality.
  • Customers who can defer payment are likely to spend more money than those who must pay upfront. It means a USANCE LC often earns the exporter more significant sales in the long-run.