Documentary Business
In foreign trade, importers focus their attention primarily on the timely delivery of the agreed upon quantity and quality, whereas for exporters assuring on-schedule payments in the agreed currencies is the first priority.
Foreign trade mainly focuses on two highly regarded methods of documentation, namely: collection documentation and letter of credit documentation.
Collection Documentation
Documentary collection refers to the collection of receivables through a bank with documentation. Both essential types of collection documents distinguish between the completion of the documents against payment or against the acceptance of an exchange. Payment processing by means of collection document requires that there be no doubt about the contract partner's willingness to pay and the ability to deliver.
Letter of Credit Documentation
Letter of credit documentation is consists of the contractual obligation of a bank with a mandate to provide a specified monetary payment after a customer provides proof of the submission of specific documents and the satisfaction of certain conditions. This obligation is abstract because exceptions to the underlying transaction are not possible. Letters of credit have both a security/payment and financing function. Depending on the scope you, basically decide on:
- Revocable letters of credit - can be altered or cancelled at any time by the initiating bank even without informing the beneficiary, and thus provide no security for the exporter.
- Irrevocable letters of credit - establish a firm commitment on the part of the initiating bank and can be neither changed nor cancelled without the consent of the initiating bank, the possible accepting bank and the beneficiary.
- Irrevocable, confirmed letters of credit - aside from the commitment of the initiating bank, such letters also establish a separate payment commitment for the accepting bank.
Of course, PSSIB's foreign specialists are always available to answer any questions concerning letters of credit trade.
