Sellers/Exporters & Buyer/Importers usually require an intermediary such as a ngân hàng or financial institution to lớn guarantee payment as well as the delivery of goods.
This is where the Documentary Letter of Credit (DLC) comes in.
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A Documentary Letter of Credit (DLC)or At Sight Letter of Credit (Sight LC) is a financial instrument, issued by banks or trade finance institutions through a SWIFT MT700 message, where seller/exporters receive sầu payment from the buyer/importer, once the terms specified in the DLC are completely fulfilled.
Once the terms specified in theDocumentary Letter of Credit (DLC) are fulfilled & the buyer/importer cannot pay, then seller/exporter can makea compliant document presentation khổng lồ demvà payment.
When the seller/exportermakes a compliant presentation, the issuing ngân hàng or financial institution will make a payment to lớn the seller/exporter.
Documentary Letters of Credits (DLC) are mostly used in international business transactions, where the buyer/exporter và seller/importer have sầu yet to build a cthất bại business relationship and/or are located in different countries.
When closing a business khuyến mãi with a buyer/importer in a foreign country, the seller/exporter is exposed to lớn certain risks including international legal systems & a laông xã of trust with the buyer/importer.
Dues lớn this, a seller/exportercan be hesitant bởi such a khuyễn mãi giảm giá without a Documentary Letter of Credit (DLC) from a trusted credit-worthy bank or financial institution as financial security.
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HOW DOES THE DOCUMENTARY LETTER OF
CREDIT (DLC)PROCESS WORK?
The parties involved in issuing a Documentary Letter of Credit (DLC) are the seller/exporter (beneficiary), the issuing bank or financial institution, the buyer/importer (applicant) who is also the bank's or financial institution's client, và usuallyan advising bankof whom the seller/exporter (beneficiary) is a client.
A Documentary Letter of Credit (DLC) requires that the seller/exporter (beneficiary) present certain documents before the letter of credit's expiration.
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These specific documents are directlyrelated to the contract between the seller/exporter (beneficiary) và the buyer/importer (applicant), as they showthe issuer that the seller/exporter (beneficiary)has completely fulfilled his/her side of the deal.
Once the seller/exporter (beneficiary) makes a compliant presentation, the issuer (ngân hàng or financial institution)pays the beneficiary even if the buyer/importer doesn't want khổng lồ pay.
The Documentary Letter Of Credit (DLC) Process:
Step 1: Application
Complete and return the DLC application withthe documents fromyour giảm giá khuyến mãi (Pro Forma Invoice,SPA, Contract,etc.).
Step 2: Draft
We will create a FREE Documentary Letter of Credit SWIFT MT700 draft for you & your sell/exporter khổng lồ nhận xét và confirm.
Step 3: Draft Reviews và Opening Payment
Once you & your seller/exporter have sầu finalized the DLC draft (changes khổng lồ the draft are miễn phí of charge) & are ready lớn obtain the DLC, you then wire the opening fee to our bank according tothe pro forma invoice sent to by us.
Once we have sầu received the wire, we will release the finalized Documentary Letter of Credit (DLC) to lớn the ngân hàng or financial institution for issuance by SWIFT MT700.
Step 4: Issuance
In most cases, the bank will issue the DLC within 48 hours of release. Once the DLC is issued, we email you a copy of the Documentary Letter of Credit as it is transmitted by a MT700 SWIFT message to the beneficiary, including the DLC reference number.
Your seller/exporter will be able to confirm receiptof theDLC transmission shortly thereafter.
Step 5: Presentation of Documents
Once the seller/exporter has prepared và loaded all goods for shipment, they must skết thúc the specified documents for that particularshipment lớn their own bank (the advising bank).
Their ngân hàng will then forward the documents lớn our bank (the issuing bank), & we will email you copies of the presentation and all of the documents that were submitted by the seller/exporter for your Đánh Giá and approval.
Step 6: Payment of Goods
Before our ngân hàng can release the original documents, we must receive sầu payment for the presentation. Once we have receivedpayment, we cosign the documents lớn you và overnight them to lớn your freight forwarder or lớn whomever youwish.
This completes the transaction.
The Documentary Letter Of Credit (DLC)is governed by a mix of guidelines known as the Unisize Customs & Practice (UCPhường 600), which was first created in the 1930s by the International Chamber of Commerce (ICC).