4. Speak on:

30 Days’ sight d/p; 60 days’ sight d/a. Unit 9 documentary credit Study these vocabulary notes

documentary credit		документарний акредитив
short-term credit		короткостроковий кредит
obtain		одержати
in advance		авансом, раніше
down payment		перший внесок
contract price		ціна контракту
open-account terms		умови відкритого рахунку
on maturity		строк платежу
documentary letter of credit		товарний акредитив
confirm		підтвердити
revocable credit		відзивний кредит
irrevocable		безвідзивний кредит
amend		доповнювати
prior notice		попереднє повідомлення
withdraw		відізвати
conceivably		можливо, ймовірно
batch		партія товару
comply (with)		виконувати
stringent		обов’язковий, точний
unalterable		незмінний
indemnity		компенсація
means		засіб
verify		перевірити
integrity		чесність, прямота

Documentary Credit

Documentary credit system is a method of payment in international trade which gives a guarantee of payment to the exporter.

Documentary credits provide the exporter with a secure (risk-free) method of payment.

Documentary credit system also helps an importer to obtain short-term credit; similarly, exporters can obtain early payment.

The time of payment agreed between an exporter and a foreign buyer can be at any point between signing the sales contract and a date after delivery of the goods to the buyer.

1. A seller might ask for 100% payment in advance or for at least a down payment of a part of the contract price when the contract is signed. This is the most ideal ‘financing’ and payment method for the seller to deliver the goods as agreed, and that the buyer is prepared to buy the goods, not only without asking credit, but perhaps even in advance of their manufacture.

2. The buyer would prefer to pay for the goods after shipment and delivery, perhaps in order to sell the goods first and use the revenues to pay the exporter. Extended periods of credit call for considerable trust in the buyer by the seller, if sales are an open account terms, or for trust in the buyer to the extent that he will pay term bills on maturity. Payment in advance is the most secure method of payment for exporter, and payment by open account is the least secure method.

A more secure method of ensuring payment is by a documentary letter of credit, issued by the buyer’s bank at the request of the buyer. It is a conditional guarantee of payment by the bank. The guarantee is conditional upon the exporter fulfilling certain requirements (eg. As to date of shipment of the goods and satisfactory shipment) which a bank will verify. So, documentary letter of credit provides very good security for the exporter and there is even less risk and inconvenience for the exporter if the letter of credit is confirmed by the exporter’s own bank or by another first-class bank in the exporter’s country.