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What is a documentary letter of credit and how does it operate?

April 26, 2017credit Documentary letter operate

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What is a documentary letter of credit and how does it operate?

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A documentary letter of credit is a ‘method of payment’ and may be described as an advice issued by a bank authorising the payment of money to a named party, the beneficiary, against delivery by the beneficiary of specified documents (usually accompanied by a bill of exchange for the amount to be paid) evidencing the shipment of described goods. The advice (letter of credit) sets out the strict terms and conditions that must be fulfilled in order for the payment to be effected. More detailed information is available in NAB’s booklet – Finance of international trade.