Why use documentary credits?
When goods are bought or sold abroad the transaction is complicated by a number of factors: The buyer and seller are most likely widely separated by legal or natural borders. The buyer and seller may be unacquainted with each others business standing and integrity. Import / export and exchange control regulations dictate the use of a letter of credit. Whereas in a shop or market the buyer actually handles, examines and physically takes away a purchase from a distance cannot always ensure that the articles agreed upon for sale are those eventually obtained. Obviously, what is required for such transactions is a form of proceeding which protect the interests of the parties involved. To satisfy both, wide use is made of the documentary credit advised through the banking system, calling for the exporter to present to a bank documents evidencing shipment or dispatch of the required merchandise for which, if the documents are in order he will be paid. These documents often convey title to th
