A credit is a document from a bank that guarantees payment. There are different types of accreditors that can offer security when buying and selling products or services. For those who go abroad, this letter guarantees that the banks issue respect the projects developed by some foreign banks. As a result, the issuing bank bears the risk of non-payment by the buyer. This is an advantage, as the issuing bank often has a personal banking relationship with the buyer. The whole commercial purpose for which the system of confirmed irrevocable documentary accreditations has been developed in international trade is to give the seller a guaranteed right of payment before moving away from the control of the goods sold. Some countries have created accreditation statutes. For example, most jurisdictions in the United States (United States) have adopted Article 5 of the Uniform Commercial Code (UCC). These statutes are designed to work with the rules of market practice, including the UCP and ISP98. These rules of conduct are included in the transaction by an agreement between the parties. The latest version of the UCP is UCP600, which entered into force on 1 July 2007. Since CCPs are not laws, the parties must include them in their agreements as normal contractual provisions. However, they continue to constitute an important part of market practices and to provide decisive support for financial law.
It is possible that the implementation of a documentary credit may be disrupted by legal actions directly related to the parties and that their rights and obligations arising from the accrediting or service may be prevented by government measures beyond the control of the parties. Alternatively, the performance of a contract – including a documentary credit obligation – could also be avoided by external factors such as natural disasters or armed conflicts. However, these risks are often considered secondary to the risk of non-payment. If you rely on credit to get payment, make sure: banks also charge a fee for the service, usually a percentage of the size of the flower. The International Chamber of Commerce Uniform Customs and Practice for Documentary Credits monitors accreditations used in international transactions. There are different types of accreditors. Importers and exporters regularly use flow-throughs to protect themselves. Working with a foreign buyer can be risky because you don`t really know who you`re working with. The range of documents that may be requested by the applicant is vast and varies considerably from country to country.
There are several methods of document verification, each representing different risk variations to the legitimacy of documents. A documentary credit offers security for buyers and sellers. In accordance with UCP 600, the bank undertakes, on behalf of the buyer (who is often the applicant), to pay the beneficiary the value of the goods shipped when acceptable documents are filed and the conditions set are strictly respected. The buyer can be sure that the goods he expects will only be received to the extent that they are proven in the form of certain documents that comply with the conditions indicated. The supplier has confidence that, if such provisions exist, it receives payment from the issuing bank, which is independent of the contracting parties. In some cases, a flow of credit requires the collection of documents. Subject to ICC URC 525, view and use, for the delivery of shipping documents against payment or acceptance of a train when shipping is made first, title documents are sent by the seller`s bank to the buyer`s bank to provide documents against payment/acceptance. .