D-1-2-8- The documentary credit by negotiation

Payment processing is one of the main preoccupations of companies with international transactions. Doing business is important, but compensation is essential. Esandis offers you free training space dedicated to international transactions, and all the skills you need to become an export or import manager. Our objective is to provide you an understanding of the importance of the payment component of an international transaction.

The documentary credit is one of these payment techniques.

1-2-8-1- The documentary credit : reminder

A documentary credit is therefore a payment technique and it is universally used within the scope of international transactions. It is one of the most secure payment techniques. This technique involves the respective importer and exporter banks. They become the guarantors of the transactions, permitting the exchange of the documents against the payment of the goods.

The documentary credit is a payment technique with rules and Uniform Customs and practices, UCP 600, that were published by the ICC, International Chamber of commerce, in 1998.

We should mention that the two most-often used documentary credits are the irrevocable documentary credit and the irrevocable and confirmed documentary credit.

1-2-8-2- The documentary credit by negotiation : definition

A documentary credit by negotiation is typified by the exporter receiving immediate payment against documents. The payment is made at the counters of the issuing bank. Le mode de réalisation d'un crédit documentaire par négociation permet à l'exportateur d'obtenir le paiement immédiat contre les documents. Le paiement est fait aux guichets de la banque émettrice. The documentary credit by negotiation can be notified and confirmed:
  • A notified documentary credit by negotiation.

    When a documentary credit is notified, the bank pays "under reserve" immediately.

  • A documentary credit by negotiation and confirmed.

    When a documentary credit is confirmed, the bank pays immediately without recourse against the beneficiary of the documentary credit.

1-2-8-3- The documentary credit by negotiation : advantages

One of the advantage is the fact that a documentary credit by negotiation can be confirmed and aslo notified. An other advantage is that the exporter is paid directly and immediatly against the documents.