Documentary letter of credit
Settling and securing trade transactions
Documentary letter of credit
Settling and securing trade transactions
Documentary letter of credit is recommended for:
- companies specializing in local or foreign trade
- suppliers/exporters and recipients/importers
L/C is a form of conditional settlements of trade transactions.
The most important features of the product
- L/C is opened in order to guarantee that a supplier/exporter (beneficiary) receives payment against the commercial documents which confirm the correct delivery of goods/services
- Payment against documents is made by the bank which has opened the L/C - bank participating in letter of credit deal only with documents and not with goods, services or performance to which the documents may relate to - it means that banks are not responsible for the existence or actual status of any goods or for performance of the contract/agreement
- L/C is opened upon request of the recipient of goods/payer (applicant)
- In the letter of credit, in place of the buyer’s undertaking to pay, a separate undertaking of the bank as a neutral entity is introduced, which thus makes the supplier independed of the will to pay or solvency of the buyer
- L/C protects:
- the supplier from the risk of refusal to pay against the documents relating to a given delivery
- the payer from the risk of incorrect delivery of goods/performance of services by the supplier
Are you interested in our offer?
Please contact your Relationship Manager. Detailed information can be also obtained from:
The cost of the call depends on your local service provider.
Benefits
- The supplier (beneficiary) who has received an L/C grants a promise of payment by the bank which has opened it.
- For the beneficiary, the confirmation of an L/C by the beneficiary’s bank result in additional security of payment.
- The payer (L/C’s applicant) has assurance, in accordance with the L/C terms and conditions, that goods characterized by certain specifications, volume and quality will be delivered in agreed time.
- Properly defined documents which should be presented by the beneficiary are the proof that the goods exist and have been shipped to the payer.
- The payment due to the beneficiary is made after the beneficiary has provided the compliant commercial documents which confirm delivery of the goods.
- The L/C is a conditional payment form – commercial documents must be in compliance with the L/C terms and conditions.
- The date of payment to the beneficiary is determined in the L/C terms and conditions ordered by the applicant.
- Payment may be made either after the documents are submitted and verified („at sight”) or on a deferred payment term.
- The applicant refunds the Bank the amount due on the same day on which the Bank made payment to the beneficiary (down payment L/C).
- When requesting for a pre-paid L/C the applicant transfers funds to the Bank on the L/C opening date, irrespective of the payment term in favour of the beneficiary.
- The beneficiary may receive payment earlier that specified in the letter of credit’s condition – after presenting necessary documents (after delivery) – discount of the payment.
- The applicant may refund the L/C amount to the Bank at the later date than the date of payment in favour of the beneficiary (prolongation).
- With prolongation, the applicant can freely manage funds allocated to L/Cs payments.
Transferable letter of credit – it enables the beneficiary (intermediary) to make settlements with the actual manufacturer/suppliers.
Letter of credit with advance payment – it allows the beneficiary to receive an advance payment.
Additional information
The applicant (ordering party) should note that any bank participating in an L/C deal with only documents and not with goods, services or performance to which the documents may relate. It means that banks are not responsible for the existence or actual status of any goods or for performance of the contract/agreement.
The beneficiary should note that the payment under L/C depends on submission of complaint documents in accordance with the terms and conditions of the L/C.
We recommend our Clients (both exporters and importers) that before choosing a letter of credit as settlement of transaction they should read the "Uniform Customs and Practices for Documentary Credits,” published by the International Chamber of Commerce as publication UCP 600 of 2007.
Downloads
Below you will find requests / orders in pdf
- Rules and Regulations for the Issuance of Bank Guarantees and Letters of Credit
- Applicant’s power of attorney
- Execution statement to the Application for product
- Execution statement to the Application for changes
- Application for transfer of funds to the Bank Handlowy w Warszawie S.A. (“Bank”) in order to issue a pre-paid letter of credit
- Amendment to application for transfer of funds to the Bank Handlowy w Warszawie S.A. (“Bank”) in order to issue a pre-paid letter of credit
- Application for transfer of the ownership of money as cash collateral to Bank Handlowy w Warszawie S.A. ("Bank") as security for the Bank's receivables under the Article 102 of the Banking Law and as a financial collateral pursuant to the Act on certain financial collaterals
- Amendment to application for transfer of money for the ownership of the Bank Handlowy w Warszawie S.A. (“Bank”) in order to secure the Bank’s receivables (art. 102 of banking act)
- Request for extension of the Repayment of the Amount Paid by the Bank to the Beneficiary under a Documentary Letter of Credit
- Applicant’s Instruction Concerning an Earlier Repayment of Prolongation