Export - Documentary Credit
You gain a considerable competitive edge, boost your export company's cash flow and risk management by using an export documentary credit. It can also serve as a financing instrument and is a globally used method of payment in international trade.
Use the export documentary credit when your customer is situated in a country, which is economically or politically unstable, or if the country's legislation or other statutes so require. The documentary credit can also be used to finance the term of payment.
- You can be sure that you receive payment after the delivery.
- You can get financing for your term receivables under certain conditions.
- In an unconfirmed export documentary credit the buyer's bank undertakes to pay the receivable against documents conforming to the terms and conditions of the documentary credit. This means that the risk related to the buyer is eliminated.
- Eliminate the risk related to the buyer's bank and country with an export documentary credit confirmed by Nordea.
- All documentary credits are issued following the international documentary credit rules (UCP 600).
Energise your exports
An excellent method of payment as it helps your company to hedge against the risks related to export trading. The buyer's bank issues an irrevocable payment undertaking to your company provided that your company presents to the bank documents conforming to the terms and conditions of the documentary credit during its validity.
The repatriation of sales receivables involves risks. Even if the buyer usually settles its payment liabilities without cause for complaint, unstable political and economic circumstances may affect the buyer's liquidity and ability to pay. The use of a documentary credit diminishes the risks related to a foreign buyer. It can also be used to finance the term of payment.
We also recommend the use of a documentary credit when the trade relationship is new or the value of the trade is significant to the buyer or your company. The same goes for the manufacture of special goods made to order or a project delivery where the payment is made as deliveries are made or as the work progresses.
Through Trade Finance Global you will, among other things, be electronically advised of a documentary credit.
At sight documentary credit
The seller will be paid after having presented documents conforming to the terms and conditions of the documentary credit.
Deferred payment documentary credit
A deferred payment documentary credit is used when the seller grants the buyer a term of payment. The seller will be paid when the term of payment has elapsed. The seller can request its bank to change the term of payment of a confirmed deferred payment documentary credit to a cash remittance. The bank then discounts the receivables related to the deferred payment documentary credit.
The parties to a documentary credit
A documentary credit usually has four parties: the buyer, the exporter and the banks of the before-mentioned parties.
- Seller/exporter = Beneficiary
- Buyer = Applicant
- Seller's bank = Advising/Confirming Bank
- Buyer's bank = Issuing Bank
Flexibility to payment arrangements
Transferable documentary credit:
When your company acts as an intermediary between the buyer and the supplier: a transferable documentary credit opened in your favour can be transferred to the supplier who then gains the security provided by the documentary credit. However, your company will still maintain the security of the original documentary credit.
Back-to-back documentary credit:
Can be used when the original documentary credit is not transferable. In practice a back-to-back documentary credit means an import documentary credit opened in favour of the supplier. The terms and conditions of this documentary credit follow the original documentary credit opened in favour of the first beneficiary. The collateral issues of a back-to-back documentary credit will be solved with ordinary credit processing arrangements.
Revolving documentary credit:
An alternative available to your company if your trading involves recurring long-term deliveries. The most significant advantage of a revolving documentary credit is often the security it brings to receiving payments for future deliveries. This diminishes the uncertainty of whether or not to begin production. A revolving documentary credit can revolve either in terms of time or amount.
Our currently valid tariff is available for viewing at all Nordea branches.
Neuvoja ulkomaankaupan tueksi
Choosing Trade Finance products and using the general International Commercial terms (Incoterms) decreases or eliminates many of the risks related to international trading.
Tee kaupankäynnistä joustavampaa valitsemalla oikea maksutapa.