Documentary credits and guarantees
The documentary credit enables the importer to be certain that his/her obligation to pay will only arise if the seller has complied with the terms and conditions set out in the credit, which must be consistent the provisions of the contract with the supplier.
The documentary credit enables the seller to obtain certainty of payment before the shipment of the goods or even before they are manufactured. The buyer will be certain that his/her obligation to pay will only arise when the seller has provided sufficient documentation with proof of the shipment of the required goods. The credit is therefore a guarantee for both parties.
The guarantee constitutes a banking commitment to a third party on behalf of the customer to ensure fulfilment of a contractual obligation. It can provide certainty for a payment obligation, a goods delivery, a service provision, the execution of construction or engineering work, the reimbursement of an advance payment, a customs debt or any other obligation arising from a contract.