04.28
In the international businesses, the seller and the buyer probably can not trust each other because the seller is worried about the buyer does not pay the bill and the buyer is anxious about the seller does not deliver goods on time, there both of parties need a third guarantee party to ensure their interests. Therefore, the bank often is the third party to use the credits to help the seller and buyer to complete the trade, and the documentary credits are the commercial letters. There are three features of the credits:
- The documentary credit is independent without depending on the trade contract, and it is only the written form.
- The documentary credit is the cash against shipping documents without considering goods, and if the document conforms to the record, the issuing bank should pay money.
- Â The documentary is only a kind of credit letter for bank and only a proof of guarantee.
It is the most common and useful form for trades all over the world. When the seller and the buyer pay money according to the credit document on premise that the buyer must have the credit document, and then buyer has obligation to send the document to the seller, which ensure the seller should be benefit from. If the buyer never sends the credit document to seller, the seller has rights to terminate the contract and ask for compensation.

