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Documentary Credit

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Letter of Credit is the most common way of payment for goods and services in commercial relations. It represents the bank’s obligation to provide the seller with payment from the L/C once the terms of the L/C are met. Letter of credits are usually used if business partners do not know each other and they need to eliminate the business risk.
 
Export Letter of Credit 
Seller (beneficiary) is in the position of exporter Intesa Sanpaolo Bank Albania as advising bank advises the seller of L/C, i.e. a written undertaking of the issuing bank to pay the seller the amount of L/C once the terms of the L/C are met. Confirmation of L/C by Intesa Sanpaolo Bank Albania (confirming bank) on the basis of the issuing bank’s application represents undertaking of the confirming bank (in addition to the issuing bank’s undertaking) to pay the seller the amount of L/C (once the terms of the L/C are met).
 
A letter of credit can be transferable L/C that allows the original seller to transfer all rights and duties from a L/C (or its part) to his/her subcontractor (second beneficiary). The issuing bank must unambiguously identify such a L/C as transferable. Transfer of L/C is often used by business or intermediary companies.
 
Import Letter of Credit 
Import L/C – buyer (applicant) is in the position of importer. On the basis of his written application Intesa Sanpaolo Bank Albania, as issuing bank will provide an irrevocable written undertaking on behalf of the buyer, to pay the seller the amount of L/C once the terms of the L/C are met.
 
Seller’s Benefits:
  • In case of foreign L/C the risk of a foreign bank or that of a country may be eliminated when a local bank confirms the L/C. In virtue of such a confirmation the confirming bank is also undertaken to pay once the terms of the L/C are met.
  • Once the bank advises the L/C opening the seller can carry out delivery of goods / services
  • Possibility to grant a supplier loan in case of L/C with deferred maturity and subsequent sale of the receivable before its maturity date – forfeiting.
  • Legal protection through the international Uniform Customs and Practice for Documentary Credits, issued by the International Chamber of Commerce in Paris No. 600/2007. 
Buyer’s Benefits 
  • L/C provides the buyer with guarantee that he will pay only after the terms of the L/C are met.
  • L/C, based on the proper selection of requested documents, guarantees the buyer that goods will be shipped in time, quality, quantity as requested.
  • Possibility to combine with a bank guarantee issued by the seller’s bank.
  • Legal protection through the international Uniform Customs and Practice for Documentary Credits, issued by the International Chamber of Commerce in Paris No. 600/2007.
How to proceed – application for L/C issue:
  • Applicant fills out an application for documentary L/C opening.
  • Buyer will provide the respective copy of contract or order form
  • Upon this Intesa Sanpaolo Bank Albania will issue a documentary L/C according to the instructions stated in the application for L/C opening and advises the seller of its obligation usually in form of a swift message sent to the seller’s bank (SWIFT).
Bank Guarantees:
  • Bid Bond;
  • Advance Payment Guarantee;
  • Performance Bond
  • Payment Guarantee
  • Other Guaranties
Documentary collection:
represents the way of payment for goods or services. It is used in foreign trade when it is not possible or suitable to issue a documentary L/C but higher payment guarantee than the one provided by clean payment is required.

 

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