Documentary collection is one of the instruments of foreign payment transactions in which the bank is a mediator between two partners. Documentary collection is based on the bank’s handling of financial and commercial documents in accordance with received instructions, for the purpose of:
The principle behind documentary collection is that the Exporter (seller), by handing over the shipping and other documents to its bank for the purpose of collection, can no longer dispose of the goods, and that the Importer (buyer) cannot take over the goods unless it buys the documents, i.e. unless it pays the value of the delivered goods to its bank or accepts the bill.
Letters of Credit
A letter of credit is a widely accepted payment instrument in international trade because it equally protects the interests of both the seller and the buyer.
The seller (letter of credit user) is sure that upon submitting regular shipment and commodity documents stated in the letter of credit, assuming that it has fulfilled all the requirements under the letter of credit, it can collect the equivalent value of the exported goods and/or services rendered because it will be paid by the bank that issued the letter of credit (or the bank that confirmed the letter of credit, in case of a confirmed letter of credit).
On the other hand, the buyer (the principal in the letter of credit) is sure that the payment under the letter of credit will be executed only if the seller, within the specified deadline, provides all the required letter of credit documents.
A standby letter of credit is an obligation of the issuing bank to pay the certain amount to the beneficiary provided that it submits a written statement to the bank within the given deadline that the principal has failed to perform the contractual liability within the stipulated time. Unlike with other types of letters of credit, the standby letter of credit is a security instrument rather than a payment instrument and therefore it is similar to a bank guarantee.
Letters of Guarantee
Bank guarantees are legal documents in which one person – guarantor (the bank), at the order and on behalf of its client – the principal, assumes an independent and irrevocable obligation to pay the amount stated in the guarantee to the guarantee holder should its client – principal fail to perform a payment/performance obligation within the agreed time period.
Crédit Agricole Serbia offers various types of guarantees to its clients:
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