Introduction to Documentary Credits

Why Attend

This course provides a practical overview of the long-established but still rather esoteric trade financing instrument, the Documentary Letter of Credit, known variously as Documentary Credit, Commercial Letter of Credit, Letter of Credit, L/C, and D/C. For the purpose of this course, we will limit ourselves to “Documentary Credit” and “L/C”. Upon completion, you will have developed a good foundational understanding of the importance of the documentary letter of credit in enabling trade, the versatility of this proven instrument in addressing a range of market conditions, and a variety of client needs. You will also appreciate the strengths of this unique financial instrument, as well as the weaknesses (and a couple of misconceptions) of this mechanism.

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Course Objectives

  •  Explain the needs of importers and exporters and how a documentary credit (DC) helps meet them.
  •  Describe the UCP 600, MT 700 SWIFT messages, and the ICC Incoterms® rules.
  •  Describe different types of DCs, including confirmed, transferable, red clauses, back-to-back, and revolving.
  •  Describe the document preparation, discrepancies, and drawing of a DC.
  •  Describe the 5 types of risks for documentary credits.
  •  Differentiate between open account terms and cash in advance.
  •  Explain the reasons to issue a Documentary Credit.
  •  Describe the differences between a basic, unconfirmed LC, and a Sight LC.
  •  Understand the SWIFT/ICC “bank payment obligation” (BPO).
  •  Describe the negotiation, financing, and settlement of a DC.
  •  Understand how DCs can improve the credit quality of a transaction.
  •  Understand how fraud can play a role in DCs.

Target Audience

General practitioners working in banks, corporates, or financial
institutions in functions such as Relationship Management, Credit,
Compliance, etc. but with an interest in trade finance.

Course contents:

  • How letter of credit works
  • Parties of a letter of credit
  • Responsibilities of the banks involved in DC’s.
  • Studying several DC application
  • Incoterms 2020 within DC application
  • Practical example in issuance (MT700 Vs. paper form).


Reference ICC. Publications used for this course:

  • 600

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