Replying to [RBATISTA]:

1. Documents against Payment (D/P)
2. Documents against Acceptance (D/A)
3. Letters of Credit (L/Cs), also known as Documentary
Credits (DCs)
What is a DC?
A bank-to-bank commitment of payment in favour of an exporter, guaranteeing that payment will be
made against certain documents that, on presentation, are found to be in compliance with terms
set by the buyer.
This is an area in which financial terminology (and acronyms) really builds up a head of steam. It is
probably worth explaining some commonly used terms, to provide a basic understanding.
Like Bills for Collections, DCs are governed by a set of rules from the ICC. In this case, the
document is called; "Uniform Customs and Practice" and the latest version is document number
500. In short, it is known as UCP500 and, again, over 90% of the world's banks adhere to this
document.
Irrevocable: The terms and conditions within a DC cannot be changed without the express
agreement of the exporter (the beneficiary). Revocable DCs are very unusual, as the conditions
can be changed unilaterally by the buyer, which is rarely acceptable to an exporter.

Unconfirmed: The payment commitment within the DC is provided by the buyer's (Issuing) Bank.

Confirmed: If an exporter has any concerns about the circumstances which may prevent payment
being made from either the Issuing Bank or buyer's Country, the adding of "Confirmation" moves
the bank/country risk issues to the bank which adds it's confirmation (the Advising bank) and
notifies the DC to the exporter. The price of such a confirmation will obviously depend upon the
level of perceived risks to be covered. Banks can often provide indicative pricing for confirmations
prior to the arrival of the DC, so that costs can be estimated.



4.Standby Letters of Credit (SBLCs) or Bank Guarantees

Other International Trade Risks