The documentary credit is a practical and effective solution for all international trade transactions take place in the world. Due to the globalization that we witness in the modern world, relations of commerce around the world have changed substantially, so it is increasingly necessary that there are legal mechanisms that enable people engaged in international transactions to ensure success of their businesses and be sure that the other party to negotiate with a swindle or not go boldly forth with a move that could hurt their interests. The documentary credit is a document that allows international traders have these guarantees. That is why nowadays in this document is a boom and is widely used in international trade relations worldwide. Let’s see how quickly one is a documentary credit.
The documentary credit is a document used in trade relations established between an importer and exporter to do business. Basically this is a document that can prove that each of the parties have complied with the agreement reached when they made their contract or business through an entity that serves to prove this, which is usually a bank. Thus, with the documentary credit the exporter knows that the person who sent their merchandise has arrived safely and that this person has sent the money agreed by the export. Also, the importer shall ensure that the goods will reach the agreed destination and pay the exporter once this result is observed. That is why the documentary credit is a highly effective mechanism in international trade relations worldwide. The truth is that the documentary credit is a guarantee in international trade relations.
Because the problem with this type of trade relations was that people who dealt not harbored the same laws, and it was difficult to standardize the legal mechanisms through which each of them could guarantee the good faith and the success of their businesses, international traders needed a mechanism such as documentary credit so that they could do business with a good degree of security and business efficiency. The form of documentary credit operation is very simple. The documentary credit is not really a single document, but consists of several documents certifying the completion of certain business operations. When we talk about the documentary credit are talking about a business that involves three people, an importer, exporter and the intermediary is usually a bank. The broker is responsible for receiving the importer all the necessary documents to prove that the exporter actually sent the merchandise that has been pledged to send, once you receive them and these are in order, tells the importer to the exporter has complied with Part of their agreement, and this is responsible for delivering the money they had promised to deliver because of the shipping. Having completed this, the intermediary has issued a document to which the importer can claim the goods delivered at the place agreed.