Documentary Credits (Imports)

• Secures the settlement of your international trade transactions
• Ensures suppliers fulfil all terms and conditions before payment is made
• Guarantees payment with our universally accepted DCs

A DC (commonly known as a Letter of Credit - LC) is an undertaking by a bank (issuing bank), on your behalf (applicant), to make payment for goods or services provided by the supplier (beneficiary) within a prescribed time limit and against stipulated documents.

After completing your DC issuance instructions, HSBC will handle all the paperwork for you. Documents submitted are checked against the UCP600 rules and for internal consistency. Once we're satisfied that the documents comply with the terms and conditions in your application, we will pay the supplier. Upon settlement of the documentary transaction or acceptance of discrepancies, we will release the trade documents/goods to you and pay the supplier on your behalf. In this way, both you and your supplier's interests are protected.

Documentary Credits can be used to improve your cashflow. Use DCs in place of deposits and/or advances financed by import loans, overdrafts or your own cash reserves. The security of an HSBC guaranteed payment may also enable you to increase the credit period the supplier is willing to extend to you. With the financial strength of HSBC, DCs issued by us will be universally accepted, both by your vendors and their bank, as payment assurance.

With DCs you can expand your business with new opportunities.

• New business partners
  Structured and clearly defined terms and conditions in the DC can provide the peace of mind necessary to do business between unfamiliar business partners. You can also strengthen your negotiating position by offering a guaranteed payment.
• New countries
  Some countries require settlement by DC due to import and/or foreign exchange controls.

There are different types of DCs. Documentary Credits can be either irrevocable or revocable. Revocable credits mean that the buyer can unilaterally change/cancel it after issuance. Understandably, suppliers generally refuse to accept revocable credits and virtually all DCs today are irrevocable.To find out more, click on the quick reference.