To The Exporter/Seller
• Letters of credit open doors to international trade by providing a secure mechanism for payment upon fulfillment of contractual obligations.
• A bank is substituted for the buyer as the source of payment for goods or services exported.
• The issuing bank undertakes to make payment, provided all the terms and conditions stipulated in the letter of credit are complied with.
• Financing opportunities, such as pre-shipment finance secured by a letter of credit and/or discounting of accepted drafts drawn under letters of credit, are available in many countries.
• Bank expertise is made available to help complete trade transactions successfully.
• Payment for the goods shipped can be remitted to your own bank or a bank of your choice.
To the Importer/Buyer
• Payment will only be made to the seller when the terms and conditions of the letter of credit are complied with.
• The importer can control the shipping dates for the goods being purchased.
• Cash resources are not tied up.
Uniform Customs and Practice for Documentary Credits (UCP)
The Uniform Customs and Practice for Documentary Credits is an internationally agreed upon set of rules for all parties involved in all types of letter of credit transactions. The rules, which were adopted by the International Chamber of Commerce in Vienna in 1933, have been revised several times and are used by banks in practically all countries.
The Uniform Customs and Practice for Documentary Credits, currently applicable, is a set of rules which, when not in contravention of local laws, are binding on the parties who have adopted them. The authority of UCP lies in its universal acceptance which is acknowledged by a statement on the letter of credit itself. All Scotiabank Documentary Letters of Credit are issued subject to UCP.
Copies of the Uniform Customs and Practice for Documentary Credits are available upon request from your nearest Scotiabank office.
General Principles of UCP
• Letters of credit are separate transactions from the sales or other contracts on which they may be based, and banks are in no way involved with or bound by such contracts, even if reference to them is included in the letter of credit.
• In letters of credit transactions, all parties deal with documents and not with the underlying contracts to which the documents may relate.
• Before payment or acceptance of drafts is effected, banks bear the responsibility for examining the documents to ensure that they appear on their face to be in accordance with the terms and conditions of the letter of credit.
• Banks bear no responsibility for: the form or genuineness of documents; for the goods described in the documents; or the performance of the seller of the goods.
