Advantages
For the importer
- A documentary letter of credit helps the importer minimise the risk the exporter not to deliver the goods.
- It guarantees that payment will be executed upon presentation of the documents confirming shipment of the goods.
- It allows the importer to structure the payment according to the contract and their needs.
- It shows solvency and ability of the importer to negotiate favourable terms in future.
For the exporter
- It guarantees payment upon complying presentation of documents.
- It minimises production risk if the buyer cancels or changes the order.
- It allows the exporter to structure the delivery in accordance with their interests.
- The importer may make claims on goods received outside the letter of credit, which gives the exporter a guarantee that they will receive the full payment for the goods delivered without further deductions.