Our Import-Export department is committed to making your transactions with international partners easier and more secure. Experienced and conscientious advisors provide all the support you need.
When you ask National Bank for a documentary credit, you can be sure that we will pay the beneficiary the amount that both parties have agreed to, in compliance with the terms and conditions of the documentary credit agreement.
A documentary credit is a very secure method of ensuring payment, and is often required for the payment of goods and services that are imported or exported.
Types of documentary credit
Irrevocable documentary credit
A payment commitment that cannot be changed or cancelled without the consent of all parties concerned.
Confirmed irrevocable documentary credit
The value of a documentary credit is based on the issuing bank and the country in which it is issued. When its value seems uncertain, the beneficiary (seller/exporter) may require that the documentary credit be both irrevocable and confirmed.
The issuing bank then calls a second bank (usually the beneficiary's bank) to confirm the documentary credit. If the bank agrees, it then undertakes to pay the beneficiary on presentation of documents that comply with the term and conditions of the documentary credit, regardless of any financial uncertainty surrounding the issuing bank and its country. The cost of confirming the documentary credit is generally borne by the beneficiary (the seller/exporter).
Transferable documentary credit
With a transferable documentary credit, the original beneficiary (or primary beneficiary) acting as an intermediary in the business transaction can transfer its rights under the documentary credit to one or more secondary beneficiaries who typically are the actual suppliers of the goods or services, up to the total amount of the documentary credit.
A documentary credit is transferable only if specified by the issuing bank. The secondary beneficiaries therefore cannot transfer their rights to a third beneficiary.
Our simplified documentary credit
The simplified documentary credit applies to amounts under $65,000, and is designed for small and medium-sized enterprises that often do business with the same supplier.
With all the features of the conventional documentary credit, the simplified documentary credit offers greater flexibility, and can be processed faster because only two documents (a commercial invoice and a shipping document) are required.
In your international transactions, you may at times be obliged to make certain commitments to prove your creditworthiness. For such transactions, our experts offer various types of guarantees to reassure your trade partners that you'll meet your specific obligations.
A bank documentary of guarantee is a document through which the bank makes an irrevocable commitment to compensate your client if you are unable to honour your financial or contractual obligations.
The commitment undertaken by the bank at your request is completely independent of the contract binding you to your client, although it may make reference to it. In essence, the bank substitutes itself for you in order to guarantee payment to the beneficiary. The strength of the guarantee is that the bank will compensate your client (beneficiary) upon presentation of documents certifying that a default or deficiency has occurred, on your part, in fulfilling the contract.
A documentary of guarantee for every situation
To demonstrate the seriousness of your tender
A bid guarantee is often necessary when you want to respond to a call for tender for a construction or supply project. It is a strong indication that your tender can be taken seriously. For instance, if you were to withdraw your tender, and refuse to accept the contract or supply a performance bond, as generally required, the beneficiary of the bank guarantee would then be compensated, and could issue another call for tender.
To protect your client against project deficiencies
Once a contract is awarded, buyers often want to obtain some form of protection with a performance guarantee. The performance guarantee protects your client against project deficiencies that are the fault of the seller. Should there be any deficiencies, the funds obtained through the guarantee can be used by the buyer to repair or complete the work.
Advance payment guarantee
To facilitate the reimbursement of a downpayment
If the buyer has given you an advance, you may be required to repay it if the deal falls through. With an advance payment guarantee, the buyer is guaranteed repayment of the advance.
To cover financial uncertainty
With this type of guarantee, the payment of financial obligations (e.g., accounts receivable, lease, open account) is secure. For example, the financial guarantee could be useful in a situation where an obligation from a sale requires an endorsement.
Standby letter of credit
To facilitate negotiations with suppliers
The standby letter of credit originated in the United States at a time when banks were prohibited from issuing documentaries of guarantee. A standby letter of credit plays the same role as a documentary of guarantee, and can be used in all of the above situations, notably to demonstrate the seriousness of a tender, contract or financial commitment.
Bank assistance to simplify documentary collection
Documentary collection is the procedure by which a bank can claim an amount due from a buyer, against presentation of commercial papers (e.g., business invoices, shipping documents, various certificates), supported or not by other financial documents (e.g., drafts, bills of exchange, promissory notes).
The bank carries out the function of agent and intermediary between the seller (exporter) and the buyer (importer). On instruction of the exporter or its bank, the bank presents the importer with documents regarding the shipping of goods or the execution of a service, in order to obtain either payment ("payable at sight") or the buyer's acceptance.
Contrary to the irrevocable documentary credit in which an issuing bank irrevocably commits to making a payment, the bank that presents the documents to the buyer is in no way obliged to pay out if the buyer does not fulfil his payment obligations.
This product is used when a buyer and seller have built a relationship on trust, and the risks related to the political, economic and legal situations of the seller's country are acceptable to the buyer.