Documentary credits and their role in foreign trade

Abstract

Race with the developments of monetary and banking performance and to avoid the dangers and the problems surrounding the import and export operations, the idea of ​​documentary credits as a tool to regulate foreign trade and to provide the guarantees sought by the parties to foreign transactions through banks to act as a mediator between the importer and exporter, where she holds these banks process the completion of transactions that occur between the parties and ensure payment of the value of imports to the source or capture the value of exports from the importing means that the said trade deals should be done between two parties present in two different countries are the exporter and importer to benefit from the advantages of documentary credits. This means that the documentary credit is a contract arises between two parties and the local bank where the customer under which the local bank to open a letter of credit at the request of the customer for the purpose of import of certain goods from abroad for the benefit of foreign source who ship these goods to the importer.