A documentary credit, also known as a letter of credit (L/C), is a written undertaking by a bank on behalf of a buyer / importer to pay the seller an amount of money within a specified time provided the seller presents documents strictly in accordance with the terms laid down in the L/C.
The Summary of Operational Procedure in Issuing L/C
- Presenting the original of the proforma invoice
- Registering orders in the Ministry of Commerce
- Presenting the original of insurance policy, indicating the goods being insured in any Iranian insurance company as well as the insurance premium payment receipt
- Presenting the necessary mortgages and guarantees (as per the related approval)
- Filling-in L/C application form and L/C issuance Jealeh contract
- Signing the related written undertakings (undertake payment for difference in exchange rate, undertake presentation of custom release, undertake presentation of required import authorization
- Receiving the related advance payment and commissions and charges from the customer
Documentary collection is a transaction whereby the exporter entrusts the collection of payment to the remitting bank (exporter’s bank), which sends docu¬ments to a collecting bank (importer’s bank), along with instructions for payment. Funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents.