Advance payment, collection, and documentary credit create different document, timing, and cost flows. Do not select among them from trust or a universal order-value threshold; compare the actual contract and bank terms.
Get a dated written bank quote covering issuance and processing fees, correspondent charges, currency, validity, amendment or discrepancy costs, and payment timing. Agree with the counterparty which side pays each item.
Align goods description, amount, payment milestone, shipment or delivery term, and exact names of documents to be presented to the bank with the seller. Check number of originals, issuer, dates, and presentation window against the contract.
Do not make an irreversible production or shipment commitment before the bank wording and sales contract are final. Review document discrepancies and timing with the bank and contract adviser; assume no fixed fee or payment guarantee.
Under ICC UCP 600, a credit is separate from the sales contract and banks examine presented documents, not goods or performance. Match document descriptions, expiry, and place of presentation to the actual shipment, and agree discrepancy handling with the bank. Do not describe a bank undertaking as an unconditional payment guarantee.
