State the different steps involved in a confirmed documentary letter Essay

State the different steps involved in a confirmed documentary letter of credit, with payment terms of ninety days sight. Then compare and contrast documentary collections and documentary letter of credit - Essay Example Afterwards, the beneficiary or the seller then transports the goods and comes up with the documents required to support the letter of credit. It is after presenting the relevant documents to the advising bank or the confirming bank that the documents can be processed for any payments to be done (Barru, 2005). The confirming or advising bank scrutinizes the documents to establish compliance with the provided letter of credit. In the event that the details are correct, the advising or confirming bank can put claims of funds through either obtaining a debit from the issuing bank’s account, waiting for some period of time to allow the issuing bank to remit or through any other bank as per the requirements of the credit. After this, it will be upon the advising or confirming bank send the documents to the issuing bank which again examines the papers for compliance and in case there are no complications, the issuing bank debits the account of the buyer. Finally, the issuing bank performs yet another duty of sending the documents back to the buyer (Azar & Abdallah, 2015). One of the similarities between the documentary collections and letters of credit is that the execution of both of these payments is performed by the banks. Moreover, documents are very essential in both of the payments and this becomes the second similarity between the two methods of payments. The third similarity is that both of these documents are governed by rules of trade which are accepted internationally (Barru, 2005). While the letters of credit majorly fall under the governance of UCP 600, cash against documents payments in this case referred to as documentary collects fall under the governance of the rules outlined in URC 522 (Ilie, 2015). For the letters of credit to be opened by the bank that issues them the applicant must be willing to accept the banks request to open them or in other