Payments against documents

A documentary credit is an obligation accepted by the bank at the request of the buyer (documentary credit applicant) to pay the amount of the documentary credit to the seller (documentary credit beneficiary), after the latter has presented documents satisfying the documentary credit conditions and terms.

1. The seller and the buyer conclude a contract.
2. The buyer approaches its bank for the issue of a LC.
3. The buyer's bank ensures that the buyer has the necessary amount for the LC: funds in the buyer's account are reserved or a credit line is granted.
4. The buyer's bank sends the LC to the seller's bank.
5. The seller's bank informs the seller about the LC.
6. The seller effects shipment of the goods.
7. The seller submits to its bank documents specified in the LC terms and conditions.
8. The seller's bank sends documents to the buyer's bank.
9. The buyer's bank makes payment to the seller's bank.

• by issuing a documentary credit, the buyer proves his solvency;
• the buyer has the possibility of foreseeing the terms for shipping out the goods;
• the seller is paid only after documents witnessing to the loading of the goods and showing the quantity of goods that were loaded have been presented to the bank. The following documents can be included in the documentary credit conditions:
  • a commercial invoice;
  • documents confirming the quality of the goods;
  • documents confirming the manner of transporting the goods and their shipment;
  • insurance during their carriage and other documents important to the buyer.

The buyer must take care that the documents foreseen in the documentary credit do not allow payment to be executed to the seller in accordance with the documentary credit after entirely different goods or poor quality goods have been delivered.

By issuing a documentary credit with deferred payment, the buyer has the possibility to pay the documentary credit after the goods have been sold.

If you are the buyer, Danske Bank A/S Lithuania Branch will issue a documentary credit when you fill out an application for issuance a documentary credit and funds have been reserved for the amount of the credit issued or a credit limit to obtain the documentary credit has been granted to your company. The Bank's specialists will help advise you on what documentary credit conditions would be the most advantageous to you.

• the seller has the Bank's obligation to pay the documentary credit if documents satisfying the documentary credit conditions are presented on time and the other documentary credit conditions are fulfilled;
• when transporting goods over a long route, payment can be received faster than the goods reach the buyer.

If you are the seller, when concluding the contract indicate Danske Bankas's information (AB "Danske Bankas", Saltoniškių g. 2, LT-08500 Vilnius, S.W.I.F.T.- SMPOLT22, telex- 26 10 04 LDB LT.), on the basis of which the buyer's bank will issue a documentary credit in favour of you through our bank. The Bank's specialists will help you conclude a contract envisaging those documentary credit payment conditions most favourable to you.