Understanding CREDOC: A Guide to Reducing Commercial and Country Risk

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[...] Irrevocable and confirmed documentary credit According to the definition of Banque-info.com, the mention 'confirmed' means that a bank domiciled in the exporter's country guarantees payment upon receipt of the documents. Through the confirmed CREDOC, the importer's bank entrusts its financial commitment to another banking agency affiliated with the exporter's country. This is the corresponding bank. The exporter then has a local contact to ensure the effective settlement of the transaction, upon receipt of the required documents conforming to the CREDOC6. III. Modes of realization A. [...]

[...] We specify below the specifics and implications of the different parties involved3 : ? Applicant The applicant resorts to the CREDOC system to guarantee the financial transaction up to the beneficiary. He is the instructor of the CREDOC procedure, communicating the necessary information to the issuing bank. ? Issuing Bank The issuing bank initiates the CREDOC procedure. It produces a document that is then transmitted to the beneficiary. ? Notifying/Reimbursing Bank The notifying bank is the beneficiary's bank. It is responsible for informing the beneficiary of the financial transfer concerning him. [...]

[...] The buyer (issuer) requests their bank to open a CREDOC with the notifying bank of the exporter (beneficiary)16. B. The agreement between the issuer and the issuing bank Once the procedure is negotiated contractually with the seller, the buyer makes a formal request for the issuance of a CREDOC to the issuing bank, specifying the conditions of its realization. This includes in particular information on the invoice amount, the deadline for sending, the mode of transport used, the Incoterm, the required documents, and the payment due date . [...]

[...] The CREDOC operations contractually engage the sender and the buyer. It appears on standard procedures that the shipment of the goods is effective before the payment is made by the buyer. In other words, the sender places its trust in its agreement with the buyer, formalized by the document bundle, as well as in the banking system used for the transfer26. It is in this way that the conformity of the documents on which the CREDOC is based is essential for the securing of the financial transfer. [...]

[...] The consequences of these operational risks particularly affect the delivery deadlines to the client, and the payment of delivery. Indeed, taking into account the elements developed in this study, it appears that the multiplication of human treatments leads to a higher error rate. The most common errors concern computer input, the processing of the document bundle (constitution and verification), as well as management choices related to the CREDOC procedure. The CREDOC procedure being characterized by a strong administrative rigor, any error in this regard leads to at least delays for the correction of the errors detected. [...]