Prepaid Documentary Credit

If you're an existing HSBC New Zealand customer, simply complete the form available at your local trade services office.

If you're a new customer to HSBC New Zealand, you'll need to open an account with us first - to do this, contact us on 0508 443 924 and we'll take you through the process.

Remember, you will need to have sufficient cleared funds with us before we can establish the DC.

Documentary Credits (also known as Letters of Credits - LCs) are one of the most popular ways of doing international business as they offer a good level of protection for both the buyer and the seller.

As an importer it can be difficult to be sure the goods you have ordered will be as specified, or that they will arrive at the time and place you have agreed with your supplier. A Documentary Credit (DC) is an agreement that the seller will receive payment upon presentation of a pre-agreed, specified set of documents to their bank. Time scales, despatch dates and other terms can be built into the Documentary Credit as required.

The key advantage of Documentary Credits is that they are controlled through the banking system. Since payment is dependent upon the exporter supplying a range of specified export documents to their bank, the importer can be much more confident that the goods they have ordered will be as specified in the contract, and delivered at the agreed time and place.

Each Documentary Credit can be tailored to your individual requirements, allowing terms to be built into the contract governing shipping, delivery, insurance and quality inspection. This in turn allows you to use the goods or sell them on with confidence, thereby fulfilling orders with different customers.

Dealing on Documentary Credit terms provides security of payment for your supplier, giving you extra bargaining power to secure a price discount on your imported goods - most exporters will typically build in heavy price penalties to protect themselves from the risk of late payment.

DCs can also be used to raise finance before or after the shipment of the goods - think carefully about your financing requirements when negotiating the underlying contract to ensure that the Documentary Credit doesn't include any unacceptable conditions.

The use of Documentary Credits is typically suited to importers or companies who trade on an international basis and who wish to offer competitive trading terms whilst retaining control over shipment terms and dates. It's worth knowing that in some parts of the world, such as the Far East, Asia or Middle East, Documentary Credits are the preferred choice for international trade transactions.

Pricing on application.