Import Letters of Credit

A documentary letter of credit, or as more commonly referred to as a letter of credit, is a conditional payment guarantee given by Danske Bank to the foreign supplier to facilitate the payment for goods or services. Payment will only be made when Danske Bank receive the documents from the supplier and they comply with the terms and conditions of the letter of credit.

How can letters of credit help your business?

  • No obligation to pay until all the conditions of the letter of credit are met
  • Enhances your credibility with your foreign supplier
  • Opportunity to negotiate improved trade terms because of the secure and quicker payment method
  • May offer an alternative to traditional forms of bank finance
  • Helps manage your liquidity and improve your cashflow

What is the process for letters of credit?

  1. A contract is made between the exporter and the importer who then agree the method of payment is a letter of credit.
  2. The importer discusses the requirements and the issuance of the letter of credit with his Relationship Manager and/or our Trade Finance Specialists.
  3. The Relationship Manager will set up a credit facility to cover the letter of credit transaction(s).
  4. The importer completes a letter of credit application which is processed by our Trade Finance team.
  5. The letter of credit is issued and sent by SWIFT to the exporter’s bank (also known as the ‘advising bank’) or to one of our foreign correspondent banks in the specific country.
  6. The exporter ships the goods and presents documentation to their bank which is then sent to our Trade Finance team.
  7. Our Trade Finance team will check the documents and provided they comply with the terms and conditions of the letter or credit, payment will be made either immediately or on an agreed future date.
  8. If there are errors in the documents, our Trade Finance team will refer any irregularities to the importer and obtain their agreement before releasing documents to them.

Other types of letters of credit

Standby Letter of Credit

A standby letter of credit is a guarantee that a bank or a financial institution provide. This is an undertaking which is activated only if something goes wrong between the buyer and the seller, such as the buyer defaulting and the expected payment does not take place. It therefore allows the seller to enforce a claim.

A standby letter of credit is similar to a bank financial guarantee with the main difference being they are covered by the same rules as letters of credit, UCP600 or ISP98 which deal specifically with this type of letter of credit.

View a sample standby letter of credit here

Important information

Letters of credit are subject to a set of international rules called Uniform Customs and Practice for Documentary Credits (UCP), Publication No. 600. The rules are set by the International Chamber of Commerce (ICC) in Paris and are used by banks worldwide.

ISBP

International Standard Banking Practice (ISBP) for the Examination of Documents under Documentary Credits is a checklist of best practice worldwide for checking documents under ISP98.

Contact your Relationship Manager as credit facilities must be in place to support import letters of credit.

Whether we provide credit depends on your circumstances, and you must be 18 or over. Lending terms and conditions apply.

You may need to provide security.

Please refer to our Fees and service charges explained – foreign payments leaflet for important information on the Trade Finance charges.

Ready to apply?

Get in touch with us using one of the ways below.

Please note you must be an existing Danske Bank business customer to avail of this service.

If you are interested in finding out more about import letters of credit, please contact Ruth Graham, Head of Trade Finance:

Telephone: 07718 153904

Alternatively you can speak to one of our Trade Finance specialists.

Telephone: 028 9004 8133

Calls may be recorded. Lines are open between 9am and 5pm Monday to Friday except for bank holidays or other holidays in Northern Ireland when the bank is not open for business.

If you’re an existing Danske Bank business customer, you can apply for a letter of credit through District, our online banking platform. Alternatively you can download our letter of credit application form. This should be completed and returned to:

Danske Bank, Trade Finance,
Donegall Square West,
Belfast
BT1 6AX