Documentary operation

Conclusion of a contract between buyer and seller does not ensure that the buyer will acquire the goods, and that the seller will receive payment. For successful long-term business operations you need to take measures in time to reduce risks in international trade, as well as in domestic trade. The documentary letter of credit and documentary collection are important payment instruments which enable the reduction of risks in international and domestic payment transactions.

At Raiffeisen Bank d.d. we provide assistance and advice for selection of the most suitable form of payment.

Letter of credit

The international documentary letter of credit is one of the most important instruments of international payments in foreign trade payment transactions; however, it also serves as an insurance instrument and as a financing instrument for international business operations. As an insurance instrument it is used as risk insurance against non-fulfillment and partial fulfillment of contractual obligations. Because of widespread financial indiscipline, it is also in use as a domestic documentary letter of credit since it transfers the risk of non-payment to the bank, and in this way guarantees stronger security than drafts.

In case of your participation in a business transaction as a vendor or beneficiary of a letter of credit, the guarantee of the bank which issued the letter of credit ensures that the bank will settle the debt if you present the according documents. In this way, your business transactions become independent of liquidity or the payment solvency of your buyer.

On the other hand, as a buyer or a contracting entity of a letter of credit you receive an assurance that the ordered goods were sent in the agreed amount and quality upon the presentation of the documents. As the contracting entity of the letter of credit you can also arrange a deferred payment of your liabilities with your bank.

The letter of credit is transferable and is used especially when you are not acting as a vendor and manufacturer of goods at the same time. The transfer of the letter of credit in favour of your supplier of goods can partially or in whole cover your liabilities to your suppliers

As a bank which issues letters of credit, we offer various letters of credit:

• export (loro) and import (nostro)
• domestic and international
• in accordance with the method of payment: letters of credit with access, with a deferred payment and stand-by letters of credit.

Business operations by collections and cheques

The documentary collection is a payment instrument, and at the same time a specific form of payment insurance for the buyer and the seller in international business transactions. It is intended for business partners who know and trust each other, while it ensures greater security as a free transaction since the bank as the mediator takes up only the implementation of the payment. Collection presents a guarantee for payment to the seller, and it guarantees the delivery of the requested goods to the buyer in accordance with contractual rules. The bank is obliged to hand over the documents only against the draft acceptance or immediate payment to the buyer, which ensures that the seller will receive payment for the delivered goods.

Procedure

• As the seller (exporter) you send the goods to the buyer (importer) and submit to us the required export documents.
• The bank forwards these documents to the buyer's bank (collection bank) for realization. The latter hands over the documents to the buyer
  - against payment of D/P (Documents against Payment) or CAD (Cash against Documents), which presents immediate payment of goods or services on the presentation of the documents;
  - against payment of D/A (Documents against Acceptance), which presents acceptance of the draft by the buyer. The latter receives the documents with acceptance, which means that he can collect the goods, while the payment proceeds only after receipt of the draft. The period until the payment of the draft presents a payment risk for the seller.
• After the provision of the coverage, the buyer's bank or the collection bank proceeds with the payment to your bank, which transfers the funds to your current account.

Kinds

• Import (loro): The bank invites the importer to pay on the basis of the received documentation. After the payment, the importer receives the documentation which is the basis for the takeover of goods.
• Export (nostro): The exporter submits the collection instructions to the bank, which the bank sends to the importer or to his bank for collection, and inflow by the collection.