Issues with documentary credits

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 issue of documentary credits

Important considerations

  • The complexity of operations

  • The involvement of a company’s various departments

  • An administrative complexity that leads to significant load breaks within the documentary chain

  • The strictness of procedures (13 different operations)

  • A lack of task automation

The documentary credit is still perceived as a complicated instrument. In addition, there is a succession of commissions that are calculated using different bases and rates, which does not make its cost clearly visible to the user.

For a vast majority of exporters, documentary credits are synonymous with bank reserves*, which instantly entail difficulties in managing their export risks. This can also lead to an increase in financial costs and a negative impact on the company’s cash flow.

Many companies are concerned about their documentary processes, which feature critical areas that are characterised by a lack of automation. This lack of automation often results in significant and relatively costly load failures, in terms of operational costs.

These critical areas are the source of errors and a lack of fluidity, which highlights the notion of “administrative complexity” that exporters face when operating with documentary credits.

(*) anomalies and errors found in the use of documentary credits