Define: Availability Under Documentary Credit

Availability under documentary credit refers to the ability of the beneficiary of a letter of credit to access the funds promised by the issuing bank. Documentary credits are commonly used in international trade transactions to provide a secure method of payment.

The availability of funds is subject to compliance with the terms and conditions specified in the letter of credit. These conditions typically include the presentation of specified documents, such as invoices, bills of lading, and certificates of origin, within a certain timeframe.

The beneficiary must ensure that the presented documents conform to the requirements stated in the letter of credit. Any discrepancies may result in a delay or rejection of payment. The issuing bank has the right to examine the documents and determine their compliance.

Once the documents are deemed compliant, the issuing bank is obligated to honour the payment commitment and make the funds available to the beneficiary. The availability of funds may be immediate or subject to certain conditions, such as the expiration of a specified period or the occurrence of a particular event.

In summary, availability under documentary credit refers to the beneficiary’s ability to access the funds promised by the issuing bank upon compliance with the specified terms and conditions. It is crucial for the beneficiary to carefully review and ensure the conformity of the presented documents to avoid any delays or rejections in payment.

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This glossary post was last updated: 11th April 2024.