Following the provisions of UCP 600, a credit is any operation for which a bank, collecting on behalf of and by order of a client, undertakes to:

Honor[4]​ means:.

The bank's obligations may be subject to the delivery of documents of a commercial nature (bill of lading, commercial invoice), customs (certificate of origin) or technical (quality certificate), and may vary according to the instructions of whoever orders the opening of said credit.

It is the bank in which the credit is available, or any bank in the case of a credit available with any bank (article 2 of the UCP 600). The designated bank is the bank where the documents are presented or, in other words, the bank where the credit can be used.

The designated bank may be: the issuing bank, the intermediary bank or any other bank.

A credit available at a designated bank other than the issuing bank will also be available at the issuing bank.

Along with the UCP, there are other complementary rules of the ICC that must be interpreted together:

Domestic

It is the letter of credit opened in favor of a beneficiary who is domiciled locally and, generally, does not require the intervention of another financial institution. It establishes a triangular relationship between the originator of the instrument, the issuing bank and the selling beneficiary.

It is the letter of credit opened in favor of a beneficiary who is domiciled in the country. Foreign banks generally intervene as intermediaries before the beneficiary.

When opening the letter of credit, the bank sends it to its foreign correspondent to add its confirmation and notify the beneficiary, directly or through its own correspondent in the destination country.

Cash on payment

This type of letter can be subdivided into demand and deferred payment.

What a letter of credit guarantees is payment for products shipped to a buyer anywhere in the world.

Against acceptance

The credit is available upon presentation of documents and a bill of exchange released on time against a bank designated for the credit, which may be the issuer or recipient itself.

Against Negotiation

The credit is available upon presentation of documents and a bill of exchange released on demand or on time against the issuing bank.

The negotiating bank “purchases” the beneficiary's rights over the credit on behalf of the issuer.

A freely negotiable credit can be negotiated by any bank.

Irrevocability of Documentary Credit[5]​

From the point of view of the issuing bank's commitment, documentary credits are irrevocable. The revocable documentary credit will no longer be covered by the Uniform Rules and Practices (UCP) as of the last revision (UCP 600).

The irrevocable documentary credit represents a firm commitment of the bank that issues it to the beneficiary, provided that the beneficiary has strictly complied with the conditions that appear in the clauses of the documentary credit. The terms of these credits cannot be canceled or modified without the prior agreement of all parties involved.

Nominative or negotiable

The letter of credit that expressly indicates the banks authorized to confirm, notify and negotiate the instrument is nominative, and those that do not expressly indicate the banks nominated to intervene in its management will be freely negotiable.

On sight, by acceptance or by deferred payment

Depending on its availability, the letter of credit may be at sight when payment is made immediately upon presentation of compliant documents; by acceptance, when payment is produced by the paying bank's acceptance of a bill of exchange issued for a certain period, or by deferred payment, when payment is established within a specific period after the use of the instrument (days of the invoice date or the issuance of the transport document).

Contenido

La emisión, modificación, reembolso, aviso de reservas y otras operaciones relacionadas con el crédito documentario se hacen a través de mensajes SWIFT de la categoría 7.

Society for Worldwide Interbank Financial Telecommunication.

Types of Category 7 messages

In addition to those outlined in the previous table, there are MT 760, 767, 768 and 769, referring to guarantees and MT 790, 791, 792, 795, 796, 798 and 799, that regulate interest expenses and other aspects (questions, answers, message properties and free format message).

MT 700 Message

These are messages for opening a documentary credit, which comply with a message format that conforms to the standards imposed by SWIFT. The message is sent by the issuing bank of the credit to the notifying bank (adviser), so that it can communicate the opening to the beneficiary and inform him of the conditions of the credit. Unless otherwise stated, the credit will be subject to the UCP 600 Rules. Likewise, a documentary credit notified to the beneficiary through a SWIFT message constitutes the operational instrument of the credit. The exception will be found in the advance notice (MT 705), which is not considered an operational instrument of the credit.

The SWIFT standards include validation rules (network validated rules) for all messages.

Following the provisions of UCP 600, a credit is any operation for which a bank, collecting on behalf of and by order of a client, undertakes to:

Honor[4]​ means:.

The bank's obligations may be subject to the delivery of documents of a commercial nature (bill of lading, commercial invoice), customs (certificate of origin) or technical (quality certificate), and may vary according to the instructions of whoever orders the opening of said credit.

It is the bank in which the credit is available, or any bank in the case of a credit available with any bank (article 2 of the UCP 600). The designated bank is the bank where the documents are presented or, in other words, the bank where the credit can be used.

The designated bank may be: the issuing bank, the intermediary bank or any other bank.

A credit available at a designated bank other than the issuing bank will also be available at the issuing bank.

Along with the UCP, there are other complementary rules of the ICC that must be interpreted together:

Domestic

It is the letter of credit opened in favor of a beneficiary who is domiciled locally and, generally, does not require the intervention of another financial institution. It establishes a triangular relationship between the originator of the instrument, the issuing bank and the selling beneficiary.

It is the letter of credit opened in favor of a beneficiary who is domiciled in the country. Foreign banks generally intervene as intermediaries before the beneficiary.

When opening the letter of credit, the bank sends it to its foreign correspondent to add its confirmation and notify the beneficiary, directly or through its own correspondent in the destination country.

Cash on payment

This type of letter can be subdivided into demand and deferred payment.

What a letter of credit guarantees is payment for products shipped to a buyer anywhere in the world.

Against acceptance

The credit is available upon presentation of documents and a bill of exchange released on time against a bank designated for the credit, which may be the issuer or recipient itself.

Against Negotiation

The credit is available upon presentation of documents and a bill of exchange released on demand or on time against the issuing bank.

The negotiating bank “purchases” the beneficiary's rights over the credit on behalf of the issuer.

A freely negotiable credit can be negotiated by any bank.

Irrevocability of Documentary Credit[5]​

From the point of view of the issuing bank's commitment, documentary credits are irrevocable. The revocable documentary credit will no longer be covered by the Uniform Rules and Practices (UCP) as of the last revision (UCP 600).

The irrevocable documentary credit represents a firm commitment of the bank that issues it to the beneficiary, provided that the beneficiary has strictly complied with the conditions that appear in the clauses of the documentary credit. The terms of these credits cannot be canceled or modified without the prior agreement of all parties involved.

Nominative or negotiable

The letter of credit that expressly indicates the banks authorized to confirm, notify and negotiate the instrument is nominative, and those that do not expressly indicate the banks nominated to intervene in its management will be freely negotiable.

On sight, by acceptance or by deferred payment

Depending on its availability, the letter of credit may be at sight when payment is made immediately upon presentation of compliant documents; by acceptance, when payment is produced by the paying bank's acceptance of a bill of exchange issued for a certain period, or by deferred payment, when payment is established within a specific period after the use of the instrument (days of the invoice date or the issuance of the transport document).

Contenido

La emisión, modificación, reembolso, aviso de reservas y otras operaciones relacionadas con el crédito documentario se hacen a través de mensajes SWIFT de la categoría 7.

Society for Worldwide Interbank Financial Telecommunication.

Types of Category 7 messages

In addition to those outlined in the previous table, there are MT 760, 767, 768 and 769, referring to guarantees and MT 790, 791, 792, 795, 796, 798 and 799, that regulate interest expenses and other aspects (questions, answers, message properties and free format message).

MT 700 Message

These are messages for opening a documentary credit, which comply with a message format that conforms to the standards imposed by SWIFT. The message is sent by the issuing bank of the credit to the notifying bank (adviser), so that it can communicate the opening to the beneficiary and inform him of the conditions of the credit. Unless otherwise stated, the credit will be subject to the UCP 600 Rules. Likewise, a documentary credit notified to the beneficiary through a SWIFT message constitutes the operational instrument of the credit. The exception will be found in the advance notice (MT 705), which is not considered an operational instrument of the credit.

The SWIFT standards include validation rules (network validated rules) for all messages.