A company may reduce the risks associated with international trade by choosing a documentary credit as the form of payment. In documentary credit, the purchaser's bank provides the seller with an irrevocable payment commitment, and, by fulfilling the terms and conditions, the seller will receive payment. For the purchaser, a documentary credit provides the opportunity to control the import event. The banks of both parties supervise the payment and the transfer of documents.
Documentary credit is used everywhere in the world, but mostly in Asia and the Middle East. Documentary credit is suitable for all kinds of trade, particularly for project-type deliveries. The use of documentary credit is based on international rules, which makes it a safe form of payment for both parties.