Documentary credit letter is a commercial term used especially in the international business transaction. It is a payment term which is actually a mechanism to allow buyers/ importers to offer safe payment terms to sellers/exporters. Bank plays a role of a payer in these transactions. Documentary credit is a technical term for letter of credit. In the international trade dealings, buyers prefer shifting the risk of payment on the bank instead of they themselves carrying the cash and paying off the sellers. Letter of credit is a document which is a payment undertaking which a bank gives to the seller on behalf of the buyer. Credit letters are a two way communication and the buyer is the applicant and the seller is the beneficiary in this communication. The bank in the country of the buyer issues the letter of credit and hence is called the Issuing Bank. The bank ideally in the country of the seller advises the letter of credit to the seller and hence is called the Advising Bank.
Here is a sample credit letter issued by a bank.
Name of the Bank along with the full Address
Irrevocable letter of Credit No.
Beneficiary: Commodity Credit Corporation
Account Party: Name of Buyer/ Exporter
Address of Buyer/ Exporter
To Whosoever it may concern,
This is to officially open our irrevocable credit in your favor for the sum not exceeding the total of ___dollars ($___), to be made available at your request made in the application dated (___) for the at sight payment.
(Insert applicable statement)/2
This Letter of Credit is valid from the date mentioned above till ___, provided, that this Letter of Credit will be automatically extended without any revision for ___ from the present or any future expiration date thereof, unless a written notice is provided by the Issuing Bank to the Commodity Credit Association at the U.S. Department of International Trade and Commerce at least 30 days prior to any such expiration.
(Name of Bank)
This is how a letter of credit is supposed to be written. This being a part of commercial sector comes under the formal type of written communication and hence the credit letter is a short piece of writing with only relevant points getting a place in the document.