Documentary collection · Concepts · European Finance Observatory

Roles that need it

Letter of credit (documentary credit)A letter of credit, also called a documentary credit, is a bank's undertaking to pay a seller a stated amount if the seller presents documents that comply with the credit's terms. It replaces the buyer's credit risk with a bank's and is usually subject to the ICC rules UCP 600. A confirmed credit adds a second bank's undertaking.
Bill of ladingA bill of lading is the document a carrier issues for goods shipped by sea. It is a receipt for the goods, evidence of the contract of carriage and, when negotiable, a document of title, so whoever holds it can claim the goods. Banks often require a full set of original bills under letters of credit and documentary collections.
Incoterms rulesIncoterms are International Chamber of Commerce trade terms that define, in three letters, who arranges and pays for transport, insurance and customs, and where risk passes from seller to buyer, for example EXW, FCA, FOB, CIF and DDP. The current version, Incoterms 2020, has 11 rules. They leave price, payment and transfer of ownership to the sales contract.

Updated 31 Oct 2026.