We have seen that, by issuing a documentary credit, the issuing bank is committed to honouring the payment provided the correct documentation is presented. If the credit is also confirmed by the receiving bank, the supplier will have an extra guarantee from their bank. If the correct documents are presented, they will benefit from guaranteed payment collection once the documents have been presented to their bank.
The beneficiary of a documentary credit, in other words the exporter, must assess whether it is worth paying the fees charged for the confirming service, according to the characteristics of the importer’s country and bank. If the exporter considers that the country and issuing bank provides sufficient confidence to guarantee collection of payments, the credit does not need to be confirmed.
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