Documentary Credit

Definition

• Written undertaking by a bank on behalf of an importer authorizing an exporter to draw drafts on the bank up to a specified amount under specific terms and conditions. They are used to facilitate international trade. In the United States, these instruments are called commercial letters of credit.

Synonyms
commercial letter of credit, letter of credit arrangement

Related Terms and Acronyms

• Letter of Credit (L/C) — Acronym,
  • A letter authorizing a person or company to draw on a bank or stating that the bank will honour the credit up to the stated amount.
• North American Free Trade Agreement (NAFTA) — Acronym,
  • An agreement between the United States, Canada, and Mexico that allows for freer trade between the three countries.