What is the difference between DP and LC in foreign trade? Different?

In foreign trade, the difference between D/P and L/C is as follows:

1, different concepts.

DP is also bank collection, that is, you give the documents to your bank, and the bank sends them to the other bank (usually the bank designated by the customer). The other bank will notify the guest after receiving the documents, and the guest will pick up the documents after paying the money.

Letter of credit refers to a payment method in export trade. The Chinese full name is documentary credit. LC is paid by letter of credit, which is safer and the handling fee is higher. At present, 30%TT payment and letter of credit payment are relatively safe payment methods for exporters, and the utilization rate is high. Among them, TT payment is more and more used by traders because of its simple method. Letters of credit are widely used in South America, the Middle East and Asia.

2. The objects of protection are different.

The letter of credit is guaranteed by the bank's credit, and the issuing bank is responsible for the first payment. As long as there are no discrepancies in the documents submitted for negotiation, the bank must unconditionally pay in full within n days after seeing the documents, regardless of whether the applicant (buyer) wants the goods.

Although there are banks involved in DP, it is guaranteed by the commercial credit of the trading enterprise (buyer), and the bank is not responsible for any payment. The bank will take the money away only after the buyer agrees to pay. The risk of DP's foreign exchange collection is relatively large, which is borne by the export enterprises themselves.

3. Different payment methods

DP is D/P. After delivery, the negotiation documents are prepared and sent to the customer's bank through the bank. The customer's bank will remind the customer that the documents have arrived, and the customer will deliver the documents after payment.

The payment method of LC letter of credit belongs to bank letter of credit, which is a very safe payment method. However, the credit of the issuing bank must be good, the documentary staff should carefully examine the documents, and the company's business, storage and transportation, and documentary departments should coordinate to avoid discrepancies in the documents.