Saturday Brain Storming Thought (198) 25/11/2023

TRANSFERABLE LETTER OF CREDIT

A Transferable letter of Credit is a letter that allows the first beneficiary to transfer some or all of the credit to another party, creating a secondary beneficiary

A Transferable letter of credit is often used in business deals to ensure payment to a supplier or manufacturer and is an alternative to making an advance payment

Key Takeaways of a Transferable letter of credit

1) A transferable letter of credit permits an initial beneficiary to transfer some or all of the credit they are due to another party

2) Transferable letters of credit are used in certain business deals to ensure that payment is made to a supplier or manufacturer

3) the parties involved in a transferable letter of credit, in addition to the bank, are the applicant (the buyer of goods or services), the first beneficiary

4) the first beneficiary (such as retailer or broker), and the second beneficiary (such as supplier or manufacturer)

Transferable standby letter of credit

A Transferable standby LC (letter of credit) is a legal document that guarantees a banks commitment to a seller

The guarantee stands even if the buyer defaults on the agreement due to some reasons or circumstances

Transferring bank in LC

Transferring bank in LC is a nominated bank that transfers the credit

A transferring bank can also be a bank authorized explicitly by the issuing bank to transfer the credit

An issuing bank can also be a transferring bank

Transferable LC transferred times

A Transferable LC can only be transferred to one or more second beneficiaries, but it cannot be transferred further

Conformity of transferable LC

1) LCs are based on conditional commitments

2) The banks prepare them at the importers request

3) A transferable LC itself is a confirmation that the payment will be made subject after the specific terms and conditions are fulfilled

4) The issuing bank can confirm the authenticity of an LC

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