LETTER OF CREDIT

• Revocable and Irrevocable Letter of Credit

• A revocable letter of credit can be changed or
cancelled by the bank that issued it at any time and
for any reason. It is uncommon
• An irrevocable letter of credit cannot be changed
or cancelled unless everyone involved
agrees. Irrevocable letters of credit provide more
security than revocable ones.
• An unconfirmed irrevocable letter of credit provides
a commitment by the issuing bank to pay, accept,
or negotiate a letter of credit.
• An advising bank forwards the letter of credit to
the beneficiary without responsibility or undertaking
on its part but confirming its authenticity.
• Irrevocable Confirmed LC (Highest level of protection)
• A letter of credit issued by a bank on behalf of
a buyer that guarantees payment for goods receive, that
is also guaranteed by the bank (Confirming bank).
• The irrevocable letter of credit removes the seller's credit
risk by assuring the seller that payment will be made by
the buyer's bank if the buyer does not pay the seller.
• Sight LC and Time /Usance LC
• A sight LC causes payment to be made immediately to
the beneficiary upon presentation of the correct
documents.
• Usance LC also known as Deferred Payment Letter of
Credit or Time LC or Term LC is a letter of
credit payable at a predetermined future date after the
requisite documents are presented.
• A Red Clause Letter of Credit is a specific type of letter of
credit in which a buyer extends an unsecured loan to a
seller. Red Clause Letters of Credit permit documentary credit
beneficiaries to receive funds for any merchandise outlined in
the letter of credit.
• Revolving Credit is Instead of arranging a new L/C for each
separate shipment, the buyer establishes a L/C that revolves
either in value (a fixed amount is available which is replenished
when exhausted) or in time (an amount is available in fixed
installments over a period such as week, month, or year).
• Transferable letters of credit should be issued in an irrevocable
form. A letter of credit can be transferred to the second
beneficiary at the request of the first beneficiary only if it
expressly states that the letter of credit is "transferable". A
bank is not obligated to transfer a credit.
• Back-to-back :Back-to-back letters of credit occur when a buyer
gives a letter of credit to a seller, who then obtains a letter of
credit for a supplier.
• https://shippingandfreightresource.com/letter
-of-credit-and-trade-finance-timelines/

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