Types of L/C: [Last Updated by: admin on 2012-01-01]
Irrevocable - a Credit which cannot be retracted or revoked once the beneficiary has been notified; there is a presumption under the UCP 500 that a Credit is irrevocable. ? advised -a Credit the opening of which the beneficiary has been informed by a local bank. ? confirmed -a Credit which has received an additional guarantee of payment by a local or highly reputable bank. ? back-to-back -a system utilised by middlemen/intermediaries to finance a single transaction through the use of two L/C's opened in succession (e.g.,"back-to-back") in order to permit the middleman/broker to use the ' proceeds from the first Credit to pay off his supplier under the second credit. ? transferable -an L/C which allows the beneficiary to make part or all of his Credit payable to another supplier; used in middleman/brokerage contexts; distinguishable from back-to-back L/C's because the transferable Credit requires the knowledge and authorisation of the importer (applicant/principal). ? revolving -a Credit which can be drawn against repeatedly by the beneficiary; : can take a variety of different forms, depending on whether the credit is limited ' in terms of time, number of possible drafts, maximum quantity per draft, or maximum total quantity. ? cumulative revolving L/C - revolving L/C under which unused amounts . can be carried forward and become available under the next draft. ? red clause - an L/C allowing payments of advances to the beneficiary (originating in the wool trade in Australia, these clauses used to printed in red ink). ? deferred - an L/C under which payment by the importer is to take place a specified time after his receipt of the shipping documents. ? sight - an L/C under which the beneficiary is entitled to present a sight draft or sight bill of exchange, which is a call for immediate payment upon acceptance of shipping documents. ? import - an L/C used to finance importation of goods. ? standby - akin to a demand guarantee or bank guarantee, the standby L/ C is generally used to assure performance or payment by the counterparty.