Usance LC [Last Updated by: Shahriar on 2017-08-31]
A Usance LC or Usance Letter of Credit is a type of LC where the payment against the LC is made certain days after the date of presentation. For example - if a LC reads that payment will be made 90 days after the date of presentation (as opposed to an immediate payment), then it would be considered as an Usance LC.
As per UCP600, Usance LC can be classified into two categories -
1. LC available by acceptance.
2. LC available by deferred payment.
While both the categories cover the same payment condition (i.e. payment will be made certain days after the presentation), the only difference is the use of draft / bill of exchange.
Deferred payment LC does not require any draft. But an Acceptance LC must require a draft or bill of exchange.
Please note: while payment under the Usance LC is made with a time lag, it is possible to obtain payment against any presentation by utilizing negotiation or discounting.