Anticipatory letter of Credit v. Red Clause Letter of credit

[jim]

hello,

can someone tell me whats the differences between Anticipatory letter of Credit and Red Clause Letter of credit. so far i understand both of them allow preshipment finance to the beneficiary.

regards

jim

[cristiand969]

Dear Jim,
Frankly speaking I have never heard about anticipatory LC. If someone knows he is kindly required to post details.
Regarding red clause LC: The Issuing Bank incorporates a clause in the Credit authorizing the Nominated Bank to pay a percentage of the value of the Credit to the Beneficiary. Historically, this
clause appeared in bold red type in order to draw attention to the special advance, and for this reason such Credits were termed Red Clause Credits. The clause may require:
i. a receipt for the advance duly signed by the Beneficiary
ii. an undertaking from the Beneficiary to utilize the funds to purchase and pack the merchandise
iii. the undertaking of the Beneficiary to present the full set of documents as stipulated in the Credit to the Nominated Bank within the expiry of the Credit..
In reimbursement the Nominated Bank is to claim on the Issuing Bank in terms of the Credit and the claim is usually to be supported by the receipt and undertakings shown above.

[shahriar]

here is a definition that i have

Red/Green Clause Credit or Anticipatory Credit is a Letter of Credit containing a clause authorising the advising bank to make advances to the beneficiary/exporter before the beneficiary presents the required documents under the credit. It is a method of pre-shipment finance for the exporter.

so i guess there is no such difference

regd

shahriar

[picant]

Hi Pals,

I found Anticipatory Credit wording in a book dated 1986, it is different from Red Clause because it is used to effect a payment, frankly no use by my part, here the text:

The L/C beneficiaries are authorized to clean sight draft on you up to the extent of........., acompnied by their simple receipt embodying the statement that the funds will be used only for the purchase and shipment of the goods for which the credit is opened and their irrevocable undertaking to deliver to you the documents stipulated in the credit prior to the expiration date thereof.

As already said, difference with Red Clause is very narrow, being Red Clause used to finance the production too, and not only to find finished goods to supply.

However, no experience about that.

Ciao

[nesarul]

DEAR SHAHRIAR,
HAVE A LOOK:
ARTICLE NAME:
Security for third parties in documentary credit operations
DCInsight Vol. 12 No.1 January - March 2006
by Reinhard Längerich
REGARDS
NESAR

[jmitra]

are these things really in use in these days? :?

mitra