Given by an “Issuing Bank” at the request of it’s customer to pay the Beneficiary against stipulated documents
A transferable Letter of Credit is one that can be transferred in full or partially by the original beneficiary to one or more second beneficiaries. Such Letters of Credit are usually issued when the ultimate buyer needs a type of commodity or goods but can only buy them through an intermediary because the latter has a relationship or sole distributor rights with the manufacturers or producers of such goods. Under such arrangements the intermediary commits to a small amount of funds to the transaction without divulging data related to the Ultimate Buyer and Ultimate Seller.
In a revolving Letter of Credit the credit amount can be renewed or reinstated without specific amendments to the Letter of Credit being required. A revolving Letter of Credit can revolve in relation to time or value .If it revolves by time, a Letter of Credit may be available for an agreed value against a predefined number of times – for example, USD100,000 every month for 12 months. If the LC revolves by value, the Letter of Credit amount is usually reinstated after utilization for a potentially unlimited number of times during the validity of the Letter of Credit. Typically, revolving Letters of Credit are used in situations where constant and regular shipments from the same supplier are effected over a given period although it is possible to limit customer exposure at any one time.
A red clause Letter of Credit facilitates pre-shipment finance for the beneficiary. It is often used to assist suppliers in paying for materials and labour or perhaps an intermediary, who needs financing to conclude a transaction. It is useful in situations where the customer‟s supplier is trusted but has difficulty in sourcing the raw materials or goods unless payment is made in advance. An important point to note is that in the event the customer‟s seller does not perform under the LC, Standard Chartered Bank’s customer, as applicable, would still be liable for settlement of the advanced funds.
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