What is a Transferable Letter of Credit ?

TRANSFERABLE LETTER OF CREDIT : is a litter of credit that permits the beneficiary of the letter to make some or all of the credit available to another party, thereby creating a secondary beneficiary. The party that initially accepts the transferable letter of credit from the bank is referred to as the first beneficiary. The bank issuing the letter of credit must approve the transfer.

A transferable letter of credit is a document that allows the first beneficiary on a standby bank assurance of funds to transfer all or part of the original letter of credit to a third party.

 

The first beneficiary (the exporter) may request the paying, accepting or negotiating bank to make the credit available in whole or in part to one or more second beneficiary.

Answer Divash wonderful

 

Greetings

Agreed with Mr. Patel.

A letter of credit is a document from a bank guaranteeing that a seller will receive payment in full as long as certain delivery conditions have been met.

In the event that the buyer is unable to make payment on the purchase, the bank will cover the outstanding amount. They are often used in international transactions to ensure that payment will be received where the buyer and seller may not know each other and are operating in different countries. In this case the seller is exposed to a number of risks such credit risk, and legal risk caused by the distance, differing laws and difficulty in knowing each party personally. A letter of credit provides the seller with a guarantee that they will get paid as long as certain delivery conditions have been met. For this reason the use of letters of credit has become a very important aspect of international trade.

The bank that writes the letter of credit will act on behalf of the buyer and make sure that all delivery conditions have been met before making the payment to the seller. Most letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and Practice for Documentary Credits. Letters of credit are typically used by importing and exporting companies particularly for large purchases and will often negate the need by the buyer to pay a deposit before delivery is made.

 

They are also used in land development to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are the supplier, usually called the "beneficiary", "the issuing bank", of whom the buyer is a client, and sometimes an advising bank, of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without mutual consent of all parties.

Transferable letter of credit is a sort of a documentary credit which can be used in situations where middlemen are playing a certain role

agree with mr.divash patel..............

Agree with Patel.............

Very simillar to Back to back LCs, that let you as a dealer able to transfer the LC opened for you from the buyer to the Seller directly with amount asked by the seller , and to get the remaining as profit for yourself. 

In a transferable letter of credit, the first beneficiary (the exporter) may request the paying, accepting or negotiating bank to make the credit available in whole or in part to one or more second beneficiary(ies). The second beneficiary can be an export-manufacturer or an export-trader. The L/C is expressly designated "transferable" by the issuing bank on instructions of the applicant