Transferable letter of credit

Transferable letter of credit permits owner (initial beneficiary) to transfer the credit to another beneficiary. It is used in international trade as an alternative to confirmed letter of credit or advance payment. In a transferable letter of credit bank (issuer) includes rules of transfer of the credit to another beneficiary. The secondary beneficiary is usually the seller who receives it as a form of payment.

Confirmed or transferable letter of credit?

Transferable letter of credit can be used in domestic and international trade. It can be easier to use for buyer due to simpler procedures. In confirmed letter of credit beneficiary has to obtain two letters of credit, while in transferable only one.

However, the bank issuing letter of credit has to be acknowledged in seller's country. If the seller doesn't accept the bank from the buyer's country the confirmation will be required. Therefore it is easier to find bank that has branches in both countries.

References

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