Define: Transferable Letter Of Credit

A transferable letter of credit is a financial instrument used in international trade that allows the original beneficiary (seller) to transfer all or part of the credit to a third party (second beneficiary) who can then receive payment from the issuing bank.

Once the original beneficiary receives a transferable letter of credit, they can request the issuing bank to transfer the credit to a second beneficiary. The second beneficiary can then present the necessary documents to the issuing bank to receive payment.

No, a transferable letter of credit can only be transferred once. Once the credit is transferred to a second beneficiary, they cannot further transfer it to another party.

Using a transferable letter of credit allows the original beneficiary to involve intermediaries in the transaction, such as agents or middlemen, who can help facilitate the trade. It also provides flexibility in payment arrangements and can help mitigate risks associated with international trade.

Yes, there are certain limitations. The transferable letter of credit can only be used for specific types of transactions, such as the resale of goods or subcontracting. Additionally, the second beneficiary must be named in the original letter of credit.

Yes, the original beneficiary can still receive payment from the issuing bank even after transferring the credit. However, the payment will be reduced by the amount transferred to the second beneficiary.

To transfer a letter of credit, the original beneficiary needs to provide a request for transfer along with any necessary supporting documents, such as a transfer agreement or a confirmation from the second beneficiary.

No, the second beneficiary cannot make any changes to the transferred letter of credit. They can only present the required documents to the issuing bank to receive payment.

If the second beneficiary fails to fulfill their obligations, such as delivering the goods or providing the required documents, the original beneficiary remains responsible for the transaction. They may face financial losses or legal consequences.

Yes, a transferable letter of credit can be canceled or amended, but it requires the consent of all parties involved, including the original beneficiary, the second beneficiary, and the issuing bank. Any changes should be documented and communicated to all relevant parties.