Different Types of Letters of Credit for Apparel Industry
Different types of letters of credit in a apparel industry
Import/export Letter of Credit
The same credit can be termed as import and export LC depending on whose perspective it is being looked upon. For the importer it is termed as Import LC and for the Exporter of goods, Export LC>
Revocable Letter of Credit
In this type of credit buyer and the bank which has established the LC, are able to manipulate the letter of credits or make any kinds of corrections without informing the seller and getting permissions from him. According to UCP 600, all LCs are Irrevocable, hence this type of LC used no more.
Irrevocable LC
In this type of LC, Any change (amendment) or cancellation of the LC (except it is expired) done by the Applicant through the issuing Bank must be authenticated by the Beneficiary of the LC. Whether to accept or reject the changes depends on the beneficiary.
Confirmed LC
An LC is said to be confirmed when another bank adds its additional confirmation (or guarantee) to honor a complying presentation at the request or authorization of the issuing bank.
Unconfirmed LC
This type of letter of credit, does not acquire the other bank's confirmation.
Transferrable LC
A Transferable Credit is the one under which the exporter has the right to make the credit available to one or more subsequent beneficiaries. Credits are made transferable when the original beneficiary is a middleman and does not supply the merchandise himself but procures goods from the suppliers and arrange them to be sent to the buyer and does not want the buyer and supplier know each other. The middleman is entitled to substitute its own invoice for the one of the supplier and acquire the difference as his profit in transferable letter of credit mechanism.
Important Points of Consideration:
A letter of credit can be transferred to the second beneficiary at the request of the first beneficiary only if it expressly states that the letter of credit is
Import/export Letter of Credit
The same credit can be termed as import and export LC depending on whose perspective it is being looked upon. For the importer it is termed as Import LC and for the Exporter of goods, Export LC>
Revocable Letter of Credit
In this type of credit buyer and the bank which has established the LC, are able to manipulate the letter of credits or make any kinds of corrections without informing the seller and getting permissions from him. According to UCP 600, all LCs are Irrevocable, hence this type of LC used no more.
Irrevocable LC
In this type of LC, Any change (amendment) or cancellation of the LC (except it is expired) done by the Applicant through the issuing Bank must be authenticated by the Beneficiary of the LC. Whether to accept or reject the changes depends on the beneficiary.
Confirmed LC
An LC is said to be confirmed when another bank adds its additional confirmation (or guarantee) to honor a complying presentation at the request or authorization of the issuing bank.
Unconfirmed LC
This type of letter of credit, does not acquire the other bank's confirmation.
Transferrable LC
A Transferable Credit is the one under which the exporter has the right to make the credit available to one or more subsequent beneficiaries. Credits are made transferable when the original beneficiary is a middleman and does not supply the merchandise himself but procures goods from the suppliers and arrange them to be sent to the buyer and does not want the buyer and supplier know each other. The middleman is entitled to substitute its own invoice for the one of the supplier and acquire the difference as his profit in transferable letter of credit mechanism.
Important Points of Consideration:
A letter of credit can be transferred to the second beneficiary at the request of the first beneficiary only if it expressly states that the letter of credit is