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Name : Madhav Nair
Subject: About Letter of Credit
Message : A Back to Back Letter of Credit transaction is a financing method where a LC (Master L/C) issued in favour of a beneficiary (usually a middleman)is used by that beneficiary to “secure” another Letter of Credit (Slave L/C) in favour of his supplier.

The Master L/C is held by the bank as a source of repayment. The beneficiary (that is you) of the Master L/C becomes the applicant of the Slave L/C.

The Slave L/C is an entirely independent transaction from the Master L/C.

UCP 500 does not recognize Back to Back L/Cs.

Most Banks issue the slave LC first taking into account the customer standing and Master LC is an added comfort.

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Alternately you could look at transferable LCs A transferable LC is one that can be transferred by the original beneficiary to one or more second beneficiaries.

Transferable letters of credit are recognised within UCP500.

Article 48 in UCP500 specifies that only the following terms and conditions may be amended upon transfer: L/C amount, unit price, shipment date, expiry date and period for presentation of documents.




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