Letters of Credit

  4. Letters of Credit

The Letter of Credit (LC) is widely regarded as the main trade finance instrument of payment. It offers a secure method of payment guaranteed by a bank, subject to the beneficiary complying with all the terms and conditions indicated in the letter of credit.

The buyer derives comfort from the knowledge that his bank would only pay upon submission by the seller of the required documents, within the timeframes stipulated in the letter of credit. On the other hand, the seller has the security of knowing that, provided he complies with the terms of the LC, there is an undertaking of payment made by the issuing bank.

FIMBank has a wealth of experience related to letters of credit, and we invite you to tap into this expertise by contacting one of our trade specialists for any queries that you might have. The success of your business transaction may depend on it.  

For further details, contact our Trade Finance team on (+356) 21322100 or send us an email.

Special Types of Letter of Credit  

Transferable letter of credit: The first beneficiary (the seller) 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).

Back-to-back letters of credit: This is a separate outward LC (or LCs) mirroring the terms of an inward letter of credit. This is ideal for traders seeking import letter of credit facilities, and an alternative mechanism to that offered by a transferable letter of credit.

Standby letters of credit: Standby LCs are used as either an instrument of default (similar to bonds and guarantees), or else as a payment instrument in their own right. They have the additional benefit of being subject to either UCP600 or ISP98 (International Standby Practices 1998), both of which are published by the International Chamber of Commerce.

Revolving letters of credit: These are useful in covering regular consignments of goods over a span of time. LCs are made available for a specific amount to be availed of within a specified period. The amount of the LC can revolve automatically or by means of an amendment to the letter of credit.

Red/Green Clause letters of credit: These types of LCs enable the beneficiary to obtain pre-shipment finance for the procurement of raw materials / goods. Green Clause letters of credit also require that the goods financed are warehoused (to be supported by documentary evidence).

Additional Value-added Support on Letters of Credit: Apart from issuing, advising, confirming, negotiating and effecting payment of letters of credit, our service can also include the following:

  1. Providing an expert opinion on LC terms and conditions, including the interpretation of specific clauses of letters of credit and suggestions for necessary modifications;
  2. Confirmation of LCs emanating from emerging markets;
  3. Assistance in the preparation of the required documentation;
  4. Checking of documents within a short time frame for special circumstances;
  5. Personalized attention at all times to ensure the success of the transaction;
  6. Structuring of trade involving the use of LCs in order to provide the ideal solutions for traders and exporters.

All letters of credit that are handled by FIMBank are subject to the most recent edition of the Uniform Customs and Practice for Documentary Credits, which is currently the 2007 Revision, ICC Publication 600 (UCP 600).

For further details, call our Trade Finance team on (+356)21322100 or send us an email on tradecommodityfinance@fimbank.com