Here we will present you a list of the most frequently used irrevocable letters of credit or LC

We say that a LC is Unconfirmed when the documents that back it up only show the bank guarantee issued by the importer's bank. The role of the notifying bank is to let the exporter know what the LC establishes but without paying for the merchandise. It is the responsibility of the exporter to obtain payment for the merchandise from a bank usually located in the country of the importer.

There are also back to back LCs. In short, they are two LCs that together form a transferable LC. These kinds of letters allow exporters who are not subject to credit to sell their products aboard.

If a foreign buyer sends a LC to an exporter, some banks and financial institutions issue letters of credit to independent suppliers of the exporter for the purpose of purchasing the commodity. If the initial LC has not been properly completed, the second is still valid and the issuing bank is obligated to pay according to the conditions.

Back to back LC are not the favorite choice of some financial institutions, because they involve more than one transaction. The more transactions, the higher the risk for complication and dispute.

Financial institutions take especial measures to protect themselves from fraud with back to back LCs. For this reason, they demand all relevant documents to the exporter in order to issue the second LC. It is based on the first LC that the bank will issue the second one. The dates of the two documents are used to verify their validity. The second one expires before the first one but gives the exporter enough time to submit the documents to request payment.

A standby LC: Unlike the regular LC which is basically a payment mechanism, a standby LC is a kind of bank guarantee that is used to cover financial obligations for non-payment. The bank issues a standby LC that held by the seller provides the customer open account terms. If payment is carried out in accordance with the conditions set by the seller, the LC is not used. However, if the client cannot make payment, the seller presents a bill of exchange with copies of invoices to the bank along with other necessary documents. The standby LC generally expires after twelve months.