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Most common Letters of Credit are the following:

  • Irrevocable Letter of Credit; In this type of Letter of Credit, any change (amendment) or cancellation of the Letter of Credit done by the applicant (BdC client)  through the issuing Bank (BdC) must be authenticated by the beneficiary (seller) of the Letter of Credit. The beneficiary has the right to accept or decline the changes proposed by the applicant.
  • Standby Letter of Credit; This Letter of Credit serves as a secondary payment method. The issuing Bank (BdC) issues a Standby Letter of Credit on behalf of an applicant (BdC client) to provide assurance of his ability to perform under the terms of a contract with the supplier. This Letter of Credit has a maturity date, and is not expected to be drawn upon.

Letter of Credit requirements set by the issuing Bank:

  • Funds to complete purchase must be positioned on a BdC checking or savings account

Elements of a Letter of Credit:

  • A payment undertaking is given by a Bank (issuing Bank which is BdC)
  • Is on behalf of the buyer (Applicant; BdC client)
  • Relevant documents must be according to the terms and conditions mentioned in the Letter of Credit and must be presented at a specific place
  • The seller (Beneficiary) is paid a given amount of money
  • A Letter of Credit has a specific time frame
  • Upon presentation of specific agreed on shipping documents by both the seller and the buyer, representing the supply of goods, such as:       
    - Bill of exchange or Co- Accepted Draft
    - Invoice(s)
    - Packing List
    - Bill of Lading
    - Insurance policies
    - Licenses

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