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What is a transferable Letter of Credit?

A transferable letter of credit is one, which specifically states that it is

transferable. This will only occur if the applicant for the letter of credit

(buyer) agrees. In a transferable letter of credit, the rights and

obligations of the beneficiary are transferred to another party, usually a

manufacturer or wholesaler. Transfer may be either full or partial.

Why transfer an L/C?

Most transfers involve a seller who, as beneficiary of the letter of credit,

has a pending sale, but is unable to purchase the merchandise from

the manufacturer on open account. Export brokers most often use

transferable L/Cs. Transferring a portion of the export L/C to the

manufacturer allows the broker to leverage the buyer's banker's credit

by providing the manufacturer with assurance of payment if the

manufacturer performs under the transferred L/C terms and conditions.

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13y ago

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