Assignment of Proceeds

It allows the beneficiary of a letter of credit to transfer part or all of the proceeds to another party. This method is often used to pay suppliers or subcontractors directly from the L/C proceeds.

In an Assignment of Proceeds, the beneficiary instructs the issuing bank to pay a specified amount to a third party. The bank then disburses the funds according to these instructions.

For example, a construction company (beneficiary) may assign proceeds to a steel supplier and an electrical subcontractor. The bank will pay the steel supplier and the electrical subcontractor directly from the letter of credit proceeds.

This process ensures that suppliers and subcontractors receive payment promptly. It also reduces the administrative burden on the beneficiary.

Assignment of Proceeds is commonly used in international trade and large-scale projects. It provides a secure and efficient payment method for all parties involved.