Transferable Letter of Credit

A Transferable Letter of Credit (L/C) permits the beneficiary to transfer part or all of the credit to another party. It is useful in supply chain transactions involving multiple parties.

Financial institutions such as banks issue Transferable Letters of Credit. These documents ensure payment to suppliers by transferring credit from the buyer to intermediaries like wholesalers, distributors, or secondary suppliers. For example, if a manufacturer needs to pay component suppliers, the supplier can receive funds through a Transferable L/C.

Conditions for transfer include conformity with original term agreements. Transfer percentages must match the initial credit value. Applicants remain liable if discrepancies arise during secondary transactions.

Common uses involve global trade, facilitating seamless transactions among exporters, importers, and third-party suppliers.

Examples of significant instances:

• Exporters transferring credit to local suppliers.
• Primary contractors allocating funds to subcontractors.
• Wholesale distributors ensuring payment to retail suppliers.

All involved parties must understand the terms explicitly to avoid disputes.