Transferable Letter Of Credit

What is a 'Transferable Letter Of Credit'

A transferable letter of credit is a letter of credit that permits the beneficiary of the letter to make some or all of the credit available to another party, thereby creating a secondary beneficiary. The party that initially accepts the transferable letter of credit from the bank is referred to as the first beneficiary. The bank issuing the letter of credit must approve the transfer.

BREAKING DOWN 'Transferable Letter Of Credit'

The transfer of credit must be clearly outlined in the documentation of the letter. However, the letter of credit must state expressly that the credit is transferable. Otherwise, no credit can be transferred regardless of any other factors.

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RELATED FAQS
  1. When do I need a letter of credit?

    Learn more about the function of a letter of credit for both the buyer and the seller, and get some examples showing when ... Read Answer >>
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    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, ... Read Answer >>
  3. Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to ... Read Answer >>
  4. What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between ... Read Answer >>
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    Review some of the standard language that ought to be included in a letter of intent between two parties in a business transaction. Read Answer >>
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    Learn about the potential consequences of violating the terms of a letter of intent, such as breakup fees, damages and agreement ... Read Answer >>
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