Transferable Letter Of Credit

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DEFINITION

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.

INVESTOPEDIA EXPLAINS

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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