1|Page

 Packing list

Letter of Credit (L/C)

A letter of credit (also known as documentary credit) is a document issued by a bank on

behalf of an applicant (the buyer) undertaking to make payment to a beneficiary (the seller)
up to a stated amount of money, within a prescribed time limit and against stipulated
documents. There are usually two banks involve in a letter of credit operation. The issuing
bank is the bank of the buyer and issues the credit; the advising bank usually located in the
sellers country.

Types of L/C

1. Revocable L/C
2. Irrevocable L/C
3. Unconfirmed L/C
4. Confirmed L/C
5. Transferable L/C
6. Untransferable L/C
7. Back-to-Back L/C
8. Advance Payment (Red Clause) L/C
9. Import/export L/C • Restricted L/C
10. Unrestricted L/C
11. Deferred L/C
12. At Sight L/C
13. Standby L/C

Unconfirmed Letters of Credit

Unconfirmed Letters of Credit can be described as a letter of credit, which has not been
guaranteed or confirmed by any bank other than the bank that opened it. In these types of
credits, the only bank that undertakes to honor a complying presentation is the issuing bank.

Confirmed Letters of Credit

 It would be easier to understand the confirmed letters of credit if we start from the
definition of the confirmation.
 Confirmation means a definite undertaking of the confirming bank, in addition to that
of the issuing bank, to honor or negotiate a complying presentation.
 If a letter of credit's payment undertaking is guaranteed by a second bank, in addition
to the bank originally issuing the credit this kind of credit is called confirmed letter of
credit. The confirming bank agrees to pay or accept drafts against the credit even if