Letter of Credit Forum

Generally, "usance" (insofar as it is applied to LCs) means that the LC is payable at a future date, but in may cases the interpretation of "usance" is that it requires a time draft.

However, whether a draft is mandatory under an LC would be dictated by how the LC is "available"; whether by Acceptance, or whether by Deferred Payment. If available by Acceptance then a draft is mandatory, but would not be required under an LC Available by Deferred Payment. These are the only recognised terms under an LC which is payable at a future determinable date.

Some countries do charge a stamp duty against drafts (bills of exchange), so if the intention is to avoid such levy, and if there is no intention to discount the draft in the secondary market, an LC available by Deferred Payment would be the better option

Dear Basitnew,

Documentary credit can be issued without calling for a draft to avoid the stamp duty either at the country of origin or at the country of payment.  

Note: I am writing this with the help of the e-learning software ‘instantLC+’ (www.paramshree.com).

Regards,

Sairam