Hello All,
I'm in the US and planning to start an import business. Kindly let me know:
1. If a customer (buyer) in the US can issue a transferrable LC or back-to-back LC to my firm in the US and in turn can I issue the LC to my supplier in India?
2. For my newly formed business, will the customer's bank issue the LC? Will the bank consider the goods that are involved in the transaction alone as colateral?
3. If the customer (buyer) in the US can issue LC only to a firm outside US (international firm), how can I protect my supplier details to the Customer to avoid any direct contacts in the future?
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Questions 1 and 3: End-customer can issue a transferrable LC, which would state you as first beneficiary and the supplier as the second beneficiary. If it's a transferrable LC, you'll need to disclose who the supplier is (since issuer and end-customer don't want to allow just anyone to present documents under the credit), but you can substitute your own invoice for that of supplier so as not to reveal supplier's prices. The alternative is for end-customer to issue LC in your favor, and you can use that credit as "collateral" for your bank to issue an LC in favor of the supplier. This would be a "back to back" transaction. In this case, no details of supplier would have to be revealed to end-customer.
Question 2: Banks are often named as "consignee" on the BL, so having the goods as collateral is a common scheme for a bank to finance an LC. But the issuing bank and the applicant may come to some other arrangement as well.
Hi Dino
I'm not so sure that it's mandatory for the issuing bank/applicant to aprove the transferee is, unless it's a specific requirement under the LC
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