[무역영어]Types of Letter of Credit

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Types of Letter of Credit

Payment and Risks with Letter of Credits

An Irrevocable Confirmed Credit

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Irrevocable (unconfirmed)- A letter of credit that cannot be amended or cancelled without prior mutual consent of all parties to the credit. Such a letter of credit guarantees payment by the bank to the seller/exporter so long as all the terms and conditions of the credit have been met. This is the most popular form of letter of credit.
Revocable (confirmed)- A letter of credit that can be cancelled or altered by the drawee(buyer) after it has been issued by the drawee`s bank. Revocable letter of credits are rarely used because of security concerns.
Transferable- A letter of credit that can be redirected at the sellers request. These are used when an export broker is involved. Once all conditions on the letter of credit are met, the broker`s bank receives the payment, takes out his commission, and completes the transaction as negotiated.
Sight- A letter of credit that requires payment to be made upon presentation of documents.
Time Draft- A letter of credit that states payment is due within a certain time (usually 30, 60, 90, or 180 days).

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