How will I Pay 4 of 6?

Before I conclude with lcs ( for now ), you might know that there are different terms involved and types of lcs you may encounter.

Ill go briefly over the main ones in case you are a little “lost” with the technical lingo:

Irrevocable : basically means that once the lc is issued it cannot be taken back till it expires

Payable at sight : basically that (if all terms are met 100%) the payment will be done immediately

Deferred : basically that (if all terms are met 100%) payment will be made after some time ( you choose, maybe 30 days after, 60 days after,and so on) (note:normally there are interest charges here )

Transferable : basically that you (as a buyer) open the lc on your supplier and he can transfer the same lc to his supplier. He can only change the amount and the delivery date. To the end supplier only your suppliers details will appear and not the end buyers. This is a common way of payment where the intermediary supplier does not reveal his source to his buyer, his buyer to his supplier, his margin, and he does not involve his money.

Back to back: basically the supplier takes your lc as a guarantee, and against this his bank opens a fresh new lc to his supplier. This form of payment is very rare nowdays and I believe only some american banks use it since a little mistake can cause the operation to go wrong. I know in spain most banks refuse to open back to back lcs.

Having said that, lets encounter the other forms of payment you must be aware of in the next chapter.