Letters of Credit are a time-tested instrument of int e rnat ional t rade . They have been used to expand markets for goods and services and to facilitate a variety of financial transactions, either as a method of payment or as a credit enhancement, within as well as across the borders of sovereign states. | An Introduction to Letters of Credit Citigroup® Global Transaction Services AN INTRODUCTION TO LETTERS OF CREDIT Bridging the challenges associated with trade finance Table of Contents Preface Chapter 1 Letters of Credit – An Introduction 1 Trade Payment Methods 2 What Is a Letter of Credit? 2 Advantages and Risk to the Buyer 3 Advantages and Risk to the Seller 3 Letters of Credit and Contracts 3 The Parties 5 Chapter 2 Letters of Credit – The Language 7 Types of Letters of Credit 8 Revocable versus Irrevocable 8 Confirmed versus Unconfirmed 8 Recognizing Letters of Credit 12 Straight Letters of Credit 12 Letter of Credit Terms and Conditions 12 Draft 12 Expiration Date 16 Latest Shipping Date 16 Latest Date for Presentation 16 Amendments 16 Chapter 3 Letters of Credit – Avoiding Problems 19 Problem Resolution 20 Documentary Requirements 20 Chapter 4 Letters of Credit – In Action 23 Export Letters of Credit 24 Import Letters of Credit 24 Foreign Currency Letters of Credit 24 Chapter 5 Letters of Credit – Special Types 29 Revolving Letters of Credit 30 Installment Letters of Credit 30 Advance Payment Letters of Credit 30 Red Clause Letters of Credit 31 Transferable and Back-to-Back Letters of Credit 31 Transferable Letters of Credit 31 Back-to-Back Letters of Credit 34 Assignment of Proceeds 35 Simplified Letters of Credit 35 Chapter 6 Letters of Credit– Export Credit Agencies and International Development Banks 37 Export Credit Agencies 38 International Development Banks 38 The World Bank 38 Other Development Banks 38 List of National Export Credit Agencies and International Development Banks 39 Export Credit Agencies 39 International Development Banks 39 Chapter 7 Letters of Credit – . Dollar Banker’s Acceptance Financing 41 Eligible Banker’s Acceptances 42 Eligible Transactions 42 . Exports and Imports 43 Time Draft Export Letter of Credit 43 Time Draft Import Letter of Credit 43 Refinancing “Sight” Draft Letters of Credit 43 Pre-Export Financing 44 .
