In trade practice, middlemen sign supply and purchase contracts with actual users and actual suppliers respectively。When the actual user issues a non-transferable letter of credit to the middleman, the middleman cannot directly transfer the letter of credit, but he can ask the bank with which he has dealings to issue a letter of credit in favor of the actual supplier on the basis of the letter of credit and with it as the applicant。This letter of credit is backed by a letter of credit。
What is the specific operation process of back-to-back letters of credit？
1.Middlemen sign contracts with importers and exporters respectively;
2.The middleman negotiates the L/C format with the exporter, and the importer goes to the issuing bank for processing;
3.The mother bank informs the middleman that the mother certificate has been issued, and the middleman takes the mother certificate to the sub-certificate bank to issue the sub-certificate, which is what we call the back letter of credit;
4.Sub-certificate bank notifies exporter to issue sub-certificate, exporter to deliver
5.After the exporter has delivered the goods, according to the relevant terms of the letter of credit, it will give some information to the issuing bank and the advising bank. After the examination is passed, it will notify the middleman to deliver the goods, the middleman will provide the corresponding documents and instructions to the advising bank, the advising bank will notify the importer to pay on schedule, the importer will accept the goods after confirming the informed information, and the exporter will receive the payment
What are the features of back-to-back letters of credit？
1.Opening back-to-back letters of credit is not an instruction of the original credit applicant and issuing bank
2.Back-to-back letter of credit is equivalent to the sub-certificate, and the original certificate is equivalent to the original certificate, both can be deposited at the same time;
3 The beneficiary of back-to-back letters of credit, that is, the exporter, cannot directly obtain the guarantee of payment from the issuing bank of the original credit, but can only obtain the guarantee of payment from the issuing bank of the sub-credit。
4.The bank facing back to the credit is the issuing bank。Once opened, the bank will assume the responsibility of the issuing bank。
Back letter of credit refers to a new letter of credit that the beneficiary of the letter of credit requires the bank to take the bank as the stock exchange and the beneficiary as the applicant。Also called transfer letter of credit。
The original letter of credit, also known as the master letter of credit, is mainly used for the trade activities of intermediaries。