Advanced LC check0 / 1 answered · 0 correct
Check 1
How many separate credits are normally involved in a back-to-back structure?
Back-to-Back Documentary Credits
Learn why a second LC creates separate bank/document risk.
Two credits
In a back-to-back structure, a bank issues a second documentary credit, often using the first/master transaction as part of its security/credit analysis.
Not a transfer
The second credit is a separate undertaking. It does not simply transfer the original LC to the supplier.
Mismatch risk
Amounts, dates, documents, shipment terms and presentation periods must be coordinated so the intermediary can use documents from the second transaction under the first.
Bank approval
The intermediary’s bank must be willing to issue the second credit and take the resulting credit/document mismatch risk.
Source / standards noteThis lesson uses original plain-English explanations. Read the credit, UCP 600 and current bank practice for a live transaction.
Remember thisBack-to-back means two separate LCs. Transferable means one credit is transferred according to permitted rules.
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