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Can a red-clause LC permit an advance before shipment?
Red Clause and Green Clause Credits
Learn the historical advance-financing structures behind these names.
Red clause
A red-clause credit can allow specified advance payment to the beneficiary before shipment, subject to the credit terms and bank agreement.
Green clause
A green-clause structure historically extends advance concepts with additional evidence, often relating to storage/warehouse control, depending on the wording.
Not automatic features
The colour names are market/history labels. The bank’s actual undertaking and conditions determine whether an advance is available.
Credit risk
Pre-shipment advances expose banks/applicants to non-performance risk and therefore require clear reimbursement/collateral arrangements.
Source / standards noteThis lesson uses original plain-English explanations. Read the credit, UCP 600 and current bank practice for a live transaction.
Remember thisRed/green clause credits are specialised advance structures, not ordinary features of every MT700.
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