Letters of credit

S Shankar (Accountant) (29 Points)

26 February 2013

I need a clarification -

Party A sends fabric to Party B. Party B exports to Party C in USA.

Now, is it feasible for Party C in USA to open a LC directly favoring Party A? Parties A & C have no direct dealings.

If such an LC can be opened, how is it to be accounted?

Thanks in advance.

regards

S.Shankar

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3 Replies

Sivakumar N (Services) (106 Points)
Replied 14 March 2013

A transferable/ back-to-back LC is a possibility - discover the mechanics from the Trade Finance banker, hence the accounting treatment.

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CA Prashant Gupta (DGM (F & A)) (14068 Points)
Replied 14 March 2013

Originally posted by : Sivakumar N
	A transferable/ back-to-back LC is a possibility - discover the mechanics from the Trade Finance banker, hence the accounting treatment.

completely agree, if you want to get LC from USA only

But why can't you use 2 LCs one from C to B and one from B to A

I told this because, in India transferable and back to back LC are less used. But that is really good option

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rakesh (accountant) (36 Points)
Replied 30 March 2013

dear all

please tell how to calculation of letter of credit opeing commission or charges on base of value of letter of credit and tenor

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