Replying to [Catalyst]:

THAT IS VERY GOOD, but can you please write in plain English... I am not lawyer!

Thank you.

Quoting from [Rudy in China]:


Replying to [Catalyst]:


THAT IS VERY GOOD, but can you please write in plain English... I am not lawyer!


Thank you.

Rudy, there is no way better to write that, it is in very plain English.  In fact Catalyst does a very good job of not throwing other technical jargon in.

Ranger

Replying to [Ranger]:

Sir,
I bow my head in whispering humbleness, and thank you mightily for your very kind, encouraging words. You inspire me. Thanks.

Replying to [Rudy in China]:
My apologies, if I have managed to confuse you further. Do feel free to ask for clarifications. I'll try my best to respond.

Replying to [Catalyst]:
An interesting article.

Replying to [Catalyst]: Ate there any banks that still provide this service. All the banks that I've contacted in U.S. do not issue Back-toBack L/C?

Replying to [Oneworld]:

You won't find ANY bank, not in the US, not anywhere in the world who'd open a "Back-to-back" LC. Not even in the UCP. There is no such thing as a "back-to-back" LC. These have been explained in the article itself.

An LC that's opened on the *back* of another is called a "Back-to-back" LC. It is a matter of nomenclature. The two LCs are INDEPENDENT, STAND ALONE instruments of payment. All banks open LCs, some of which could be opened as "Back-to-back" LCs.

Replying to [Catalyst]: Dear Catalyst, very well explained for those who know something about the business.

I try to simplify a bit the "Back to Back L/C" (BtBLC) for THOSE being new to business.
First of all getting all the trading knowledge is a process of years of learning and doing, based on well education in this business, for example a bank specialist or foreign trade specialist, approved by an official school of the country he comes from : )

A BtBLC is used by a trader or trading company who does not have the money or credit line to purchase the goods he/they want to trade.
So their bank is not giving them any money unless they can secure their credit application (for buying the goods)
For this purpose they can use an other L/C to back (secure) their credit application. GOT IT ?
To my understanding the bank will only accept an IRREVOCABLE AND CONFIRMED LETTER OF CREDIT to back/secure it.

Anyhow a process not for a beginner as there are many MORE risks in such business.

Regards Tom

Replying to [GermanTrader]:

Your explanation is absolutely correct.

But, every silver lining has a cloud attached to it...when the exporter gets an irrevocable LC, and then approaches his bank to issue another LC to pay his (domestic) supplier, that bank would like to examine its credit risks before it issues that (second, which is called the "back-to-back") LC. The issue here is, is the exporter capable of paying under the second (back-to-back) LC, IF unforunately the export LC fails to work, somehow; the exporter cannot ship, or not get paid for one reason or another?????