BACK TO BACK LETTERS OF CREDIT
Posted 02 Jan 2008 02:39
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?????