L/C can be a safe way for buyers and sellers if used correctly.

First I want to talk about L/C at sight. Your supplier provide the shipping document to buyer's bank and buyer's bank release the money after receiving the shipping document.

L/C at sight is sort of an old-fashion L/C and is not very common except for mineral or some other low-value items.

L/C at sight has two drawbacks:

1. Even supplier has provided the shipping documents and received by buyer's bank (the bank buyer opens the L/C with), there is usually very hard for buyer to verify it's authenticity before funds are released by buyer.

2. Even all shipping document provided by supplier is authentic, there is no knowing whether the items being shipped are indeed whta the buyer order.

There however, is a new form of letter of credit, called ITLC, Irrevocable transferable letter of credit. (Note that it's not a commonly used name by banks, and different banks call it differently), but the term start gaining popularity among traders, so I will use such term from now on.

ITLC as the name referred to is irrevocable (so if the items arrived are as described, buyer is refrained from refusing the goods), transferrable (so if the person whose name on the ITLC and the person whose going to redeem the ITLC at the bank is not the same person, it's still okay).

So basically it's the same as L/C at sight except that funds held in buyer's bank will not be released till buyer has inspect the goods to his/her satisfaction. It gives buyer a lot more protection than the traditional L/C at sight. Thus remove 99.99% of buyer getting scammed.

So next time when your supplier request payment by L/C. Insist on using ITLC instead of L/C at sight.

Hope it helps. :)

Replying to [santahw050]:

I recall that this item (or similar) appeared on this forum earlier too. My advice to the readers: if they act based on this writeup, they do so at their own risk.

Replying to [santahw050]:


 

You need to take a class as apparently you do not understand the concepts of an L/C and I side with Catalyst if anyone takes your advice they do so at their own peril.   Moreover its apparent you do not grasp the idea of what a transferable credit is for.  

I don't know why someone wants to talk as an authority on something they don't understand.  This is as good as your so called ebook removed by Ebay.    I also can't understand how someone that couldnt even do simple due diligence in Septemper 2007 is now an authority on L/C's.

As for your acronym ITLC it must be of your own device. 

Tell us again why any buyer should always open a Transferable Credit and what a transferable credit has to do with inspection of products?  You made the following statement:

"So basically it's the same as L/C at sight except that funds held in buyer's bank will not be released till buyer has inspect the goods to his/her satisfaction. It gives buyer a lot more protection than the traditional L/C at sight. Thus remove 99.99% of buyer getting scammed."

Three questions for you:

1  What is a transferable credit and its use?

2.  What is your definition of "AT SIGHT"

3.  How does a transferable credit at sight gurantee that the buyer inspects the goods before the credit is payed to the beneficiaries bank?

Also if you are the seller and this is the first time you are doing business with this buyer are you going to accept your document known as an "ITLC"  By the way I have not seen this term used by the ICC nor have I seen where any prime bank uses such terminology.  Maybe you can direct us to a page on any banking site that refers to an ITLC.

Ranger