Transferable Letter of Credit

Tags: Glossary

A letter of credit that can be transferred to a third party.

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What is a Transferable Letter of Credit?

A transferable letter of credit is a financial instrument used in international trade to transfer the payment obligation from the original beneficiary (seller) to a third party. This type of letter of credit allows the seller to transfer the credit to another party, such as a supplier or subcontractor, to facilitate the transaction. 

To use a transferable letter of credit, the original beneficiary must obtain the consent of the issuing bank and provide the necessary documents to the third party. The third party then becomes the new beneficiary of the letter of credit and can receive payment from the issuing bank. 

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