Back to Back Letter of Credit

Back to Back Letter of Credit

Back to Back LC (BBLC) involves 2 LCs, one export LC (Master LC) in favour of the customer (Middleman) and another Import LC (Baby LC) in favour of the ultimate supplier. Upon receipt of the Master LC, the Middleman requests CB Bank to issue Baby LC closely matched with that the terms and conditions of the Master LC except differences, such as curtailment of expiry, shipment date, latest date for presentation of documents, amount, unit price, quantity of goods, increase in amount for insurance coverage. The settlement of the import LC (Baby LC) comes from the Export LC (Master LC) proceeds.

FEATURES AND BENEFITS
Role of CB Bank : Issuing Bank and Trade service product provider
Tenor : Range from Sight to Usance of 180 days (maximum)
Benefits to Importer (Middleman)

  • A capital efficient payment method

  • Helps to protect your control over relationships with trading partners

  • A safe and convenient way to settle trade transactions

  • A more flexible payment option than Transferable LC

  • Keeps buyer and supplier details confidential so you can maintain your commission income
Process

  • Your buyer issues an LC via his bank (LC issuing bank)

  • You submit an application to CB Bank to issue LC to your seller

  • CB Bank issues the LC to your seller

  • Your seller ships out goods and submits trade documents to his bank

  • CB Bank notifies you when trade documents have been received and checked

  • You may substitute the documents

  • CB Bank will send the new set of documents to LC issuing bank for payment / acceptance

  • CB Bank will pay you for the balance (after deducting the charges and amount due to your seller) when the funds are received from the LC issuing bank
RATES AND FEES (SUBJECT TO CHANGES)

Pre-arranged fees & charges
REQUIREMENTS

  • Master BBLC Agreement (incorporating Power of Attorney and Assignment of Proceeds)

  • Cash margin Agreement

  • Irrevocable Documentary Credit Application Form

  • Application for Freight Financing (if any)

  • Request Cover Letter with Company Letterhead

  • Sales contract

  • Commercial invoice

  • Import/export license issued by Ministry of Commerce (both original and copy)

  • Shipping documents (Bill of Lading / Air waybill / Packing List)