A back-to-back letter of credit is useful in the case wherethe beneficiary of the letter does not provide the goods himself using a third party supplyer and these subcontractors ask to be secured by a documentary credit too.
A back-to-back letter of credit is used in a trade transaction involving an intermediary between the buyer and seller, it is a documentary credit option that will allow intermediaries without credit themselves to carry out import-export operations.
Back-to back LC main advantage is for the intermediary as it is able not to disclose the source of the exported goods, the terms and conditions of the contracts towards the buyer and as well towards the subcontractors as they may be different and the ultimate will never know the destination of the goods.
It is crucial that back-to-back letters of credit mirror each other in other words they have the same shipping, inspection, and terms. The reason for the importance of an LC being mirrored is that the first letter of credit becomes the security for the second letter of credit
TRADEFINANCE.AFRICA COUNTRIES OF EXPERTISE
LC FEE AND CHARGE UCP 600 TEXT LC DISCOUNT BACK TO BACK LC STANBY LETTER OF CREDIT DOCUMENTARY COLLECTION BILL DISCOUNTING PROMISSORY NOTE DISCOUNTING BID BOND PERFORMANCE BOND ADVANCE PAYMENT BOND MAINTENANCE BOND ALGERIA ANGOLA BENIN BOTSWANA BURKINA FASO BURUNDI CABO VERDE CAMEROON CENTRAL AFRICAN REPUBLIC CHAD COMOROS DRC CONGO REPUBLIC OF THE CONGO IVORY COAST DJIBOUTI EGYPT EQUATORIAL GUINEA ERITREA SWAZILAND ESWATINI ETHIOPA GABON GAMBIA GHANA GUINEA BISSAU KENYA LESOTHO LIBERIA LIBYA MADAGASCAR MALAWI MALI MAURITANIA MAURITIUS MOROCCO MOZAMBIQUE NAMIBIA NIGER RWANDA SAO-TOME AND PRINCIPE SENEGAL SEYCHELLES SIERRA-LEONE SOMALIA SOUTH-AFRICA SOUTH-SUDAN TANZANIA TOGO TUNISIA UGANDA ZAMBIA ZIMBABWE GUINEA CONAKRY SUDAN NIGERIA BLOCKCHAIN TRADE FINANCE