1. Revolving L/C
A revolving L/C is a L/C in which the beneficiary can use the specified amount within a certain period of time and then restore the original amount of the L/C and use it again, over and over again, until the specified number of times or the cumulative total amount of the L/C is reached. Revolving L/C is generally applicable to long-term contracts with relatively large and single goods, which can be supplied and paid in batches on a regular basis. For importers, it can save the procedures and costs of opening letters of credit one by one, reduce deposits, and facilitate capital turnover; for exporters, it can reduce the procedures of urging and examining certificates one by one, and obtain the guarantee of recovering all the payment for goods.
2. Reciprocal L/C
Reciprocal L/C is a settlement method commonly used in barter transactions or processing and assembly of supplied materials and parts. Because both parties are concerned that the other party only uses rights but does not fulfill obligations, they adopt the method of opening letters of credit to each other to connect imports and exports. Its characteristics are: the beneficiary and the applicant of the first letter of credit are the issuer and beneficiary of the second reciprocal letter of credit respectively. The issuing bank of the first letter of credit is also the notifying bank of the reciprocal letter of credit; the notifying bank of the second letter of credit is generally also the issuing bank of the reciprocal letter of credit. The amounts of the two letters of credit can be equal or unequal. The two letters of credit can take effect at the same time or one after another.
3. Anticipatory letter of credit
An anticipatory letter of credit (anticipatory L/C) refers to a letter of credit that allows the beneficiary to advance the payment of the goods before the goods are shipped and the documents are delivered. There are two types: full advance and partial advance. The part that can be advanced on the partial advance letter of credit is mostly the deposit paid by the buyer to the seller included in the total amount of the letter of credit. In order to attract attention, this clause of advance payment of goods was often typed in red in the past, so it is commonly known as “red clause letter of credit” (red clause L/C). At present, my country sometimes uses this letter of credit in compensation trade.
4. Local Letter of Credit
Local Letter of Credit (local L/C) or local letter of credit refers to a letter of credit where the issuer, issuing bank and beneficiary are all in the same country. In most cases, it is used for transferring letters of credit. For example, after the exporter receives a letter of credit from a foreign country, out of the need to keep business secrets and prevent the domestic manufacturer of the goods from knowing the name, address or selling price of the foreign importer, he is unwilling to transfer the original letter of credit to the domestic manufacturer, and requires the local bank to open a local letter of credit to the local manufacturer based on the original letter of credit.