The purpose of a letter of credit is to mitigate the risk associated with international trade for both the buyer and the seller. There are many types of letters of credit, each serving a different purpose for either the buyer, the seller or both. One such type of letter of credit is a usance letter of credit.
A usance letter of credit provides a deferred payment option to the buyer. The tenor of payment is pre-decided by the buyer and the seller. The usance letter of credit can be classified into two based on it’s tenor. The usual tenors can be as follows:
- payment within 90 days after the bill of lading. This means that after the bill of lading is issued, the buyer has a period of 90 days from the date of the bill of lading to make the payment for the goods; and
- payment within 30 days after sight. This means that on the date that the issuing bank receives the documents required to be delivered to the buyer to confirm the seller has fulfilled its part of the contract, that the buyer has 30 days to make the payment for the goods.
Our expert team of solicitors at Francis Wilks & Jones are here to help you with any questions which you may have in relation to a usance letter of credit. Our knowledge of letters of credit is very broad and we have dealt with many issues and questions over the years relating to a letter of credit. Our expert banking and finance lawyers are here to help.