Mr. Customs Specialized Attorney, how are letter of credit types divided in international trade?

Hello. I am a customs specialized attorney at Daeryun Law Firm.

The types of letters of credit in international trade are as follows.

1. Irrevocable letter of credit

Once issued, it cannot be modified or canceled without the consent of the importer and exporter. This increases transaction stability, so it is the most commonly used.

2. Revocable letter of credit

The letter of credit can be canceled or modified without the consent of the importer or exporter. However, this type does not guarantee transaction safety, so it is rarely used today.

3. Confirmed letter of credit

A method in which not only the exporter's bank but also a neutral third-party bank confirms the letter of credit and guarantees payment. The exporter receives a guarantee from another bank in addition to their own bank, providing higher safety to the exporter.

4. Revolving letter of credit

A letter of credit set up to be used multiple times within a certain period when multiple transactions are required. It is automatically replenished so that it can be used again when a certain amount is exhausted.

5. Sight letter of credit

A letter of credit in which payment is made immediately upon submission of documents, with payment made without delay if the documents meet the conditions.

6. Usance letter of credit

A letter of credit in which payment is made after a fixed period, with payment made after a certain period, usually a deferred payment method.

If you are curious about the type of letter of credit appropriate for your situation, please seek advice from a customs specialized advisor or customs specialized attorney who has obtained customs broker qualifications.