To an attorney specializing in customs: how are the types of letters of credit divided in international trade?

Hello. I am an attorney specializing in customs at Daeryun Law LLC.

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

1. Irrevocable letter of credit

Once opened, it cannot be amended or canceled without the consent of the importer and the exporter. Because this enhances the stability of the transaction, it is the most widely used.

2. Revocable letter of credit

A letter of credit can be canceled or amended even without the consent of the importer or the exporter. However, because this type does not guarantee the safety of the transaction, it is rarely used today.

3. Confirmed letter of credit

This is a method in which not only the exporter's bank but also a neutral third bank confirms the letter of credit and guarantees payment. Because the exporter receives a guarantee from another bank in addition to its own bank, it provides greater security to the exporter.

4. Revolving letter of credit

This is a letter of credit set up so that it can be used multiple times within a certain period when repeated transactions are required. Once a certain amount is used up, it automatically revolves so that it can be used again.

5. Sight letter of credit

This is a letter of credit under which payment is made immediately after the documents are submitted; when the documents satisfy the conditions, the payment is made without delay.

6. Usance letter of credit

This is a letter of credit under which payment is made after a fixed period; the payment is made after a certain period, and it is usually a deferred payment method.

If you are curious about the type of letter of credit suited to your case, we encourage you to seek advice from customs specialists who hold a licensed customs broker qualification and from attorneys specializing in customs.