Back To Back Letter Of Credit
[Your Company's Letterhead]
[Date]
[Issuing Bank's Name and Address]
Dear [Issuing Bank],
Subject: Back-to-Back Letter of Credit
We, [Your Company's Name], hereby request [Issuing Bank's Name] to issue a Back-to-Back Letter of Credit in favor of [Intermediary's Name] (Beneficiary), as per the following terms and conditions:
1. Applicant (Buyer):
[Your Company's Name]
[Your Company's Address]
[City, State, Zip Code]
[Country]
[Contact Person and Title]
[Contact Email]
[Contact Phone]
2. Beneficiary (Intermediary):
[Intermediary's Name]
[Intermediary's Address]
[City, State, Zip Code]
[Country]
[Contact Person and Title]
[Contact Email]
[Contact Phone]
3. Ultimate Beneficiary (Seller):
[Seller's Name]
[Seller's Address]
[City, State, Zip Code]
[Country]
[Contact Person and Title]
[Contact Email]
[Contact Phone]
4. Description of Goods/Services:
[Detailed description of the goods or services being traded]
5. LC Amount:
[Total amount of the Back-to-Back LC]
6. Expiry Date:
[Expiry date of the Back-to-Back LC]
7. Presentation Period:
[Number of days after shipment/date of issuance for presentation of documents]
8. Documents Required:
[List of documents required for payment under the Back-to-Back LC, including invoice, packing list, bill of lading, certificate of origin, etc.]
9. Shipping Terms:
[Incoterms® 2020 rule that defines the shipping terms, e.g., EXW, FOB, CIF, etc.]
10. Charges:
[Specify who will bear the costs associated with the Back-to-Back LC, such as issuing charges, confirmation charges, and reimbursement fees]
11. Special Instructions:
[Any additional instructions or requirements specific to this transaction]
Please ensure that the Back-to-Back LC is issued and transmitted to [Beneficiary's Bank's Name and Address] through an authentic SWIFT message. We also request [Issuing Bank's Name] to confirm the Back-to-Back LC to facilitate trade between [Intermediary's Name] and [Seller's Name].
We hereby undertake to indemnify and hold [Issuing Bank's Name] harmless from and against any and all claims, damages, and liabilities arising from or related to this Back-to-Back LC.
If you require any further information or clarification, please do not hesitate to contact us.
Thank you for your prompt attention to this matter.
Sincerely,
[Your Name]
[Your Title]
[Your Company's Name]
[Your Email]
[Your Phone]
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Standard Back-to-Back Letter of Credit Request
Subject: Request for Issuance of Back-to-Back Letter of Credit
Dear [Bank Officer Name],
We kindly request the issuance of a back-to-back letter of credit in favor of our supplier, [Supplier Name], under the terms of our master LC No. [Master LC Number] dated [Date]. The LC should be for an amount of [Amount] and valid until [Expiry Date]. All terms and conditions shall mirror the master LC unless otherwise stated.
Please find attached all relevant documents for your reference and processing. We appreciate your timely assistance.
Sincerely,
[Your Name]
[Company Name]
Urgent Back-to-Back Letter of Credit Email
Subject: Urgent Issuance of Back-to-Back Letter of Credit
Dear [Bank Officer Name],
We request urgent issuance of a back-to-back LC for our supplier, [Supplier Name], under Master LC No. [Master LC Number] dated [Date]. The required amount is [Amount] with expiry on [Expiry Date]. Kindly expedite the process to avoid shipment delays.
Attached are all necessary documents. Thank you for your prompt attention.
Best regards,
[Your Name]
[Company Name]
Formal Back-to-Back LC Confirmation Letter
Subject: Confirmation of Back-to-Back Letter of Credit Issuance
Dear [Supplier Name],
This is to formally confirm that a back-to-back LC has been issued in your favor under Master LC No. [Master LC Number] dated [Date]. The LC amount is [Amount] and valid until [Expiry Date]. All terms and conditions comply with the master LC unless specifically amended.
Please acknowledge receipt and confirm your acceptance of the LC terms.
Sincerely,
[Your Name]
[Company Name]
Back-to-Back Letter of Credit Amendment Request
Subject: Amendment Request for Back-to-Back Letter of Credit
Dear [Bank Officer Name],
We request the following amendments to the back-to-back LC No. [LC Number] issued under Master LC No. [Master LC Number]:
1. Extend expiry date to [New Expiry Date]
2. Revise shipment terms as per attached updated contract
Please process the amendment at your earliest convenience and confirm once done.
Thank you for your support.
Best regards,
[Your Name]
[Company Name]
Provisional Back-to-Back Letter of Credit Notification
Subject: Provisional Back-to-Back LC Notification
Dear [Supplier Name],
We wish to inform you that a provisional back-to-back LC has been arranged in your favor under Master LC No. [Master LC Number] dated [Date]. The provisional amount is [Amount] pending final verification and approval from our bank.
Kindly review the provisional terms and provide acknowledgment.
Sincerely,
[Your Name]
[Company Name]
What is a Back-to-Back Letter of Credit and Why It Is Used
- A secondary LC issued based on an existing master LC
- Enables a buyer to finance payments to a supplier using the security of the original LC
- Commonly used in trading scenarios involving intermediaries
- Ensures payment security and smooth international transactions
Who Should Send a Back-to-Back Letter of Credit
- Importers or trading companies acting as intermediaries
- Exporters requesting a secondary LC to fulfill orders
- Bank officers responsible for LC processing and approval
Whom Should a Back-to-Back LC Be Addressed To
- Supplier or exporter receiving the secondary LC
- Issuing bank handling the back-to-back LC
- Beneficiaries outlined in the master LC
When to Use a Back-to-Back Letter of Credit
- When an intermediary purchases goods on behalf of another party
- When the master LC cannot be assigned directly to the supplier
- During international trade requiring secure financing for suppliers
- For partial shipments or phased deliveries requiring separate LCs
How to Apply for a Back-to-Back Letter of Credit
- Review terms of the master LC
- Identify the supplier and required LC amount
- Draft a formal request to the issuing bank
- Attach supporting documents: invoice, purchase order, and master LC copy
- Ensure compliance with bank regulations and international trade laws
- Submit the request and follow up for issuance
Formatting Guidelines for Back-to-Back Letters of Credit
- Tone: Professional and formal
- Include: Master LC reference, amount, beneficiary, expiry date, and terms
- Attach supporting documents
- Signature: Authorized company representative
- Mode: Preferably official letter, but email acceptable for internal processing
Requirements and Prerequisites Before Issuing a Back-to-Back LC
- Copy of the master LC
- Agreement or contract with the supplier
- Approved credit limit with the issuing bank
- Compliance checks (KYC, regulatory approvals)
- Payment terms clearly defined
After Sending a Back-to-Back Letter of Credit
- Obtain confirmation from the bank of LC issuance
- Notify the supplier and request acknowledgment
- Monitor shipment and document compliance for payment
- Keep record of all communications for auditing and future reference
Common Mistakes to Avoid in Back-to-Back LC
- Failing to reference the master LC correctly
- Omitting critical terms like amount, expiry date, or beneficiary
- Ignoring bank compliance and documentation requirements
- Sending provisional LC without proper confirmation
Elements and Structure of a Back-to-Back Letter of Credit
- Subject line indicating LC type
- Salutation to the bank or beneficiary
- Reference to master LC and terms
- Amount and currency
- Expiry date and validity period
- Shipment terms and documents required
- Closing statement and signature
Tips for Efficient Back-to-Back LC Processing
- Verify master LC terms carefully
- Maintain clear communication with supplier and bank
- Use professional and precise language
- Ensure all required documents are attached
- Follow up consistently to avoid delays
FAQ About Back-to-Back Letters of Credit
-
Q: Can the secondary LC differ from the master LC?
A: Minor amendments are possible, but generally, terms should mirror the master LC. -
Q: Who bears the risk in a back-to-back LC?
A: The intermediary relies on the master LC for security; the supplier depends on the secondary LC. -
Q: Are banks required to issue a back-to-back LC?
A: Issuance is subject to the bank’s approval, credit checks, and compliance with regulations.
