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Sometimes Issuers of services and goods after receiving the irrevocable L/C , request opening one or more back to back L/C . In such negotiation from two separate L/C are used and using of it when is necessary . . .

Back To Back Documentary Letter of Credits

Sometimes Issuers of services and goods after receiving the irrevocable L/C , request opening one or more back to back L/C . In such negotiation from two separate L/C are used and using of it when is necessary that the main beneficiary doesn't able to provide goods and for many other reasons , namely , first beneficiary lack of intention to disclosure name of his buyer for the second beneficiary and or beneficiary lack of acceptance to transfer of L/C for it's high risk and or kind of main L/C currency differs from kind of buying goods currency by first beneficiary from goods producer ( second beneficiary ) , and or first beneficiary want to provide the goods with amount less than first L/C amount from second beneficiary and sell for first L/C price to first L/C buyer , in such case back to back L/C is necessary and using of transferable L/C in these cases will not possible, so for opening back to back L/C , first beneficiary request for second L/C opening .

Conditions and important notes which are considered and observed in the time of second L/C opening are as follows :

1. Second L/C opening is the subject which is only related to beneficiary and second L/C opener bank and knowing and other factors agreement , i.e first L/C opener bank or first applicant , are not necessary .
2. Maximum FX amount limit and second L/C currency kind can be to 90 percent of first L/C amount .
3. First L/C conditions and back to back L/C such as goods and requested documents and …must have necessary proportion .
4. Expiry date of back to back L/C must be at least 15 days prior to first L/C expiry date and at most one week after the last shipment date .
5. After opening of the second LC , the bank may only accept those amendments of the first LC of the opening Correspondent which are relevant to conditions of both LCs and the request for full cancellation of the first LC is subject to the full cancellation of the second LC and agreement of the Second beneficiary within the validity of the LC .
6. Opening of the back to back LC is done taking into consideration the client's credit worthiness ( beneficiary of the first LC ) , obtaining enough security and carrying out the required processes in the relevant Credit Commission in accordance with the specified ceilings and Uniform Customs and Practice For Documentary Letters of Credit .
7. In case back to back LC is used for import of the goods from outside of the country or Free Zones , implementation of all processes of order registration , obtaining relevant licenses and observation of the circulars relevant to the import of the goods are obligatory .

Processes of Back to Back LC

1. Receipt of the Export LC for which BSI is advising and negotiating bank .
2. Review of the opening bank's credit worthiness.
3. Advising of the LC to the first beneficiary .
4. Receipt of the first beneficiary's request for opening of the back to back LC based on the Export LC.
5. Obtaining the authorization of Export Section of FX Operations Department for issuance of the back to back LC.
6. Implementation of LC opening processes such as obtaining Credit Commission's approval relevant to the specified ceilings complying with Uniform Customs and Practice for Documentary Letters of credit and filling in the form No 508 , undertaking form and other documents related to the letter of credit.
7. Receipt of the specified advance payment from the applicant .
8. Opening of the back to back LC.