Special types of documentary credit

Confirmed Irrevocable Documentary Credit
A confirmation of an irrevocable documentary credit by a bank (the confirming bank) upon the authorization or request of the issuing bank constitutes a definite undertaking of the confirming bank, in addition to that of the issuing bank, provided that the stipulated documents are presented to the confirming bank or to any other nominated bank on or before the expiry date and the terms and conditions of the documentary credit are complied with, to pay, to accept draft (s) or to negotiate.

Revolving Documentary Credit

A documentary credit is one by which, under the terms and conditions thereof, the amount is renewed or reinstated without specific amendments to the documentary credit being required. The revolving documentary credit may be revocable or irrevocable, and may-revolve in relation to time or value.

Red Clause Documentary Credit

A red clause documentary credit is a documentary credit with a special condition incorporated into it that authorizes the confirming bank or any other nominated bank to make advances to the beneficiary before the presentation of the documents.

Standby Credit

The standby credit is a documentary credit or similar arrangement, however, named or described, which represents an obligation to the beneficiary on the part of the issuing bank to:
(l) repay money borrowed by the applicant, or advanced to or for the account of the applicant; (2) make payments on account of any indebtedness undertaken by the applicant; or
(3) make payments on account of any default by the applicant in the performance of any obligation.

Transferable Documentary Credit

A transferable documentary credit is a credit under which the beneficiary (first beneficiary) may request the bank authorized to pay, incur a deferred payment undertaking, accept or negotiate (the “transferring bank”), or in the event of freely negotiable credit, the bank specifically authorized in the credit as a transferring bank to make the documentary credit available in whole or in part to one or more other beneficiary/ies (second beneficiary/ies).

Back-to-Back Documentary Credit

The benefit of an irrevocable documentary credit (the primary credit) may be made available to a third party where the primary beneficiary uses the documentary credit as security/collateral to obtain another documentary credit (the secondary credit) in favour of the actual supplier. This secondary credit is known as back-to-back documentary credit.

Source: ICC Guide to Documentary Credit Operations, Publication No. -515

Special types of documentary credit