These are issued to enable the exporter to get his suppliers on credit. These are issued mainly when the primary beneficiary does not want the buyer to know who the supplier of the goods sold are (in trading operations) or when the opener is not prepared to open a transferable credit.

3. Counter credit: This kind of credit is similar to a back to back credit. It's identifying factor is that the seller has his own bank (as opposed to the advising/confirming bank) to issue the credit as a counter to the first one.

4. Red clause credit: This a method of financing before shipment and are so called because the clause relating to the provision for finance wasoriginally written in red ink of the credit to draw attention to this special feature. Normally the beneficiary under a credit receives payment only after shipping the goods and submitting the documents stipulated in the credit. This credit authorises the advising or commercial bank to make advances to the beneficiary before presentation of documents. This is to enable him to purchase or process goods to be shipped. These advances together with the accrued interest is to be repaid by the beneficiary with the proceeds of the draft negotiated after the shipment or adjusted at the time the draft is negotiated.

The onus of final repayment is on the buyer who would be liable for repayment of the advances if the seller fails to submit the documents called for under credit.

He would also be liable for all costs incurred by the issuing and the advising/confirming banks.

5. Green clause letter of credit: Green clause letters are an extension of the red clause credits in that they envisage the grant ofstorage facilities at the port of shipment over and above preshipment finance. These are not usually issued.

6. Standby letters of credits: A standby letter of credit is not really a credit but is a guarantee for the performance of a contract and is realisable on the presentation to the issuing bank of a declaration that a named party has not fulfilled the contract.

7. Acceptance credits: Letters of credit are normally payable on sight. Payment is to be made on the presentation of the documents. Acceptance credits expect the beneficiary to draw a bill of exchange (bill) for a period of time (30 days, 60 days, etc). The bill may be drawn on a bank and the bank accepts it and pays the bill on maturity. These are used when the transaction involves suppliers' credit. The beneficiary can, if he needs finance, discount the draft (bill) with his bankers. If the bil is accepted by the bank it is known as "banker's acceptance." The beneficiary is assured then of payment on due date.

In these typesof credit the shipping documents are usually handed over to the opener on his accepting the bill. This is the form of credit most favoured by importers as they are able to often sell the goods and pay their dues from the proceeds without resorting to bank finance.

8. Deferred payment letter of credit: In this kind, credit is usually used in the import/export of capital goods. They are similar to acceptance credits. Payment is made in instalments and each instalment is covered by a separate draft. The drafts will be accepted by the issuing bank when the documents are submitted in accordance with the terms of the letter of credit. The exporter can have the drafts discounted with his banker or the issuing bank if the drafts are drawn under the credit. However, drafts under a deferred credit drawn for a very long time may not be rediscountable. Additionally, no discount may be possible if drafts are not drawn as the draft is the negotiable instrument.

9. Transit credit: A transit credit involvesthe confirmation of a letter of credit by a bank in a country other than that of the buyer or the seller. This bank may also open the credit. These credits are used if: