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At Sight Letter of Credit 

Understanding at sight letter of credit.










Irrevocable Letter of Credit Sample in Swift Format
According to current letters of credit rules, namely UCP 600, credits must state how they are available to beneficiaries in terms of payment type. UCP 600 - Article 6-b states that "A credit must state whether it is available by sight paymentdeferred paymentacceptance or negotiation." In this article I will try to explain you at sight letters of credit.
Definition of an at sight letter of credit :
At sight payment is a payment due on demand. At sight letter of credit can be defined as a letter of credit that is payable as soon as the complying documents have been presented to the issuing bank or the confirming bank.

When should the beneficiary expect to receive the payment from the issuing bank or the confirming bank under an at sight letter of credit?

If is the issuing bank or the confirming bank finds out that the presentation is complying then they should transmit the funds to the beneficiary. We know that banks have 5 working days to determine whether a presentation is compying or not. So beneficiary should expect to receive the letter of credit amount from the issuing bank or the confirming bank between 7-10 days after documents received by these banks.   

In which circumstances at sight letter of credit can be preferred?
At sight letter of credit can be used in situations where the beneficiary needs funds as soon as shipment is completed. At sight letters of credit are mostly used in small to medium sized transactions where applicant is located in a relatively risky country. 

What are the potential risks in at sight letters of credit?

At sight letters of credit bear common risk factors we may see in a regular letter of credit transaction. You can have a look at our page to find more details in risk issues under letter of credit transactions from this link. Additionally in most cases at sight letters of credit increase fraud risk of the applicant as applicants must pay to the goods long before they receive them.

At sight letter of credit is shown in a swift message as belows,
MT 700 Issue of a Documentary Credit 
      Field 41a: Available With ... By ...
  • BY ACCEPTANCE
  • BY DEF PAYMENT
  • BY MIXED PYMT
  • BY NEGOTIATION
  • BY PAYMENT
            
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What is at sight letter of credit? 

UCP 600 - Article 6-b states that "A credit must state whether it is available by sight paymentdeferred paymentacceptance or negotiation." In this article I will try to explain you at sight letters of credit.
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