Back-to-back documentary credit
An irrevocable back-to-back documentary credit (the primary credit) may be made available to a third party where the primary beneficiary uses the documentary credit as security to obtain another documentary credit (the secondary credit) in favour of the actual supplier.
The process involves two separate documentary credits:
- In favour of the first or primary beneficiary.
- In favour of a second beneficiary who is supplying the goods.
The secondary credit needs to abide by the requirements of the primary credit within the set time limits and produce the documents.