TRADE FINANCE AND LETTERS OF CREDIT
Melville Capital Group LLC. facilitates and manages the process of opening Letters of Credit (LC's) on behalf of its
clients. The LC's are issued by Prime Banks. We have established banking relationships, and are positioned to
provide flexible and expedited services. Specific collateral deposits are not required, we leverage the banking or
lending facilities which may be currently provided by other institutions.
We enable purchasers of products to enable the issuances of LC's for the local country usage of pre-export financing.
Our partners are experts in the World of Trade Finance, in all types of LC contracts such as UCP 600 for
documentary LC's and ISP98 for standby Letters of Credit.
We provide LC's for almost any type of commodity goods to apparel and textiles, and electronic components to
consumer appliances and specialty products. Transaction amounts can be for $200,000 to $500,000,000.
We maintain an effective AML program and are KYC and US Patriot Act compliant.
Types of Letters of Credit
Irrevocable
An irrevocable letter of credit can not be amended or revoked without the agreement of ALL the parties to the letter of
credit, so it provides the assurance that providing the beneficiary complies with the terms, he/she will be paid for the
goods or services. Under UCP 500, a letter of credit is deemed irrevocable unless otherwise stated.
Unconfirmed
An unconfirmed irrevocable letter of credit provides a commitment by the issuing bank to pay, accept, or negotiate a
letter of credit. An advising bank forwards the letter of credit to the beneficiary without responsibility or undertaking on
its part except that it must use reasonable care to check the authenticity of the credit which it advised. It does not
provide a commitment from the advising bank to pay, so the beneficiary is reliant upon the undertaking of the
overseas bank. The beneficiary is not protected from the credit risk of the issuing bank nor the country risk.
Confirmed
Confirmed irrevocable letter of credit is one to which the advising bank adds its confirmation, makes its own
independent undertaking to effect payment, negotiation or acceptance, providing documents are presented which
comply with the terms of the letter of credit. The advising bank, which may also be the confirming bank, assumes the
country (political and economic) risk of the applicant’s country as well as the credit risk, failure and default of the
issuing bank and effects payment to the beneficiary without recourse.
Transferable Credit
Under a transferable letter of credit a beneficiary (the first beneficiary) can ask the issuing/advising/confirming bank to
transfer the letter of credit in whole or in part to another party/ies such as supplier/s (second beneficiary/ies). A
transferable letter of credit is usually used when the beneficiary is not the manufacturer/original supplier of some/all of
the goods/services. This process enables the beneficiary to pay the manufacturer/original supplier by letter of credit. If
the bank agrees, this bank, referred to as the transferring bank, advises the letter of credit to the second
beneficiary/ies in the terms and conditions of the original letter of credit with certain constraints defined in Article 48 of
UCP 500. Transferable credit:
Can be transferred by the original beneficiary to one or more other parties. It is normally used when the first
beneficiary does not supply the merchandise himself, but is a middleman and wants to transfer all or part of his rights
to the actual supplier (Article 38 UCP 600)
Assignment of Proceeds
The right to the proceeds of a letter of credit can sometimes be assigned where the beneficiary of a letter of credit is
not the actual supplier of all or part of the letter of credit and wants the bank to pay the supplier out of funds received
from the letter of credit. The beneficiary may choose this option if he or she does not want to request a transferable
letter of credit from a buyer in order to keep the buyer from knowing who is the actual supplier of the goods does not
have the necessary credit with the bank to issue a new letter of credit to a supplier. An assignment of proceeds takes
the form of an irrevocable instruction from the beneficiary to the bank requesting that it pay the supplier out of the
proceeds of the letter of credit which becomes due when documents are presented in compliance with the terms of the
letter of credit.
Standby
A standby letter of credit is one which is issued as a back-up or form of insurance for the seller should the buyer
default on the agreed-upon payment terms. A standby letter of credit is issued in the same way a documentary credit
is in that the collateral needed for issuance is required by the issuing bank and the beneficiary must comply with every
detail as outlined in the letter of credit. Normally, this type of LC functions like a guarantee. This type of credit can be
drawn against only upon performance of service or financial obligation default. It is a definite undertaking of the
issuing bank. The standby letters of credit from CIB and GEBS both state that they are governed by UCP 600. If that is
the case, should we mention ISP98.
Revocable
Under UCP 600 a letter of credit is revocable even if there is no indication to that effect (article 3).
Documentary; Merchandise, Commercial, Trade
The majority of LCs issued are in payment for goods in shipment or current services performed. Payment is normally
made against documents for goods shipped. (Article 2 UCP 600)
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