Light ticket letter of credit

Light Credit (Clean Credit)

Definition of light ticket letter of credit
The letter of credit is divided into two categories: the light ticket letter of credit and the documentary letter of credit, depending on whether it follows the documents. A light ticket letter of credit is a letter of credit without a bill, and the beneficiary can collect the money in batches or once at the advising bank by opening a receipt or a money order. In trade, it can play the role of pre-extracting payment. The foreseeable letter of credit in trade settlement and the travel letter of credit in non-trade settlement are all light ticket letters of credit.

A Credit Credit is a letter of credit paid by a Clean Draft that does not accompany the shipping document. The bank pays by light ticket, and can also ask the beneficiary to attach a non-shipping document, such as an invoice, a list of advances, and so on.

Risk Analysis of Light Ticket Letter of Credit
A light ticket letter of credit is a type of letter of credit. When the beneficiary requests a negotiation or payment, there is no need to submit a shipping document, but only a draft or invoice. However, the letter of credit is a commitment of the bank to pay on certain terms, and the light ticket is no exception.

The documents under the light ticket L/C do not have shipping documents, so the risk to the importer is relatively large, and it is impossible to control the delivery, quality and quantity of the goods through various documents. Importers have to rely on the credit of the exporter, otherwise there will be a situation where the money is both empty. The issuing bank is also unable to use the shipping documents to prevent risks. It can only be based on the credit of the importer or other guarantees provided by the importer, so the risk of the bank is relatively large.

For exporters, the issuing bank under the light of the letter of credit still bears the first payment obligation and does not need to provide shipping documents, so it should be advantageous. Because the fewer documents submitted under the letter of credit, the less likely it is that the documents will not match. Moreover, the greater the risk of the importer, the greater the risk to the importer and the lower the risk of the exporter as the counterpart. Therefore, the use of light ticket letters of credit in international trade is relatively small, mostly used to pay for subordinate expenses, tail payments, sample fees, etc., as well as other non-trade expenses. Under normal circumstances, the risk of a light ticket letter of credit is less than the documentary credit for the exporter.