Red Clause LC

Also known as anticipatory Letter of credit a red clause LC allows the beneficiary to avail finances in advance to execute the required order in LC. Normally, payment against the LC to the beneficiary is effected on post shipment stage. I.e against the shipping documents. In some cases it may be possible for the exporter to enter into an arrangement with its importer to provide the former with pre-shipment finance, for the procurement of raw materials, processing and packing the goods. by establishing a red clause LC.such a letter of credit provides for either an immediate payment to the beneficiary of full or part amount of the credit or payment to the beneficiary of part amounts form time to time as per the terms indicated in the credits against delivery of specified documents.these payments are made in-anticipation of the exporter shipping the goods and submitting the relatives documents under the credit at a later date.