An acceptance L/C (Acceptance Letter of Credit) refers to a letter of credit under which the issuing bank, after receiving documents that comply with the terms of the L/C, undertakes to pay at a specified future date. It is a type of usance L/C and is typically used in trade scenarios where the exporter grants the importer a certain credit period. Use cases include: when the importer needs working capital turnover, or when the exporter wishes to expand sales but is unwilling to bear the risk of foreign exchange collection. Precautions: The exporter should pay attention to the creditworthiness of the accepting bank, because after acceptance, if the bank fails, risks may still arise; at the same time, under an acceptance L/C, the exporter may discount the unmatured draft to obtain funds in advance, but must pay discount interest. Differences from other terms: A sight L/C (Sight Letter of Credit) is payable upon presentation of documents, whereas an acceptance L/C involves future payment; unlike a negotiation L/C, under an acceptance L/C the issuing bank assumes the payment obligation rather than the negotiating bank. In addition, an acceptance L/C usually requires the submission of a usance draft, while a sight L/C may not require a draft.
📝 Examples
1. We signed a contract with a Middle Eastern customer, agreeing to use an acceptance letter of credit, payable 90 days after sight, so that the customer has enough time to sell the goods before making payment. (Note: The exporter gives the importer a 90-day credit period to reduce the importer's financial pressure.)
2. Under an acceptance letter of credit, after the issuing bank accepts the time draft submitted by the beneficiary, the beneficiary may apply to the bank for discounting to recover the payment in advance, but discount interest must be deducted. (Note: The exporter uses the discounting function of the acceptance letter of credit to accelerate capital turnover.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner