Transferable vs Back-to-Back Letter of Credit: Choosing a Trading Structure
How intermediaries choose between transferring a credit and opening a second, back-to-back credit.
Reviewed by LCCheck team (owner-approved) · 2026-10-12
Short answer
A transferable credit (UCP 600 Art. 38) lets a middleman transfer the credit, with limited changes, to a supplier; only one credit exists. A back-to-back credit is a separate second credit opened by the middleman's bank, backed by the first. Transfer needs the original credit to say 'transferable'; back-to-back needs the middleman's own credit line.
| Transferable | UCP 600 Art. 38, one credit |
|---|---|
| Back-to-back | Two separate credits |
| Needs | 'Transferable' wording or bank line |
Transferable
- Simpler and cheaper.
- Limited term changes allowed (amount, price, dates, insurance).
- Substitution of invoice to protect margin.
Back-to-back
- Independent terms can be aligned.
- Middleman's bank takes the risk.
- Documents must satisfy both credits.
Sources
General guidance, not legal advice. Your bank examines documents independently.
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