Back to Back Letter of Credit
This is a new letter of credit opened based on an already existing, nontransferable credit used as collateral. A Back-to-Back Letter is used when the beneficiary (client) does not wish to divulge certain information deemed sensitive. A trader receives a letter of credit from the buyer and then opens another letter of credit in favour of the Supplier, thus, the first letter of credit serves as collateral for the second letter of credit.