DLC at Sight vs Transferable LC in Commodity Transactions
The practical difference between a documentary credit payable at sight and a credit that a bank agrees to transfer to a second beneficiary.
Last reviewed
“At sight” and “transferable” describe different features of a documentary credit. They are not alternatives on one scale.
Documentary credit at sight
A documentary credit is a bank undertaking governed by its own terms. “At sight” generally means the nominated or issuing bank pays after a complying presentation is examined, subject to the credit and applicable rules. It does not mean cash appears the moment a vessel loads.
The credit must still define the beneficiary, amount, expiry, presentation place, documents, shipment terms, tolerance, partial shipment, transshipment, and other conditions. Banks deal with documents, not the physical goods.
Transferable credit
Under UCP 600 Article 38, a credit is transferable only if it specifically says it is transferable. A bank has no obligation to transfer it except to the extent and in the manner the bank expressly consents.
The first beneficiary can request that the transferring bank make the credit available to a second beneficiary. That can support an intermediary structure, but it is not automatic. The issuing bank’s wording, transferring bank’s consent, countries, parties, documents, amounts, shipment structure, and compliance review all matter.
One credit can be both
A documentary credit can be available at sight and be transferable. It can also be at sight and non-transferable. “Sight” addresses payment timing after a complying presentation. “Transferable” addresses whether and how the bank permits a second beneficiary.
Why sellers often reject transferable credits
A seller may require a direct credit in its own favour because it wants a direct bank undertaking, fewer documentary layers, clearer amendment control, or a procedure already approved by its bank. A buyer may prefer a direct seller-beneficiary structure for the same reasons.
That is not evidence that one side is fraudulent. It is a structural preference that must be tested against the actual transaction and banks.
Other intermediary structures
Alternatives can include an assignment of proceeds, a back-to-back credit, a separate fee agreement, or a direct sale contract with disclosed compensation. Each creates different credit, documentary, compliance, tax, and operational consequences.
No website article can determine which structure a bank will approve. The applicant, beneficiary, intermediary, issuing bank, nominated bank, jurisdictions, transaction documents, and economics must be reviewed together.
GMC’s current boundary
GMC does not represent that it has a standing trade-finance facility or that a bank will accept GMC as applicant, beneficiary, transferring party, or payee. A proposed transaction remains subject to counterparty agreement, professional review, and written bank approval.
The right question is not “Can we get a transferable sight LC?” It is: “Which documented structure protects the parties, fits the contracts, and is approved by the banks that must execute it?”
Does “at sight” mean immediate payment?
No. The bank must receive and examine the required presentation. Discrepancies, presentation location, banking days and the credit’s own terms affect timing. Shipment and payment are separate events.
Can any LC be transferred?
No. A transferable credit must say that it is transferable, and the transferring bank must agree to act. Commercial parties should not promise a transferable structure before the relevant banks have reviewed the applicant, beneficiary, wording and transaction.
What should be agreed before an SPA is signed?
The parties should know the intended applicant, beneficiary, amount, currency, availability, presentation place, document set, shipment tolerances, expiry and amendment control. The SPA and credit need to be drafted as one execution system. If a broker fee or separate compensation agreement exists, it must be lawful, documented and compatible with the buyer’s procurement policy and the banks’ review.
Sources and review record
These are the primary or authoritative sources used for this explainer. Listing a source does not imply endorsement of GMC.
- UCP 600 Article 38: Transferable Credits International Chamber of Commerce · reviewed August 26, 2026
- Incoterms and commercial contracts International Chamber of Commerce · reviewed August 26, 2026