Back - to - back DC

Back-to-back Documentary Credits (BBDC), also known as a Baby DC, are used by traders, middlemen and buying agents. A BBDC is a DC issued based on another in the same trade transaction (the same goods are called for under both DCs). The first DC, sometimes known as the Master DC, is issued by your buyer and payable to you. Based on this master DC, you issue another DC, which is known as a back-to-back DC, to purchase goods from your supplier.

The master DC can be any Irrevocable or Transferable credit and you do not need to request a master DC specifically from your buyer. Also, the DC you issue to your supplier is indistinguishable from a regular irrevocable DC.

Efficient Use of Capital

When the BBDC is issued, the terms and conditions are usually structured to match those of the master DC as closely as possible. This minimises the chances of your being required to pay the supplier under the BBDC but being unable to meet the terms of the master DC and thus unpaid.

Payment for the BBDC will stem from documents eventually presented under the master credit. Depending on how closely the terms of the two DCs are matched, you may be able to use the master DC as security and obtain facilities to issue the BBDC more easily.

Confidentiality

Since the transaction basically involves two separate DCs, the details of your buyer and your supplier will be kept away from each other during this trading transaction. Thus, a back-to-back DC will be able to protect your control over the relationships and commission income from acting as a middleman

For further information, please call our Customer Service Centre on 4 4722 24 or stop by at your nearest HSBC branch.You could also contact us via e-mail.