Document background
The Red Letter of Credit is a vital trade finance instrument in Hong Kong's international commerce landscape, designed to facilitate trade by providing sellers with advance funding before shipment. This specialized document type emerged from the need to support exporters with working capital while maintaining the security features of traditional Letters of Credit. When using a Red Letter of Credit, the beneficiary can receive a percentage of the credit amount in advance, typically against a simple written request or warehouse receipt. The document operates under Hong Kong jurisdiction while adhering to international banking practices (UCP 600), making it particularly suitable for transactions involving Hong Kong-based traders or banks. It includes specific provisions for advance payment, required documentation, and security measures to protect all parties involved in the transaction.
