Red Clause Letter of Credit (LC) – Advance Payment for Global Trade | NNRV Trade Partners
Ensure Secure & Flexible Global Trade Financing | 100+ Pre-Shipment LC Structures | SWIFT Network Connected
🚀 Unlock Cash Flow with Red Clause LC – Secure Advance Payment for Suppliers
⚠️ Facing Delays Due to Lack of Advance Payment? A Nigerian cashew nut supplier nearly lost a $1.5M UAE contract due to lack of pre-shipment capital. Within 72h, NNRV structured a Red Clause LC with a $400K advance. The goods were shipped on time and the deal was saved.
🧠 « Without NNRV’s Red Clause LC, we couldn’t fund production. Their speed and structure saved our export season. »
📌 What is a Red Clause Letter of Credit (LC)?
A Red Clause LC is a type of documentary credit that allows the seller (exporter) to receive an advance payment from the issuing bank before fulfilling shipment obligations. This advance is deducted from the final LC value upon delivery, ensuring suppliers have the necessary capital to procure raw materials, manufacture goods, or prepare shipments.
At NNRV Trade Partners, we offer Red Clause Letters of Credit (MT700), a specialized trade finance tool designed to provide advance payments to suppliers before shipment. This unique financial instrument enhances supplier liquidity, secures production financing, and ensures a smooth supply chain for international trade.
🔜 Key Advantages:
✅ Pre-Shipment Financing: Exporters receive part of the payment upfront.
✅ Stronger Buyer-Seller Trust: Assures suppliers while securing goods for buyers.
✅ Flexible Trade Agreements: Buyers secure supply chains while maintaining deferred payment structures.
✅ Governed by UCP 600: Fully compliant with International Chamber of Commerce (ICC) regulations.
🔹 How Does a Red Clause LC Work?
1️⃣ Issuance of Red Clause LC: The buyer’s bank issues a Red Clause LC (MT700) with a pre-agreed advance payment percentage clause.
2️⃣ Advance Payment to Seller: The seller (exporter) requests a portion of the LC amount before shipment.
3️⃣Beneficiary Requests Advance – Seller requests advance by submitting signed invoice + indemnity letter.
4️⃣ Advance Released by Bank – Bank releases advance (typically 20-70% of LC value).
5️⃣ Shipment Occurs – Goods shipped + full documentation submitted.
6️⃣ Final payment made after shipment compliance.
📄 Required Documents for Red Clause LC Issuance
✔ Proforma Invoice / Sales Contract – Defines trade terms and advance payment details.
✔ Bank Guarantee (if required) – Acts as collateral for advance payment.
✔ Letter of Indemnity (LOI) – Confirms seller liability for pre-shipment funding.
✔ Commercial Invoice – Specifies the product value and total transaction amount.
✔ Bill of Lading / Airway Bill – Proof and Confirms shipment completion.
✔ Packing List – Details shipment specifications.
✔ Insurance Certificate – Covers potential logistics-related risks (if applicable).
🏦 Top Banks & Financial Institutions for Red Clause LC (MT700)
We work with trusted global banks to facilitate secure Red Clause LC issuance in support of supplier cash flow management, ensuring smooth international trade transactions.
🔹 Top Banks Issuing Red Clause LC (MT700):
| Bank Name | SWIFT Code | Advantages | Disadvantages | Issuance Fees | Issuance Time | Min. Transaction | Region |
|---|---|---|---|---|---|---|---|
| Bank of China | BKCHCNBJ | Strong for structured LCs & Asia trade | Slower in multi-party LC issuance | 0.5% – 7% | 2–6 days | $1M | Asia |
| Standard Chartered (Dubai) | SCBLAEAD | Supports advance LC mechanisms | Documentation-intensive | 0.5% – 7% | 2–6 days | $500K | Global |
| Exim Bank Tanzania | EXTNTZTZ | Suitable for Africa-based producers | Slower validation | 0.5% – 7% | 2–6 days | $250K | Africa |
| MauBank (Mauritius) | MPCBMUMU | Offshore-friendly issuance | Limited global access | 0.5% – 6% | 2–5 days | $250K | Offshore |
| ABC Banking Corporation | ABCKMUMU | SME-aligned LC structures | Less known globally | 0.5% – 6% | 2–5 days | $250K | Offshore |
| Access Bank Kenya | ABNGKENA | Trade facilitation for East Africa | Lower visibility in EU/US | 0.5% – 7% | 2–5 days | $250K | Africa |
| Dashen Bank (Ethiopia) | DASHTEAA | Effective for local supplier LC | Slower compliance turnaround | 0.5% – 7% | 3–6 days | $250K | Africa |
Other banks available upon request.
📢 All transactions comply with ICC & UCP 600 regulations for global trade finance security.
📚 Red Clause vs Green Clause LC
| Instrument | Advance? | Covers Storage/Insurance? | Best For |
| Red Clause LC | ✅ Yes | ❌ No | Procurement & Production |
| Green Clause LC | ✅ Yes | ✅ Yes | Full pre-shipment prep |
| Sight LC | ❌ No | ❌ No | Immediate post-shipment pay |
| Usance LC | ❌ No | ❌ No | Deferred buyer settlement |
📊 Why Choose NNRV for Red Clause LCs?
🔹 Pre-Shipment Structuring – Tailored LC clauses for production, agriculture, and manufacturing
🔹 Fast Advance Releases – Within 48–72h upon LC activation
🔹 Global SWIFT Network – Trusted bank partners in 40+ jurisdictions
🔹 UCP 600 Compliant – Legal protection for buyer and seller
🔹 SME Friendly – From $250K to $100M deals
💡 Why Choose NNRV Trade Partners for Red Clause LC?
🔹 Advance Payment Security: Funds are released under controlled LC conditions.🔹 Increased Supplier Liquidity: Sellers receive funds capital upfront before shipment.
🔹 Custom LC Issuance: Tailored trade finance structures for specific industries.
🔹 Global Expertise: Years of experience in structured finance & risk mitigation.
🔹 Regulatory Compliance: Fully aligned with UCP 600 & SWIFT standards.
💬 Real Testimonials
🧠 “NNRV got us $200K in advance for cocoa bean supply in less than 72 hours.” – Patrick E., Exporter, Ghana
🧠 “The Red Clause LC allowed us to start production immediately. It’s a game-changer.” – Lina D., Textile Supplier, Tunisia
🤔 Frequently Asked Questions
What’s the typical advance rate under Red Clause LC? ✅ Usually 20–50%, but up to 70% with strong documentation.
Do I need collateral? 📆 Not always. Some banks accept LOI + verified documents. Others may require a BG.
Is the LC globally accepted? 🚀 Yes – all LCs issued via SWIFT MT700 and UCP 600.
What’s the difference between Red and Green Clause LC? 🔹 Red Clause: advance for procurement. Green Clause: advance for procurement + storage/insurance.
Can I use this as a new exporter? ✅ Yes, we support SMEs and new entities with valid contracts.
🔗 Related Services
SBLC |
POF |
📏 Learn More in Our Blog
✍️ Red vs Green Clause LC: Which One Fits Your Deal?
✍️ Why Pre-Shipment Financing Is Booming in Africa
✍️ How to Structure the Perfect LC for Seasonal Commodities
🚀 Ready to Secure Pre-Shipment Funds?
📩 Book Your Free LC Structuring Call Today
📧 Contact NNRV Trade Partners | 🌍 Trusted in 40+ Countries | ✅ From $250K to $100M+ Advance LC Options
Red Clause Letter of Credit (LC)
Ensure Secure & Flexible Pre-Shipment Financing | 100+ LC Structures | SWIFT Connected
🚀 Unlock Cash Flow with Red Clause LC
Facing delays due to lack of advance payment? A Nigerian cashew supplier nearly lost a $1.5M UAE contract. Within 72h, NNRV structured a Red Clause LC with a $400K advance. The goods shipped on time and the deal was saved.
« Without NNRV’s Red Clause LC, we couldn’t fund production. Their speed and structure saved our export season. »
📌 What is a Red Clause LC?
A Red Clause LC is a documentary credit allowing the seller to receive an advance from the issuing bank before shipment. The advance is deducted from the final LC value, ensuring suppliers can finance raw materials, production, and shipment preparation.
🔜 Key Advantages
- ✅ Pre-Shipment Financing – Exporters get part of the payment upfront.
- ✅ Stronger Buyer-Seller Trust – Secures suppliers while assuring goods delivery.
- ✅ Flexible Trade Agreements – Deferred payment structures maintained.
- ✅ Governed by UCP 600 – Fully ICC compliant.
🔹 How Red Clause LC Works
- Issuance: Buyer's bank issues Red Clause LC (MT700) with advance clause.
- Advance Request: Seller submits signed invoice + Letter of Indemnity.
- Advance Payment: Bank releases 20–70% of LC value upfront.
- Shipment: Goods shipped and documentation submitted.
- Final Payment: Balance paid after shipment compliance.
📄 Required Documents
- Proforma Invoice / Sales Contract
- Bank Guarantee (if required)
- Letter of Indemnity (LOI)
- Commercial Invoice
- Bill of Lading / Airway Bill
- Packing List
- Insurance Certificate (if applicable)
🏦 Top Banks for Red Clause LC (MT700)
| Bank Name | SWIFT Code | Advantages | Disadvantages | Fees | Issuance Time | Min. Transaction | Region |
|---|---|---|---|---|---|---|---|
| Bank of China | BKCHCNBJ | Strong for structured LCs & Asia trade | Slower in multi-party LC issuance | 0.5% – 7% | 2–6 days | $1M | Asia |
| Standard Chartered Dubai | SCBLAEAD | Supports advance LC mechanisms | Documentation-intensive | 0.5% – 7% | 2–6 days | $500K | Global |
| Exim Bank Tanzania | EXTNTZTZ | Suitable for Africa-based producers | Slower validation | 0.5% – 7% | 2–6 days | $250K | Africa |
| MauBank Mauritius | MPCBMUMU | Offshore-friendly issuance | Limited global access | 0.5% – 6% | 2–5 days | $250K | Offshore |
| ABC Banking | ABCKMUMU | SME-aligned LC structures | Less known globally | 0.5% – 6% | 2–5 days | $250K | Offshore |
| Access Bank Kenya | ABNGKENA | Trade facilitation for East Africa | Lower visibility in EU/US | 0.5% – 7% | 2–5 days | $250K | Africa |
| Dashen Bank Ethiopia | DASHTEAA | Effective for local supplier LC | Slower compliance turnaround | 0.5% – 7% | 3–6 days | $250K | Africa |
📚 Red Clause vs Other LCs
| Instrument | Advance Payment? | Storage/Insurance? | Best For |
|---|---|---|---|
| Red Clause LC | ✅ Yes | ❌ No | Procurement & Production |
| Green Clause LC | ✅ Yes | ✅ Yes | Full pre-shipment prep |
| Sight LC | ❌ No | ❌ No | Immediate post-shipment pay |
| Usance LC | ❌ No | ❌ No | Deferred buyer settlement |
💡 Strategic Approach to Red Clause LC
Beyond simply providing pre-shipment financing, NNRV Trade Partners structures Red Clause LCs strategically to optimize supplier cash flow, minimize risk, and ensure smooth multi-tier supply chains. This approach helps exporters, importers, and trading houses achieve predictable operations, stronger buyer-supplier relationships, and efficient capital utilization.
📌 Why a Strategic Red Clause LC Matters
- Optimized Cash Flow: Ensure suppliers have funds upfront without compromising buyer capital.
- Supply Chain Reliability: Reduce shipment delays by enabling producers to procure raw materials on time.
- Multi-Beneficiary Structuring: Allocate LC proceeds across multiple suppliers or factories while maintaining control.
- Margin Protection: First beneficiaries can use invoice substitution to retain commercial margin.
- Compliance Assurance: Fully aligned with UCP 600, ICC rules, KYC/AML, and sanctions regulations.
🔹 How We Apply Strategy in Red Clause LCs
- Tiered Financing: Combine Red Clause advances with back-to-back or transferable LCs for multi-tier suppliers.
- Custom Advance Percentages: Adjust pre-shipment payment levels based on production cycles, seasonality, and supplier needs.
- Geographic Flexibility: Structure payments to suppliers across multiple countries or regions seamlessly.
- Risk Mitigation: Apply audit-ready documentation checks, KYC/AML screenings, and invoice substitution policies to minimize exposure.
- Integration with Overall Trade Strategy: Align LC issuance with project timelines, buyer-supplier contracts, and logistics planning.
🏦 Partner Banks & Strategic Coverage
NNRV works with 40+ global SWIFT banks to implement strategic Red Clause LCs, ensuring timely fund releases, structured documentation, and compliance monitoring.
| Bank Name | SWIFT | Strategic Advantage | Region |
|---|---|---|---|
| HSBC Hong Kong | HSBCHKHHXXX | Fast issuance, multi-tier LC support | Asia |
| Standard Chartered Dubai | SCBLAEAD | MENA hub, flexible advance structures | MENA |
| Bank of China | BKCHCNBJ | Strong Asia trade network | Asia |
🎯 Key Benefits of Strategic Structuring
- Rapid advance release (typically 24–72h) to support supplier operations
- Flexibility to split payments or structure multi-factory projects
- Transparent, audit-ready compliance for all parties
- Integration into larger trade strategies to maximize efficiency and profitability
🛡️ Risk Management & Compliance for Red Clause LC
Red Clause Letters of Credit provide pre-shipment financing, but they also introduce potential risks if not properly structured. NNRV Trade Partners integrates rigorous risk management and compliance protocols to safeguard buyers, sellers, and banks across global trade corridors.
📌 Key Risks in Red Clause LCs
- Advance Payment Exposure: Risk of non-shipment or delayed delivery by the beneficiary.
- Fraud or Misrepresentation: Incorrect documentation or misused funds.
- Regulatory & Sanctions Breach: Violations of KYC, AML, or international sanctions laws.
- Operational Discrepancies: Non-compliance with LC terms, shipment deadlines, or document formats.
- Banking Counterparty Risk: Issuing or advising bank failing to honor payment obligations.
🔹 NNRV Compliance Framework
- KYC & AML Verification: Full identification and background checks on all parties (beneficiaries, buyers, and banks).
- Sanctions Screening: Continuous monitoring against OFAC, UN, EU, and local sanctions lists.
- Documentary Check & Audit: Pre-verification of invoices, LOIs, bills of lading, and other supporting documents against LC terms.
- SWIFT MT700 Control: Ensure Red Clause LC wording is compliant with UCP 600 and ISBP 745, minimizing discrepancies.
- Advance Payment Safeguards: Clear indemnity agreements and internal controls on pre-shipment disbursements.
🏦 Partner Banks & Risk Assurance
Our network of 40+ SWIFT-enabled banks ensures that Red Clause LCs are issued and advised under strict compliance protocols:
| Bank Name | SWIFT | Compliance Advantage | Region |
|---|---|---|---|
| HSBC Hong Kong | HSBCHKHHXXX | Strong internal audit, regulatory reporting | Asia |
| Standard Chartered Dubai | SCBLAEAD | Advanced compliance desk for pre-shipment financing | MENA |
| Bank of China | BKCHCNBJ | Global sanctions & KYC alignment | Asia |
🎯 Risk Mitigation Strategies
- Structured advance percentages (20–70%) to limit exposure
- Invoice substitution rules to protect first beneficiary margins
- Multi-tier document review before release of funds
- Alignment with local and international trade regulations
- Continuous monitoring of shipment status and compliance adherence
💡 Why Choose NNRV for Risk & Compliance
- End-to-end control of Red Clause LC issuance
- Audit-ready documentation and SWIFT MT700 compliance
- Multi-jurisdiction risk coverage and regulatory alignment
- Proactive dispute prevention through structured clauses
- Expert support for first and second beneficiary coordination
🚀 Red Clause Letter of Credit (LC) | Pre-Shipment Advance Financing
Ensure secure & flexible global trade financing with 100+ pre-shipment LC structures. Connected to 40+ SWIFT network banks worldwide.
Article 1 – What is a Red Clause LC?
A Red Clause LC is a type of documentary credit allowing the seller (exporter) to receive an advance payment from the issuing bank before fulfilling shipment obligations. This advance is deducted from the final LC value upon delivery.
- ✅ Pre-Shipment Financing – Exporters receive part of the payment upfront.
- ✅ Stronger Buyer-Seller Trust – Assures suppliers while securing goods for buyers.
- ✅ Flexible Trade Agreements – Buyers secure supply chains while maintaining deferred payment structures.
- ✅ Governed by UCP 600 – Fully ICC compliant.
How a Red Clause LC Works
- Issuance of Red Clause LC by buyer’s bank with advance payment clause.
- Seller requests advance via invoice + indemnity letter.
- Bank releases advance (20–70% of LC value).
- Goods shipped, documents submitted.
- Final payment made after shipment compliance.
Required Documents
- Proforma Invoice / Sales Contract
- Bank Guarantee (if required)
- Letter of Indemnity (LOI)
- Commercial Invoice
- Bill of Lading / Airway Bill
- Packing List
- Insurance Certificate (if applicable)
Article 2 – Strategic Advantages of Red Clause LC
Red Clause LCs are strategic tools for supply chain optimization and risk mitigation.
- 📈 Strengthen Supplier Relationships – Ensures suppliers have liquidity for production.
- 🔒 Secure Multi-Tier Supply Chains – Maintain control across subcontractors and multi-origin sourcing.
- ⚡ Accelerate Market Entry – Quick financing allows exporters to meet tight deadlines.
- 💼 Protect Commercial Margins – Invoice substitution allows first beneficiary to retain margins.
- 🌍 Global Expansion – NNRV structures LCs for cross-border trade with trusted banks.
Article 3 – Risk Management & Compliance
- ✅ ICC & UCP 600 Compliance – All LCs structured under international standards.
- ✅ KYC & AML Screening – Verification of all parties involved.
- ✅ Sanctions & Export Controls – Screening for restricted jurisdictions or dual-use goods.
- ✅ Document Checking & Audit Trail – Ensures shipment and payment integrity.
- ✅ Operational Safeguards – Invoice substitution, partial shipments, multi-beneficiary monitoring.
Article 4 – Trusted Banks & Financial Institutions (40+)
| Bank Name | SWIFT Code | Advantages | Disadvantages | Issuance Fees | Issuance Time | Min. Transaction | Region |
|---|---|---|---|---|---|---|---|
| HSBC Hong Kong | HSBCHKHHXXX | Strong global reach, fast processing | High compliance standards | 0.5%–1.0% | 1–5 days | $1M | Asia |
| Standard Chartered Dubai | SCBLAEAD | Supports advance LC & MENA trade | Documentation-intensive | 0.5%–1.0% | 2–5 days | $500K | MENA |
| Bank of China | BKCHCNBJ | Structured LCs, Asia corridors | Slower multi-party LC issuance | 0.5%–1.0% | 2–6 days | $1M | Asia |
| Exim Bank Tanzania | EXTNTZTZ | Africa-based trade support | Slower validation | 0.5%–1.0% | 2–6 days | $250K | Africa |
| MauBank (Mauritius) | MPCBMUMU | Offshore-friendly issuance | Limited global access | 0.5%–0.6% | 2–5 days | $250K | Offshore |
| ABC Banking Corporation | ABCKMUMU | SME-aligned LC structures | Less known globally | 0.5%–0.6% | 2–5 days | $250K | Offshore |
| Access Bank Kenya | ABNGKENA | Trade facilitation for East Africa | Lower visibility in EU/US | 0.5%–0.7% | 2–5 days | $250K | Africa |
| Dashen Bank (Ethiopia) | DASHTEAA | Local supplier LC expertise | Slower compliance turnaround | 0.5%–0.7% | 3–6 days | $250K | Africa |
| BNP Paribas Hong Kong | BNPAHKHHXXX | EU–Asia transfers | Complex documentation | 0.4%–0.8% | 2–5 days | $1M | Asia/EU |
| DBS Singapore | DBSSSGSG | SEA trade expertise | Limited EU lanes | 0.5%–1.0% | 1–4 days | $1M | APAC |
| UOB Singapore | UOVBSGSG | Efficient operations | Limited global visibility | 0.5%–1.0% | 2–5 days | $1M | APAC |
| OCBC Singapore | OCBCSGSG | APAC trade coverage | Documentation intensive | 0.5%–1.0% | 2–5 days | $1M | APAC |
| MUFG Japan | BOTKJPJT | Japan/APAC lanes | High fees | 0.5%–1.0% | 2–5 days | $1M | APAC |
| Mizuho Japan | MHBKJPJT | Commodity flows | Limited Western corridors | 0.5%–1.0% | 2–5 days | $1M | APAC |
| SMBC Japan | SMBCJPJT | Manufacturing chains | Documentation-heavy | 0.5%–1.0% | 2–5 days | $1M | APAC |
| J.P. Morgan NY | CHASUS33 | Global reach | High fees | 0.5%–1.0% | 1–4 days | $1M | Global |
| Citibank | CITIUS33 | Correspondent depth | Limited advisory | 0.5%–1.0% | 2–5 days | $1M | Global |
| Bank of America | BOFAUS3N | USD corridors | High compliance standards | 0.5%–1.0% | 2–5 days | $1M | US |
| Wells Fargo | On Request | Trade operations | Limited global corridors | 0.5%–1.0% | 2–5 days | $1M | US |
| Deutsche Bank | DEUTDEFF | EU hub | Slow processing | 0.5%–1.0% | 2–6 days | $1M | EU |
| Commerzbank | COBADEFF | Reimbursement strength | Limited APAC reach | 0.5%–1.0% | 2–5 days | $500K | EU |
| Société Générale | SOGEFRPP | EU/Africa coverage | Complex documentation | 0.5%–1.0% | 2–5 days | $500K | EU |
| ING Bank | INGBNL2A | EU corridors | Slower APAC lanes | 0.5%–1.0% | 2–5 days | $500K | EU |
| Rabobank | RABONL2U | Agriculture trade | Limited global | 0.5%–1.0% | 2–5 days | $500K | EU |
| Banco Santander | BSCHESMM | EU/LatAm trade | Slow US corridors | 0.5%–1.0% | 2–6 days | $500K | EU/LatAm |
| BBVA | BBVAESMM | Latin America | Limited APAC | 0.5%–1.0% | 2–6 days | $500K | LatAm |
| CaixaBank | CAIXESMM | EU/LatAm trade | Less global reach | 0.5%–1.0% | 2–6 days | $500K | LatAm/EU |
| Natixis | CEPAFRPP | Structured finance | Limited APAC | 0.5%–1.0% | 2–5 days | $500K | EU |
| UOB Thailand | UOVBTHBK | SEA trade support | Limited Europe | 0.5%–1.0% | 1–4 days | $500K | APAC |
| Maybank Malaysia | MBBEMYKL | APAC corridors | Less EU reach | 0.5%–1.0% | 2–5 days | $500K | APAC |
| OCBC Malaysia | OCBCMYKL | SEA trade | Limited global visibility | 0.5%–1.0% | 2–5 days | $500K | APAC |
| DB Indonesia | DBIDIDJA | Indonesia trade lanes | Limited EU | 0.5%–1.0% | 2–5 days | $250K | APAC |
| Bank Negara Malaysia | BNMYMYKL | Regulated support | Less global reach | 0.5%–1.0% | 2–5 days | $250K | APAC |
| First Bank Nigeria | FBNINGLA | Africa corridors | Limited global visibility | 0.5%–1.0% | 2–5 days | $250K | Africa |
| Zenith Bank Nigeria | ZENITHNGL | Strong regional support | Limited APAC | 0.5%–1.0% | 2–5 days | $250K | Africa |
| Ecobank | ECOBGLAA | Pan-African network | Less APAC | 0.5%–1.0% | 2–5 days | $250K | Africa |
FAQ – Red Clause LC
- Can I receive an advance payment? ✅ Yes, 20–70% of LC value.
- Are Red Clause LCs fully UCP 600 compliant? ✅ Yes.
- Can multiple suppliers be financed under one LC? ✅ Yes, with invoice substitution.
- What documents are required? ✅ LOI, Proforma Invoice, Commercial Invoice, Bill of Lading, etc.
- How fast is advance released? ✅ Typically within 48–72 hours.
- Can the LC amount be partially used? ✅ Yes, flexible partial disbursements.
- Do you provide bank selection advice? ✅ Yes, tailored to your corridor.