A Deferred Payment Letter of Credit (also known as Usance Letter of Credit or Usance L/C) is a financial instrument used in international trade transactions to provide payment terms to the buyer, allowing them to defer payment for goods or services purchased until a specified future date. It facilitates international trade by providing a secure and efficient mechanism for deferred payment arrangements between buyers and sellers.
A deferred letter of credit is similar to a sight letter; however, it does not clear all the payments at once. This letter releases a portion of the amount upon receiving the documents. This gives sufficient time for a buyer to find the seller’s fault.