A letter of credit transfer is the right stated in the L/C that allows the trader (first beneficiary) to transfer the L/C to the next beneficiary (second beneficiary), who is the manufacturer or supplier. Typically occurs in a deal where the trader is not the manufacturing company or there may not be enough items. The importer bank will issue a letter of credit to the trader with terms permitting to transfer the right under the L/C to the next beneficiary.

Normally, an L/C transfer is a one-time transfer for the whole amount, however, if the L/C allows for partial shipment, it can be partially transferred to more than one-second beneficiary; but the total amount must not exceed the amount in the L/C and can only be transferred once. The next beneficiary who receives the L/C transferred will not be able to transfer the L/C to another person.

The transferred letter of credit might be charged in two ways: