Full Guide to UPAS Letter of Credit & UPAU Letter of Credit

Full Guide to UPAS Letter of Credit & UPAU Letter of Credit

Full Guide to UPAS Letter of Credit & UPAU Letter of Credit

Conclusion First: use a UPAS LC when the seller needs cash now and the buyer wants time to pay. Use a UPAU LC when both sides accept deferred payment to maturity or when the seller is fine to discount later. Both are bank-backed and sit at the core of modern trade finance.

A UPAS letter of credit pays the seller at sight while the buyer repays the bank at the agreed usance. A UPAU letter of credit pays at the agreed usance date for both sides. Picking the right structure changes cash flow, risk cover, and fees. Start with the quick screening below. You will see a recommendation, whether confirmation is likely, and an indicative cost range.

UPAS vs UPAU Readiness & Pricing

Answer step by step. We will recommend UPAS or UPAU, show if confirmation is needed, and estimate key charges.

1 of 10
Does The Seller Need Payment At Shipment
Does The Buyer Need Time To Pay
Requested Tenor
Face Value (Indicative)
Issuing Bank Country Risk
Will The Beneficiary Ask For Confirmation
Document Set Readiness
Preferred Ruleset
Incoterm
Exporter Preference

What UPAS And UPAU Mean

UPAS — Usance Payable At Sight. The seller is paid at sight by a bank. The buyer repays the bank at the agreed usance. It solves seller liquidity while giving the buyer time to sell goods or cycle cash.

UPAU — Usance Payable At Usance. Both sides settle at maturity. The seller can still discount with a bank, yet the LC itself pays at the end of the term.

UPAS vs UPAU — Side by Side

Feature UPAS LC UPAU LC
Seller Cash Flow Paid at sight after compliant documents Paid at maturity unless discounted
Buyer Cash Flow Repays at usance to issuing bank Repays at usance per LC terms
Typical Use Exporter wants cash now, importer needs time Both sides accept deferred settlement
Costs Driver Discount margin, confirmation if needed, LC fees Acceptance commission, confirmation if needed, LC fees

Roles In The LC Flow

  • Issuing Bank. Opens the LC for the buyer and commits to pay per terms.
  • Advising Bank. Authenticates and advises the LC to the seller.
  • Confirming Bank. Adds its payment undertaking when the seller requires extra comfort.
  • Negotiating or Nominated Bank. Checks documents and pays the seller for UPAS or discounts UPAU.

How The Process Runs

  1. Buyer and seller agree contract and Incoterm. They select UCP 600 or ISP98.
  2. Buyer requests LC issuance. Issuing bank transmits by SWIFT to the advising bank.
  3. Seller ships and presents a clean document set: invoice, transport, packing, insurance when required.
  4. Bank examines documents. For UPAS the seller is paid at sight. For UPAU the draft is accepted to maturity or discounted.
  5. Buyer repays bank at usance. Any confirmation or discount charges are settled per fee letters.

Fees And Charges You Should Model

Issuance

LC opening and advising fees. Amendment and message charges when needed.

Confirmation

Extra cost when seller demands a second undertaking based on country and bank risk.

Discount or Acceptance

UPAS uses discount at sight. UPAU uses acceptance commission and discount only if seller wants early cash.

Documents That Keep You Safe

  • Commercial invoice that matches LC fields
  • Transport document that matches Incoterm and LC data
  • Packing list, inspection, and insurance where required
  • Any certificates or approvals named in the LC

Ready To Request A UPAS or UPAU Term Sheet

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FAQ

How is a UPAS LC different from a sight LC
Both pay the seller at sight. UPAS adds a deferred repayment by the buyer at usance, so the bank funds the gap.
When should we add confirmation
When the issuing bank or country is outside the seller policy or when the beneficiary mandates a second undertaking.
Which ruleset is best for UPAS or UPAU
Most trade LCs use UCP 600. Some standby style structures use ISP98. Choose based on documents and how claims will be examined.

We act as arranger and advisor. We are not a bank. All engagements require KYC, AML, and sanctions screening. Banks make independent approvals and set final pricing. Ranges and outputs here are indicative and not an offer.

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