Hi. In a simple way, there aren’t any big differences between a usance letter of credit and a deferred letter of credit. Both of these are ways to pay at a later date. There is a small difference, though.
Who is going to pay the interest? Usance L/C means that if this option is chosen, the exporter will send a draft for, say, 180 days sight, but will get the money at sight. But the importer will pay his bank, with interest, after 180 days. I’ve heard that these LCs come from South Korea, and I’ve worked with some of them.
On the other hand, deferred Payment means that the payment will be made, say, 180 days after sight. That means that after 180 days, the issuing bank will pay the exporter. Of course, the exporter can get the money before then by negotiating or offering a discount. In this case, the interest will be paid by the exporter.
Still, the terms deferrered letter of credit and usance letter of credit are used interchangeably in the market.
I hope this helps.
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