A crucial component of a letter of credit is the red clause, which enables the beneficiary to obtain partial advance payments. This provision, traditionally set in red ink, is why it is commonly referred to as the 'red clause'. In most cases, the beneficiary simply needs to present drafts and confirm that shipping documents will be submitted in a timely manner to receive payment for the authorized advances. This type of credit is similar to Advance Clause Credits and is primarily used in Australia and New Zealand for export of wool and meat.
