Marginal

credit. In exchange, particularly foreign exchange, the term marginal credit refers to a commercial letter of credit which may be drawn against within the margin of the letter, or in other words, up to the amount specified in the letter. Such a credit is as a rule employed in a triangular operation. Example: A merchant in New York wishes to buy goods in China. He procures a letter of credit from a dealer in foreign exchange in New York which is to be honored by the correspondent in London of the dealer who i ued it. Ordinarily goods purchased in China by a New York merchant are paid for in London. The New York merchant forwards the letter of credit with his order for goods to the party of whom he is to buy the goods in China. The seller of the goods in China ships the goods and draws a draft for the amount of them against the New York merchant’s credit in London. To the draft is affixed the authorization to draw, the letter of credit, and likewise the bill of lading for the goods. The draft is sold in China and forwarded to London for col-.lection the same as any other draft and in due course it is transmitted with the bill of lading to New York. Thus, the seller of the goods in China has not parted with his goods until he has obtained or made sure of payment and the New York merchant who has bought them has not paid for them (by use of his letter of credit) until the bill of lading giving title to them has been surrendered.