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Parties to Letters of Credit

This page dels with the parties of the letter of credit. 














Applicant 
 
Applicant is the buyer of the goods or services supplied by the seller. Letter of credit is opened by the issuing bank as per applicant's request. However, applicant does not belong one of the parties to a letter of credit transaction. This is because of the fact that letters of credit are separate transactions from the sale or other contract on which they may be based. 

Beneficiary
 
Beneficiary is the seller of the goods or the provider of the services in a standard commercial letter of credit transaction. Letter of credit is opened by the issuing bank in favor of the beneficiary. 
 
Issuing Bank
 
Issuing Bank is the bank that issues a letter of credit at the request of an applicant or its own behalf. Issuing bank undertakes to honor a complying presentation of the beneficiary without recourse. 
 
Nominated Bank
 
Nominated bank is the bank with which the credit is available or any bank in the case of a credit available with any bank.
 
Advising Bank
 
Advising bank is the bank that advises the credit at the request of the issuing bank. An advising bank that is not a confirming bank advises the credit and any amendmend without any obligation to honor.
 
Confirming Bank
 
Confirming bank is the bank that adds its confirmation to a credit upon the issuing bank's authorization or request. Confirming bank may or may not add its confirmation to a letter of credit. This decision is up to confirming bank only. However, once it adds its confirmation to the credit confirming is irrevocably bound to honor or negotiate as of the time it adds its confirmation to the credit. Even if the issuing bank fails to honor, confirming bank must pay to the beneficiary.
 
Reimbursing Bank 
 
Reimbursing Bank shall mean the bank instructed and/or authorized to provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank.





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Main parties of Letter of Credit transaction such as 
applicant, 
beneficiary, 
issuing bank, 
confirming bank, 
nominated bank, 
will be disscussed in this article.  
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