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What does "with recourse" and "without recourse" mean in international letter of credit transaction?
 
Understanding the difference between "with recourse" and "without recourse" terms in a letter of credit transaction.















With recourse and without recourse are two terms defining whether or not the paying letter of credit bank shall claim refund from the beneficiary in case it could not get reimbursement from the issuing bank. 

















With recourse term defines the situation in which the paying bank will be able to claim refunds from the beneficiary in case the letter of credit documents are not paid by the issuing bank. In general the nominated bank or the negotiated bank pay the letter of credit amount to the beneficiaries with recourse terms. (How does a negotiable letter of credit work?)

Without recourse term defines the situation in which the paying bank will not be able to claim refunds from the beneficiary in case the letter of credit documents are not paid by the issuing bank. In general the confirming bank pay the letter of credit amount to the beneficiaries without recourse terms. 

Note: Nominated banks may also pay to the beneficiaries against discrepant documents with recourse basis. This payments should be covered with a formal indemnity.  


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Which bank pay with recourse and which bank pay without recourse basis?

What is the meaning of with recourse term in international trade finance terminology? What is the meaning of without recourse  in international trade finance terminology? I will be answering these questions with the help of the graphic illustration.
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