Parties to Letter of Credit
From Supply Chain Management Encyclopedia
Russian: Стороны по аккредитиву
There are some parties involved into transactions using letters of credit. The main of them are listed below along with convenient terms and correspondent definitions .
- Applicant (See Letter of Credit – BUYER (Importer))
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 (See Letter of Credit – SELLER (Exporter))
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 (See Letter of Credit – ISSUING BANK (Buyer’s 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 (See Letter of Credit – ADVISING BANK (Seller’s 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 amendment without any obligation to honor.
- Confirming Bank (See Letter of Credit – CORRESPONDENT 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.
- ↑ Parties to Letters of Credit - http://www.letterofcredit.biz/Parties_to_Letters_of_Credit.html
- ↑ Article 2 - ICC Uniform Customs and Practice for Documentary Credits (UCP 600) - http://www.agrtrade.com.ar/uploaded_files/ucp_600.pdf?PHPSESSID=99c75fc58b96f7228480a939363b0272
- ↑ Article 13 Bank-to-Bank Reimbursement Arrangements in ICC Uniform Customs and Practice for Documentary Credits (UCP 600) - http://www.agrtrade.com.ar/uploaded_files/ucp_600.pdf?PHPSESSID=99c75fc58b96f7228480a939363b0272 a. If a credit states that reimbursement is to be obtained by a nominated bank ("claiming bank") claiming on another party ("reimbursing bank"), the credit must state if the reimbursement is subject to the ICC rules for bank-to-bank reimbursements in effect on the date of issuance of the credit. b. If a credit does not state that reimbursement is subject to the ICC rules for bank-to-bank reimbursements, the following apply: i. An issuing bank must provide a reimbursing bank with a reimbursement authorization that conforms with the availability stated in the credit. The reimbursement authorization should not be subject to an expiry date. ii. ii. A claiming bank shall not be required to supply a reimbursing bank with a certificate of compliance with the terms and conditions of the credit. iii. An issuing bank will be responsible for any loss of interest, together with any expenses incurred, if reimbursement is not provided on first demand by a reimbursing bank in accordance with the terms and conditions of the credit. iv. A reimbursing bank's charges are for the account of the issuing bank. However, if the charges are for the account of the beneficiary, it is the responsibility of an issuing bank to so indicate in the credit and in the reimbursement authorization. If a reimbursing bank's charges are for the account of the beneficiary, they shall be deducted from the amount due to a claiming bank when reimbursement is made. If no reimbursement is made, the reimbursing bank's charges remain the obligation of the issuing bank. c. An issuing bank is not relieved of any of its obligations to provide reimbursement if reimbursement is not made by a reimbursing bank on first demand.