Parties To A Letter Of Credit

• Depeding on the circumstances, various names used in a letter of credit may refer to the same party.

• The Applicant opens the letter of credit.
  • The buyer, or customer, is the Applicant.
  • Sometimes the Applicant is called the account party.

• The Opening Bank issues the letter of credit.
  • The Opening Bank's credit replaces the buyer's credit.

• The Advising Bank is an agent of the Opening Bank.
  • Verifies the authenticity of the Opening Bank.

• The Confirming Bank is usually the Advising Bank, but it confirms that the credit exists.
  • It can negotiate the documents, and can accept the letter of credit the Opening Bank will not pay.

• The Paying Bank is also called the drawing bank.
  • The Paying Bank may act also the Advising Bank, or the Confirming Bank, or the Opening Bank.

• The Beneficiary is often the seller.
  • It is party to whom the credit is issued.

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© 2004 John Michael Pierobon

Notes