8 parties involved in an LC Letter of Credit - LC

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Who are the parties involved in a Letter of Credit – LC


In this article, let us discuss about the parties involved in a letter of credit.


Who are the parties involved in an LC Letter of Credit.


The major parties involved in a letter of credit are discussed below. We can classify mainly eight main parties involved in a Letter of Credit.


Applicant of Letter of Credit.

Applicant is one of the main parties involved in a Letter of Credit. Who is an applicant under Letter of credit?

Applicant is the party who opens Letter of Credit. Normally, buyer of goods is the Applicant who opens letter of credit. Letter of credit is opened as per his instruction and necessary payment is arranged to open Letter of credit with his bank. The applicant arranges to open letter of credit with his bank as per the terms and conditions of Purchase order and business contract between buyer and seller. So Applicant is one of the major parties involved in a Letter of credit.

Who are the parties involved in an LC Letter of Credit

LC Issuing Bank

Issuing Bank is one of the other main parties involved in an LC. Who is an Issuing Bank under Letter of credit?

Issuing Bank is the bank who opens letter of credit. Letter of credit is created by issuing bank who takes responsibility to pay amount on receipt of documents from supplier of goods (beneficiary under LC).


Beneficiary party

Beneficiary is one of the main parties under letter of credit. Beneficiary of Letter of credit gets the benefit under Letter of credit. Beneficiary is the party under letter of credit who receives amount under letter of credit. The LC is opened on Beneficiary party’s favor. Beneficiary party under letter of credit submits all required documents with is bank in accordance with the terms and conditions under LC.

Advising Bank

Advising bank is another party involved under LC. Advising bank, as a part of letter of credit takes responsibility to communicate with necessary parties under letter of credit and other required authorities. The advising bank is the party who sends documents under Letter of Credit to opening bank.


Confirming Bank

Confirming bank is one of the other parties involved in Letter of Credit. Confirming bank as a party of letter of credit confirms and guarantee to undertake the responsibility of payment or negotiation acceptance under the credit.


Negotiating Bank

Negotiating bank is one of the main parties involved under Letter of Credit.

Negotiating Bank, who negotiates documents delivered to bank by beneficiary of LC. Negotiating bank is the bank who verifies documents and confirms the terms and conditions under LC on behalf of beneficiary to avoid discrepancies


Reimbursing Bank

Reimbursing Bank is one of the parties involved in an LC. Reimbursing bank is the party who authorized to honor the the reimbursement claim of negotiation/ payment/ acceptance.


Second Beneficiary

Second beneficiary is one of the other parties involved in Letter of Credit. 

Second beneficiary who represent the first beneficiary or original beneficiary in their absence, where in the credits belongs to original beneficiary is transferable as per terms.


I have explained above 8 main parties involved in Letter of Credit. However, some of the parties in letter of credit mentioned above may act as functions of one or more parties under Letter of Credit.


You can also read more information by clicking   Letter of credit - How does LC work?      What are the advantages of Letter of Credit to Exporter? How LC is benefited to Importer?   Are there any disadvantages to importer for a consignment under Letter of Credit?   What are the disadvantages of LC to an exporter?     How to check authenticity of LC? What is Prime Banker?  Yes, I am sure, once after going through that articles you will have a good knowledge about Letter of Credit.


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shaheena shaik: dear sir/madam can u give the details of ARE NO(ARE-1).....

Devinder Kumar: I have negotiated exported documents against LC for USD 195000. Issuing bank made the payment but deducted USD 500 as discrepancy fee . The detail given for discrepancies were not actual discrepancies. Can our bank take up with issuing bank for balance re-imbrues or can we claim from our bank as they have negotiated the documents. ???


Teerawee Thainugul: My situation is the buyer wants to pay the goods by L/C, and the term is we do FOB, which I only deliver the goods to local sea port. The shipping would be taken care by seller's local agent. 1) is it okay and safe to use L/C in this case, since I don't ship the goods myself. 2) if this is okay, what's the procedures to release the payment and when should it be? 2) any suggestions you may have? Sorry I'm new to L/C.

James Cheng : I was researching this type of financing for my export business and found your web site to be very educational. One question I have is would you know of any banks that would give me a letter of credit in the states?

Prof. Xavier Fornt: In your article '' Who are the parties involved in a Letter of Credit '' you wrote that the applicant is one of the main parties involved... I regreat to inform you, that the International Chamber of Commerce in his oficial publication Nr. 680 Commentary on UCP 600, written by the UCP 600 Drafting Group, defining applicant and in the last paragraph wrote : The use of the term ''Party'' in the definition is not intended to incluyde thge applicant as a party to the documentary credit, but to reflect the concept thast the applicant can mean an entity other tan the bank's actual customer.( pag 15 )

Iyassu Isaac: Do you know any Bank in UK that heleps to open Letter of Credit

Monica: Can a orgin Bank be specified as Consignee in Bill of Lading for a FOB shipment. Is it possible to open a LC like it.

vishnu agiwal : We are a Indian firm want to purchase some goods from America and want to sale it in Poland. It will be a direct shipment from America.Our Buyer( Poland Firm) will open LC in our name with our banker in India and we will be opening LC in Seller name( American firm). Now in this case what will be documentation and what is the procedure.Will it attract sale tax in India. Whether it is allowed as per Indian applicable law.Please advice us detail procedure,for which we will be highly obliged

Athimoolam Rajendran : I read some articles at howtoexportimport.com. I thank you very much & appreciate your service to international trade.

Bhagirath Vyas: I am a USA citizen and having an NRE, foreigh fund account with ICICI in India. I am also serving a Hindu temple as one of its trustees,in Fiji. I am sending a container full of fiber glass decorations to beautify the temple. Am I liable to pay any sales tax or any other taxes of Indian Govt. for sending the shipment to my temple in Fiji? Please reply me on my email. Thank you very much.

paulos Mulugeta: I just want to be clear that if the importer bank has not order the advising/beneficiary bank to reimburse it self on opening of the L/c what will happen when the advising bank send the documents to the issuing/opening bank? shall it wait another instruction to claim its payment?

Sudhakar yalkondawar : Need L C

SHIPONEPY: Exporter got export LC from buyer in a bank where the exporter have no acoount. what is the name of that bank if i am a exporter or in LC business what is the name of that bank?????

Dharm Vijayvargiya: Kindly just confirm and any other bank which is not negotiating bank or advising bank , can negotiate payment from Negotiating bank ??? As UCo Bank is negotiating bank and we want that HDFC will take payment from UCO bank on behalf of us,,, Possible ??

SHARAD JAGANNATH CHAUDHAARY: Letter of Credit Negotiations

Vincent Amurat: What is the safest way for mandate to received their commission and what is the safetest way for mandate .

Gilbert: hi, appreciate if anyone could answer my question. Is it possible for the reimbursing bank to be the confirming bank at the same time in one LC? Thank you

olusesan: Please, can i get my buyer in India to open LC to my bank in Nigeria? But the Beneficiary is in Benin Republic. The bank in Benin cannot discount the Unconfirmed LC from India. The solution is to send it to my bank in Nigeria where I can discount it. And i transfer the funds to pay for the goods in Benin republic. And i ship the goods to India from Benin republic. Conclusion: applicant and issuing bank in India. The beneficiary is based in Benin Republic. The receiving bank in Nigeria. Thank you

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