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.