Letters of credit have three main characters, the originator, the beneficiary and the banks.
A letter of credit is written by an originator to perform two functions:
One of them is to connect the buyer with the seller so that the transaction is performed efficiently and based on the expectations of both sides.
Two, it functions as a link between the importer and the banks. The importer convenes with the issuing bank to create a letter of credit in order to pay the exporter and which is subject to the terms and conditions of the agreement.
There is always at least one kind of financial institution that functions as the mediator for the payment of the letter of credit. This bank is also the one that coordinates with the originator on the documentary credit. the issuing bank is not the only one involved, there may be other banks that do small or big functions depending on the type or letter of credit.
The Beneficiary (Seller): The exporter who is in favor of issuing the letter of credit. He or she has the right to demand payment after meeting the terms and / or conditions set out therein.
The beneficiary is the person that has to deliver the goods to the port of entry and who would receive payment for it if the transaction goes according to what the letter of credit establishes.
Here we mention three types of banks that are generally involved in the creation and follow-up of letter of credit.
The Issuing bank. It is the one that writes the actual letter of credit in cooperation with the importer in order to give to the exporter. This bank also has the responsibility of informing the corresponding bank whether or not the exporter can receive payment.
Confirming Bank: it assumes the obligation against the recipient to make the payments for the amount of the letter of credit or whether it has received no reimbursement from the issuing bank. A confirmed letter of credit carries a commitment to pay against the beneficiary of two banks: the issuer and confirmer.
Notifying banks are correspondent banks located in the country of the exporter and will carry out the responsibilities of payment to the seller when the terms and conditions have been followed. They notify the exporters when the letter of credit has been open in their favor.
A letter of credit is written by an originator to perform two functions:
One of them is to connect the buyer with the seller so that the transaction is performed efficiently and based on the expectations of both sides.
Two, it functions as a link between the importer and the banks. The importer convenes with the issuing bank to create a letter of credit in order to pay the exporter and which is subject to the terms and conditions of the agreement.
There is always at least one kind of financial institution that functions as the mediator for the payment of the letter of credit. This bank is also the one that coordinates with the originator on the documentary credit. the issuing bank is not the only one involved, there may be other banks that do small or big functions depending on the type or letter of credit.
The Beneficiary (Seller): The exporter who is in favor of issuing the letter of credit. He or she has the right to demand payment after meeting the terms and / or conditions set out therein.
The beneficiary is the person that has to deliver the goods to the port of entry and who would receive payment for it if the transaction goes according to what the letter of credit establishes.
Here we mention three types of banks that are generally involved in the creation and follow-up of letter of credit.
The Issuing bank. It is the one that writes the actual letter of credit in cooperation with the importer in order to give to the exporter. This bank also has the responsibility of informing the corresponding bank whether or not the exporter can receive payment.
Confirming Bank: it assumes the obligation against the recipient to make the payments for the amount of the letter of credit or whether it has received no reimbursement from the issuing bank. A confirmed letter of credit carries a commitment to pay against the beneficiary of two banks: the issuer and confirmer.
Notifying banks are correspondent banks located in the country of the exporter and will carry out the responsibilities of payment to the seller when the terms and conditions have been followed. They notify the exporters when the letter of credit has been open in their favor.
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