Relationship between parties to a letter of credit
The parties to a letter of credit will increase or decrease due to different specific trading conditions, but generally speaking, the circulation of a letter of credit will involve the following main parties:
(1) The issuing bank refers to the bank entrusted by the applicant to open a letter of credit for it, usually the bank where the buyer is located.
(2) The advising bank refers to the bank entrusted by the issuing bank to notify the beneficiary of the letter of credit, usually the bank where the beneficiary is located, and the advising bank generally has business relations with the issuing bank.
(3) The beneficiary refers to the person named in the letter of credit who has the right to enjoy the rights and interests of the letter of credit, that is, the seller in the international contract for the sale of goods.
(4) Designated bank refers to the bank designated in the letter of credit that can be exchanged for the letter of credit. If the letter of credit can be exchanged at any bank, any bank is a designated bank. A letter of credit that is stipulated to be honored at a designated bank can also be honored at the issuing bank. The designated bank is generally the bank where the seller is located. The designated bank can be the advising bank or another bank other than the advising bank.
(5) The negotiating bank refers to the designated bank that purchases bills of exchange or documents by prepaying or agreeing to prepay the beneficiary's documents. Negotiating banks can enjoy the benefits of letters of credit by purchasing bills of exchange or documents.
(6) Confirming bank refers to the bank that adds confirmation to the letter of credit according to the authorization or requirements of the issuing bank. Confirmation refers to the firm commitment of the confirming bank to honour or negotiate documents according to the commitment of the issuing bank. The confirming bank irrevocably undertakes the responsibility of acceptance or negotiation from the time when it adds its confirmation to the letter of credit. The confirming bank is equivalent to the issuing bank relative to the beneficiary; Compared with the issuing bank, the confirming bank is the guarantor and the issuing bank is the guarantor. Unlike issuing banks, advising banks and designated banks, negotiating banks or confirming banks only exist when the letter of credit stipulates the use of negotiating letters of credit or confirmed letters of credit.
Applicant refers to the person who applies for opening a letter of credit in a bank. In international trade, the applicant for opening a letter of credit is usually the buyer in an international contract for the sale of goods. In actual business, there are also cases where a third party other than the buyer applies to open a letter of credit for the buyer. At this time, the applicant is a third party, not the buyer. When an applicant applies for opening a letter of credit, it is generally necessary to provide a deposit or other guarantee to the issuing bank. The relationship between the issuing bank and the applicant shall be subject to the adjustment applied by the issuing bank.
Relationship between parties to a letter of credit
The relationship between letters of credit can be divided into broad sense and narrow sense. Narrow letter of credit relationship refers to the relationship based on the letter of credit issued by the issuing bank, including the relationship between the issuing bank and the beneficiary, the relationship between the issuing bank and the advising bank, the relationship between the issuing bank and the designated bank, the relationship between the designated bank and the beneficiary, the relationship between the confirming bank and the issuing bank, and the relationship between the confirming bank and the beneficiary. The letter of credit relationship in a broad sense includes the relationship between the issuing bank and the applicant in addition to the above relationship. Different parties have different legal relationships and their rights and obligations are governed by different agreements. In China, the relationship between China issuing bank, beneficiary and designated bank is treated as a foreign-related relationship, while the relationship between China issuing bank and applicant is treated as a domestic credit relationship.
As far as its operation principle is concerned, under the payment method of letter of credit, the issuing bank located in the applicant's country pays the beneficiary with the help of other banks located in the beneficiary's country. Beneficiaries either submit documents directly to the designated bank where they are located and accept payment, or submit documents to the issuing bank through the bank where they are located and accept payment. In either case, the issuing bank is the person who is ultimately responsible for payment. If other banks pay the beneficiary according to the letter of credit, the issuing bank needs to reimburse these banks for the amount paid. Due to the different roles played by other banks, the legal relationship between the relevant parties is also different.
(a) between the applicant and the beneficiary
The relationship between the insured and the beneficiary is a sales contract. The applicant is the buyer of an international trade contract and the beneficiary is the seller. In the contract concluded by both parties, it is agreed to pay the payment by letter of credit, so the buyer should open the letter of credit according to the contract, and the seller should deliver the goods according to the contract and provide the agreed documents. An issuing bank is a bank that undertakes the payment obligation to the beneficiary. The issuing bank irrevocably undertakes the obligation of acceptance from the time of opening the letter of credit. The responsibility of the issuing bank to repay the designated bank is independent of the responsibility of the issuing bank to the beneficiary. The issuing bank is generally the applicant's bank or its bank. The relationship between the issuing bank and the applicant is regulated by the letter of credit, while the relationship between the issuing bank and the beneficiary is regulated by the letter of credit.
(2) Between the issuing bank and the applicant.
The relationship between the issuing bank and the applicant is a contractual relationship determined by the issuing bank's application and other documents. In this contractual relationship, the main obligation of the issuing bank is to open a letter of credit according to the application for opening a letter of credit, and carefully examine all documents to ensure that the documents are consistent with the letter of credit. The applicant shall pay the deposit or provide other guarantees, pay the account opening fee and pay the redemption instruction.
(3) between the issuing bank and the beneficiary
The relationship between the issuing bank and the beneficiary is stipulated by the letter of credit. In the case of opening an irrevocable letter of credit, when the letter of credit reaches the beneficiary, an independent contract binding on both parties is formed between the issuing bank and the beneficiary. The beneficiary is the person named in the letter of credit who accepts the letter of credit and has the right to enjoy the benefits of the letter of credit. Generally, it is the seller in the sales contract. In the case of transferable letter of credit, in addition to the direct seller, it also includes the actual supplier (second beneficiary) of the goods.
(4) Between the advising bank and the issuing bank.
There is a principal-agent relationship between the advising bank and the issuing bank. The advising bank accepts the entrustment of the issuing bank, which notifies the beneficiary of the letter of credit on behalf of the issuing bank, and the issuing bank pays the commission to the advising bank.
(5) Between the advising bank and the beneficiary
There is no contractual relationship between the advising bank and the beneficiary. The advising bank notifies the beneficiary because it has an obligation to the issuing bank, not because there is a contractual relationship between the advising bank and the beneficiary. This is also reflected in UCP500. According to Article 7, a letter of credit can be notified to the beneficiary through the advising bank, and the advising bank is not liable. However, in view of the problem of forged letters of credit in international trade, this article also stipulates that if the advising bank decides to notify the letter of credit, it shall reasonably and prudently examine the apparent authenticity of the notified letter of credit.
The relationship between the validity of the letter of credit and the latest date of shipment 1, the date of shipment or the latest date of shipment: that is, the time limit or the latest date for the seller to load all the goods on the means of transport or deliver them to the carrier. (The date of issuance of the bill of lading, that is, the sailing date, shall not be later than the validity period stipulated in the letter of credit, and the date of shipment shall not be later than the expiration date of the letter of credit if there is no validity period stipulated).
2. Maturity date: that is, the validity period of the letter of credit. The carrier, that is, the seller, should submit the documents to the bank no later than this date, so the carrier should give the seller the bill of lading before this date so that he can submit the documents to the bank for negotiation in time. )
3. Time limit for delivery: that is, a specific time limit after the delivery date of transport documents, which must be submitted to the bank designated by the letter of credit for payment, acceptance or negotiation. (If stipulated in the letter of credit, documents must be submitted within the stipulated validity period; If it is not specified, it shall be delivered within 2 1 day at the latest; However, in both cases, the documents must be presented not later than the expiry date of the letter of credit)
4. Double overdue: The latest shipment date stipulated in the letter of credit and the negotiation expiration date are the same day, or the shipment date is not specified, which is called double overdue in practice (in principle, there should be a certain interval between the expiration date of the letter of credit and the latest shipment date so that the carrier can have time to prepare documents, submit documents and negotiate, but in case of double overdue, the carrier should pay attention to loading the goods on the means of transport or handing them over to the carrier a few days before the expiration date of the letter of credit so as to have enough time to prepare. )
Rights and responsibilities of the main parties to the letter of credit 1, rights and responsibilities of the applicant to open the letter of credit: (1) Apply for opening the letter of credit according to the time stipulated in the contract; (2) a reasonable instruction to open a letter of credit; (3) Providing guarantee for opening letters of credit; (4) Pay the related expenses for opening and amending the letter of credit; (5) Pay the redemption instruction to the issuing bank.
2. Issuer's right: (1) to collect handling fee and deposit; (2) Reject documents that are inconsistent with the beneficiary or the negotiating bank. (3) After payment, if the applicant is unable to pay the bill, he can handle the bill and goods; (4) If the goods are insufficient, the balance can be recovered from the applicant.
3. Responsibility of the issuing bank: (1) Open and amend the letter of credit according to the instructions of the applicant; (2) Examine the documents reasonably and carefully; (3) Take the first and independent payment responsibility.
4. Rights and responsibilities of the beneficiary: (1) Review the terms of the letter of credit; (2) Submit correct and complete documents in time; (3) Require the issuing bank to honor.
5. The rights and responsibilities of the advising bank: As the agent of the issuing bank at the place of export, the agency responsibility of the advising bank is limited to informing the beneficiary of the letter of credit of the future letter of credit and subsequent amendments (if any), proving its authenticity and clarifying doubts in time. Of course, it has the right not to accept the designation of the issuing bank, but it must notify the issuing bank without delay.
6. Rights and responsibilities of the negotiating bank: Rights of the negotiating bank: (1) You can negotiate or not; (2) Documents (freight) can be processed after negotiation; (3) After negotiation, if the issuing bank uses bankruptcy or non-payment as an excuse, it can recover the advance payment from the beneficiary.
7. Responsibility of the negotiating bank: (1) Strictly review the documents; (2) Documentary bills are negotiated or discounted. (3) Endorsement of the letter of credit.
8. Rights and responsibilities of the confirming bank:
(1) The confirming bank has the right not to confirm the amendment of the letter of credit. If the confirmation is not agreed, the issuing bank or beneficiary must be informed as soon as possible; If the confirming bank agrees to amend the contents, it has an irrevocable obligation to the letter of credit from the time when the amendment is notified.
(2) In the case of consistent documents, the confirming bank's payment responsibility is exactly the same as that of the issuing bank, and they are both the first payer.
(3) The confirming bank has the right to reject documents with discrepancies, but it must clearly indicate this attitude to the beneficiary.
9. Rights and responsibilities of the paying bank: Once the paying bank accepts the entrusted payment from the issuing bank, its responsibility for reviewing documents and making payment is the same as that of the issuing bank. End? , if found inconsistent, should immediately refuse to pay. Once the payment is made at the time of inspection, it cannot have recourse to the beneficiary. The paying bank has no recourse after payment, and can only claim compensation from the issuing bank.
10. Rights and responsibilities of the reimbursing bank: (1) If the issuing bank has no deposit or insufficient deposit, and there is no overdraft agreement, the reimbursing bank has the right to refuse to pay.
(2) Reimbursement expenses are generally borne by the issuing bank. If it is the other party's responsibility, the reimbursing bank will generally deduct it directly from the reimbursement. (3) The reimbursing bank does not accept documents, does not review documents, and does not have relations with beneficiaries.
Guess you like:
1. international trade practice gains
2. Operating steps of letter of credit circulation procedure
3. international trade documents's thesis
4. Model essay on practical experience in international trade
5. International Trade Papers