What is a party?

Also known as an applicant or account, the account is the buyer that applies to the bank for the letter of credit. Once the application is approved, the applicant may submit a letter to the seller, also known as the recipient or accredited party, as proof that the payment will be offered for any purchased goods. This type of arrangement is often used when the buyer and seller are found in different countries.

One of the most common examples of the account is an individual or a company involved in importing goods from the country of the seller to the Buyer's business in another country. The idea of ​​a credit letter is to ensure that even if the buyer had the default in the purchase, the bank that issued a credit letter would honor the obligation and payment of the payment to the seller. This is particularly important when the buyer and the seller in the past have been business and still in the process of sending a business relationship.

sellerThey often require the account party to provide a letter of credit even if there is a well -established relationship between the two parties. In some cases, the letter is necessary to comply with the regulations that the seller must follow as part of his business operation. Other times, the letter may be required due to a political climate in the nation where the buyer is located. In both scenarios, the requirement for the letter of credit has nothing to do with the amount of trust that the seller invests in the buyer, but in the possibility of ongoing external events that would disrupt the successful completion of the transaction.

While the bank issuing bank guarantees that the seller will be paid out, that does not mean that the account party may fail without any responsibility to the bank. Once the bank has settled with the seller, the institutions usually start proceedings to obtain the amount of purchase from the account. This can be achieved by collecting funds from the buyer's accounts located at the bank or by taking any legal measure is necessary to POKthe engraving of payment failure.

If the importer works through a financial company or other third party to secure a bank accreditation, each party in this process can be identified by a different term. The buyer would be referred to as Account Party , while a financial company or third party would be marked as applicant or Accountee . The seller, which is eventually due, would be referred to as the accredited party or recipient .