How do the banks involved in an advised letter of credit transaction function?
The bank that issues an advised letter of credit (the issuing bank) assumes the role of the foreign buyer, whereas the bank that conveys the letter of credit to the seller (advising bank) assumes no role other than conveying the letter of credit to the beneficiary. By functioning in this manner, the issuing bank effectively eliminates the payment risk associated with the foreign buyer. Since the advising bank assumes no role other than conveying the letter of credit terms to the beneficiary, however, the payment risk associated with the issuing bank remains the payment risk with which the seller/exporter must contend.
The bank that issues an advised letter of credit (the issuing bank) assumes the role of the foreign buyer, whereas the advising bank assumes no role other than conveying the letter of credit to the seller/beneficiary. By functioning in this manner, the issuing bank effectively eliminates the payment risk associated with the foreign buyer. Since the advising bank assumes no role other than conveying the letter of credit terms to the beneficiary, however, the payment risk associated with the issuing bank remains the payment risk with which the seller/exporter must contend.
• The bank that issues an advised letter of credit (the issuing bank) assumes the role of the foreign buyer, whereas the bank that conveys the letter of credit to the seller (advising bank) assumes no role other than conveying the letter of credit to the beneficiary. By functioning in this manner, the issuing bank effectively eliminates the payment risk associated with the foreign buyer. Since the advising bank assumes no role other than conveying the letter of credit terms to the beneficiary, however, the payment risk associated with the issuing bank remains the payment risk with which the seller \ exporter must contend. • Should a U.S. exporter who is the beneficiary of an advised letter of credit attempt to retain control over the product that has been exported to a foreign buyer until such point that the U.S. exporter receives payment under the advised letter of credit? • While not necessarily essential or critical, it may prove to be in the exporter’s best interest to do so. This
