1 Reimbursing bank. The reimbursing bank of a letter of credit is also called a letter of credit clearing bank. It refers to a bank that, under the instruction or authorization of the issuing bank, pays the claims of the paying bank or negotiating bank. The reimbursing bank accepts the entrustment or authorization of the issuing bank and makes reimbursement based on the claims of the paying bank or negotiating bank by telex or airmail. However, this reimbursement is not regarded as the final payment of the issuing bank because the reimbursing bank does not examine the documents and is not responsible for the discrepancy between the documents and the documents. When the issuing bank finds that the documents and the documents are discrepant after seeing the documents, it can directly recover the amount that has been paid from the negotiating bank or the paying bank that sent the documents.
2 Confirming bank refers to a bank that confirms the letter of credit at the request or authorization of the issuing bank. It has the same responsibilities and status as the issuing bank. After the confirming bank adds the confirmation to the letter of credit, it is independently responsible for the beneficiary and assumes the responsibility of payment or negotiation. After payment or negotiation, no matter whether the issuing bank goes bankrupt or refuses to pay unreasonably, the beneficiary cannot be recoursed. In actual business, the confirming bank is usually concurrently served by the notifying bank, but other banks can also provide confirmation.
3 An accepting bank refers to a bank that signs on the front of the bill of exchange and promises to pay the bill on maturity after confirming that it is in compliance with the provisions of the letter of credit after reviewing the documents. The accepting bank can be the issuing bank itself, or the notifying bank or other designated bank. If the accepting bank goes bankrupt or loses the ability to pay after accepting the bill of exchange, the issuing bank shall bear the final payment responsibility.
4 A transferring bank is a bank that, at the entrustment of the beneficiary (also called the first beneficiary when transferring the letter of credit), transfers the transferable letter of credit to the transferee of the letter of credit (i.e. the second beneficiary). The transferring bank is generally the notifying bank, but can also be the negotiating bank, the paying bank or the confirming bank.
5 The second beneficiary refers to the beneficiary of the transferable letter of credit that accepts the transfer, also known as the assignee or transferee of the letter of credit, generally the producer or supplier of the goods. The transferor of the transferable letter of credit, that is, the first beneficiary, is usually a middleman or the buyer’s agent stationed in the seller’s location. After the second beneficiary accepts the letter of credit, he can no longer transfer the transferable letter of credit to other people for use, but it is allowed to transfer it back to the first beneficiary of the letter of credit, that is, the original beneficiary of the letter of credit.
Among the parties to the above-mentioned letter of credit, the paying bank, the accepting bank, the negotiating bank, the reimbursing bank and the transferring bank are all designated banks of the issuing bank. According to the definition under Article 2 of UCP600, a designated bank refers to a bank that can be honored by a letter of credit, or if the letter of credit can be honored by a bank, it is any bank.