be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary, but the issuing bank is bound to reimburse the negotiating bank or any payment made prior to receipt of notice of cancellation, against shipping documents which are apparently in accordance with the terms of L/C. So this is clear that Revocable L/C can be amended any time without prior notice to he beneficiary. So, revocable letter of credit is very risky. Irrevocable letter of credit: Such a letter of credit cannot be changed unless both buyer and seller agree to make changes. Usually an L/C is regarded as irrevocable unless otherwise specified. Therefore, in effect, all the parties to the letter of credit transaction, i.e. the issuing bank, the seller and the buyer, must agree to any amendment to or cancellation of the letter of credit. Irrevocable letters of credit are attractive to both the seller and the buyer because of the high degree of involvement and commitment by the bank(s). By the 1993 revision of the UCP, credits are deemed irrevocable, unless there is an indication to the contrary. Parties to Letter of Credit The bank at the request of an importer in favor of an exporter from whom he has contracted to purchases some commodities or services issues a Letter of Credit. Generally the Letter of Credit is transmitted to the beneficiary through a bank in the beneficiary’s country. Therefore, parties of Letter of Credit are mainly: A. Obligatory parties are: Applicant: The person or somebody who requests the bank to issue a Letter of Credit to import goods or commodities or services. Issuing Bank: The issuing bank's liability to pay and to be reimbursed from its customer becomes absolute upon the completion of the terms and conditions of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is given a reasonable amount of time after receipt of the documents to honor the draft. The issuing banks' role is to provide a guarantee to the seller that if compliant documents are presented, the bank will pay the seller the
amount due and to examine the documents, and only pay if these documents comply with the terms and conditions set out in the letter of credit. Advising Bank: An advising bank, usually a foreign correspondent bank of the issuing bank will advise the beneficiary. Generally, the beneficiary would want to use a local bank to insure that the letter of credit is valid. In addition, the advising bank would be responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. If the issuing bank does not pay the beneficiary, the advising bank is not obligated to pay. Beneficiary: The beneficiary is entitled to payment as long as he can provide the documentary evidence required by the letter of credit. The letter of credit is a distinct and separate transaction from the contract on which it is based. All parties deal in documents and not in goods. The issuing bank is not liable for performance of the
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