What is a credit letter?
The credit letter is known as an instrument of payment that is subject to certain international regulations for which an issuing bank, for the request of an adviser, must realize a payment to a third person named a beneficiary, any time you determine it of credit be complete.
We can say also that a credit letter is something like commitment in writing, that it is assumed by a bank, to carry a payment out for needed by the request of a seller, in accordance with the instructions of the buyer. The credit letter is one of the simplest documents as for his form, but of the most complex as for his content. Frequently, the credit letter receives the credit name Documentario. A credit letter takes as a principal function guaranteeing those buyings and sellings that are realized over a distance and not only inside a country, but also goods can be exported to merchants who are placed in other countries.
 A credit letter is a product of guarantee of some financial sectors like, for example, the guarantee of tender that can be for a project of construction carried out by some government. Anyway, the credit letter takes as a principal function the guarantee of the obligations that the providers possess in projects of big importance, as well as also, they have the function to support the emission of certain commercial roles, and in many cases a credit letter is even used to spoil legal pitfalls. A few years ago in Middle East, the credit letter was used to be able to extract a person of the jail.
Those who intervene in the credit letter are usually those that offer them; generally it is a question of banks (issuing bank) that are the managers of opening this credit letter and of course those who use the credit letter; usually the buyers and importers, although also the beneficiary, or, the seller, also it takes part of her. But if we them analyze point for point, then we must begin by the adviser of the credit letter that is the person who requests the opening of the same one coming to the bank to specify his request. Generally the credit letter is acquired due to the adviser for a certain beneficiary, which one will have the possibility of realizing a draft with the letter against the presentation of certain documents that take as an obligation to make the shipment of the goods clear.
 Two are the ties in which the adviser takes part: that of buying and selling that runs between the adviser of the credit letter and the beneficiary, and the credit tie between the adviser and the issuing bank. In this case we must say that the issuing bank does an agreement with the adviser with certain obligations of credit that in turn they will establish due to the adviser, the credit letter directed to the beneficiary. The beneficiary or seller is the exporter who receives the emission of the credit letter. The same one, is provided with the right to demand the payment of the letter once all the terms and conditions have been fulfilled been convenient.
The beneficiary of the credit letter is that that has the right to realize a draft against the letter and in turn, to demand his payment with the presentation of the documents that should credit it. The beneficiary turns out to be an active subject of the juridical relation of the credit, what means that the same one possesses the right on the credit that is specified in the credit letter. As for the issuing bank we can say that it must always exist since it is the entity in charge of of the credit letter either his time open, it is that posiciona like principal obligation in the credit chain documentario.
The credit letter and the banks
It is important to bear in mind that in addition to the issuing bank, there exist additional banks that are related to this chain, which always work to function of issuing bank. For example, the bank conformador is that that assumes opposite to the beneficiary the obligation of the cancellation of the total that appears in the credit letter, without importing that there has been received the refund of the issuing bank.
Also the corresponding bank is notificador that is in charge of offering to him the division service to the issuing bank to notify the beneficiary on the opening of a credit letter to his favor. The corresponding bank can work according to notifying this, without acquiring any type of obligation opposite to the beneficiary of the credit letter, but if it has the obligation to pay the credit letter to the beneficiary to him if it is verified that it has been fulfilled by all the terms.
The bank payer carries those payments out to the beneficiary of the credit letter any time his name appears as part of the text of the same one. In this case, it is not in the obligation to pay the credit letter if it does not receive funds of the issuing bank. Finally we have the negotiating bank and acceptor who is that that takes the decision to move forward the payment to the beneficiary at the moment when the same one presents all the corresponding documents à la carte of credit. |
