🧑💼 Account Party
US Capital Private Bank Knowledge Base
📖 What is Account Party?
The Account Party is the individual or entity that instructs the bank to open a letter of credit (LC) and on whose behalf the bank agrees to make payment under the LC terms. Typically, this party is the importer or buyer involved in an international trade transaction.
⚙️ Role and Responsibilities
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Initiates the Letter of Credit: The Account Party applies for the LC to guarantee payment to the seller/exporter.
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Provides Funds or Credit: The bank’s obligation to pay is contingent upon the Account Party’s ability to fund or back the transaction.
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Ensures Compliance: The Account Party must ensure all terms and documents required under the LC are met to facilitate smooth payment.
📚 Other Terms
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Applicant: The Account Party is also commonly referred to as the Applicant in banking and trade finance terminology.
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Importer/Buyer: In trade finance, the Account Party is usually the buyer who requires the LC to assure the seller of payment.
💡 Importance
The Account Party is crucial in trade finance as they enable the opening of Letters of Credit, which serve as a trusted payment mechanism, reducing risk for exporters by guaranteeing payment upon presentation of compliant documents.
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