Reimbursement

Reimbursement involves the issuing bank repaying the confirming or negotiating bank for payments made to the beneficiary under the letter of credit terms. For instance, when a seller (beneficiary) meets the required conditions, the negotiating bank pays them. The issuing bank then reimburses this amount to the negotiating bank, ensuring the seller receives payment as stipulated in the agreement. This process ensures trust and guarantees payment fulfillment in international trade transactions.

Entities involved include the issuing bank, confirming or negotiating bank, and the beneficiary. Significant instances involve various types of Letters of Credit (L/C), such as Standby L/C and Commercial L/C.