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1. Acting for the Issuer
   The nominated bank acts for the issuer, and it is the issuer that must reimburse the nominated bank for the payment it makes to the seller/beneficiary (see UCP 600 art. 7(c)). Sometimes the issuer will reimburse the nominated bank directly, but at other times the issuer will pay through an account maintained by the issuer with another bank in the state where the currency involved is local. A European bank that issues a credit denominated in Japanese yen will effect payment out of its yen account maintained with a bank in Japan. In that case, the issuer may simply authorize the Japanese correspondent to reimburse the nominated bank that disburses funds to the seller.

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2. Reimbursement Instructions
   In the SWIFT message opening the credit, the issuer will instruct the nominated bank to obtain reimbursement by drawing on the issuer’s correspondent bank, the reimbursing bank. Simultaneously, the issuer will send a message to the reimbursing bank authorizing it to honour claims for reimbursement that it receives from the nominated bank. The reimbursement authorization is not a letter of credit but merely a direction. Unless the issuer of the credit authorizes the reimbursing bank to issue a reimbursement undertaking to the nominated bank and the reimbursing bank does so, the reimbursing bank’s obligation to pay the nominated bank is a matter between the issuer and the reimbursing bank. If the issuer has insufficient funds on deposit with the reimburser and has not made arrangements for the reimbursing bank to advance the funds, the reimbursing bank will not reimburse. In this interbank transaction, the reimburser will pay the nominated bank and charge the issuer’s account. ICC has issued rules for such interbank reimbursements, ICC Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, ICC Publication No. 525 (1995).

3. Reimbursing the Issuer
   The final link in the reimbursement chain is reimbursement of the issuer. The buyer/applicant or the party that arranged for the credit (see Illustrations 7-1 and 7-2) will reimburse the issuer. Since the issuer is frequently the buyer/applicant’s working capital lender, the reimbursement will often be part of the applicant’s obligations under the working capital loan agreement. If the credit has been paid in a foreign currency, the applicant must reimburse the issuer in that currency. Most of the time, the bank effectively sells the needed currency to the applicant by charging the equivalent amount in the applicant’s local currency either to the applicant’s depositary account or to its line of credit. If the issuance of the credit is an isolated transaction between the issuer and the buyer/applicant, the reimbursement agreement normally requires the buyer to put the issuer in funds before the issuer actually parts with its own funds to pay the beneficiary. Of course, even in isolated transactions, an issuer may agree to advance funds on the buyer/applicant’s behalf. In that case, the issuer will retain whatever collateral was obtained from the buyer when the credit was issued and may also retain title to, or a security interest in, the goods by means of a trust receipt or other legal process.
   Sometimes the subject of the international sales contract may be goods or commodities that have sufficient market value to provide some or all of the security the issuer needs.

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