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Letter of Credit negotiation is defined within Uniform Customs & Practice for Documentary Credits as the "giving of value". In effect, by negotiating export documents under a Letter of Credit, the nominated Bank will pay the customer and the Exporter, with its own funds, and will rely on the reimbursement by the Issuing Bank at a later date. Letters of Credit that are both available at sight or Usance are capable of being negotiated.
Negotiation of documents under a Letter of Credit can either be with or without recourse to the customer. If the export documents are compliant with the Letter of Credit terms and the Letter of Credit is confirmed by the nominated Bank, then negotiation will be without recourse to the customer. On the other hand, if the Letter of Credit is not confirmed, then negotiation will be with recourse to the customer.
(What is meant by “with recourse” is that in the event the Issuing Bank refuses to pay or accept documents under the Letter of Credit, the nominated Bank will have the right to claim reimbursement, with interest, on the funds that have been advanced to the customer.).