Legal Definitions - confirmed letter of credit

A confirmed letter of credit is a type of letter of credit that involves a bank (the issuer) agreeing to pay a third party (the beneficiary) on behalf of a customer, as long as certain conditions are met. This type of letter of credit is often used in international trade to ensure that the seller will receive payment for their goods or services.

For example, let's say a company in the United States wants to buy goods from a company in China. The Chinese company may require a confirmed letter of credit to ensure that they will receive payment for the goods. The U.S. company would work with their bank to issue the letter of credit, which would then be confirmed by a Chinese bank. Once the goods are delivered and the conditions of the letter of credit are met, the Chinese bank would pay the Chinese company on behalf of the U.S. company.