Assignment

The transfer of rights, title, interest, and benefits of a contract or financial instrument to a third party.

The beneficiary of a letter of credit is entitled to assign his claims to any of the proceeds that he may be entitled to, or portions thereof, to a third party. Usually, the beneficiary informs the issuing bank that his claims under the letter of credit were assigned and asks the bank to advise the assignee (third party) that it has acknowledged the assignment. The validity of the assignment is not dependant on bank approval. In contrast, the transfer requires the agreement of the nominated (beneficiary) bank. An assignment is possible regardless of whether the letter of credit is transferable.