With recourse /without recourse letter of credit
A recourse letter of credit allows the financing bank to claim payment from the beneficiary if the applicant defaults, while a without recourse letter of credit does not. These terms define the risk assumption between the bank and the beneficiary in the event of non-payment.
For example, if company A in the U.S. purchases goods from company B in China with a recourse letter of credit, company B can seek payment directly from company A if they default. With a without recourse letter of credit, the risk shifts to the issuing bank, and company B cannot pursue company A if the bank fails to pay.