Under what condition might a letter of credit be canceled or changed?

A letter of credit is a financial instrument used in international trade to provide a guarantee of payment to the exporter from the buyer's bank, provided that the exporter meets the terms specified within the letter. The correct condition under which a letter of credit might be canceled or changed is by mutual consent of both parties involved, which generally includes the buyer (importer) and the seller (exporter).

While banks play a significant role in managing letters of credit, they typically act as intermediaries. For instance, the issuing bank can cancel or amend a letter of credit at the request of the applicant (usually the buyer), but this usually requires agreement from the beneficiary (the exporter). Therefore, the ability to cancel or change primarily lies with mutual consent, rather than solely the issuing bank or the exporter.

Understanding this helps clarify the cooperative aspect of international trade transactions, emphasizing the importance of agreement between those directly involved in the letter of credit scenario.