In the context of cargo shipping, the beneficiary is the party that will receive the payment for the cargo. This is almost always the seller or exporter.
This term isn’t just about who gets the money. It’s a formal, legal designation used in international trade documents to ensure the right person gets paid after they prove they’ve shipped the cargo.
Where You See This Term
The beneficiary is the key party named in payment instructions, most commonly:
- Letters of credit (L/C): A buyer (importer) asks their bank to open a letter of credit. This L/C is a binding promise from the bank to pay the beneficiary (the seller) as long as the beneficiary presents a specific set of documents (like the Bill of Lading) exactly as required.
- Bank drafts/documentary collections: The exporter (the seller) is the one who draws the draft and is the beneficiary of the payment.
In short, the beneficiary is the seller who must present the correct shipping paperwork to the bank to get paid.