CAN AN LC AVAILABLE BY NEGOTIATION BE ISSUED WITHOUT REQUIRING PRESENTATION OF DRAFTS?

QUESTION

Dear Sir,

This is Jawad from Askari Bank Pakistan.

Please answer my question below:

We issued LC available by negotiation and we did not include “All drafts” clause in 47A.

Applicant has requested for Amendment in LC today and wants to add Clause in field 47 as below:

‘Drafts / bill of exchange not required.’

Please suggest if we amend the LC as requested by the customer.

Thank you.

Jawad

—

ANSWER

Hi,

I guess that your bank issued LC available by negotiation without requiring presentation of drafts and that MT 700 issued has no field 42C (Drafts at…) and field 42a (Drawee).

If so, there is no need for your bank to amend the LC adding in field 47A (Additional Conditions) the clause “Drafts / bill of exchange not required”.

This complies with ICC Guide Notes for Documentary Credit Formats, which recommends that the habit of requiring a draft for an LC available at sight be curtailed, particularly sight drafts on issuing bank, confirming bank or a bank nominated to pay, unless there is a specific commercial, regulatory or legal reason.

If the customer insists on such an amendment, your bank can do so at their request as there is no harm but first try to explain to them that such an amendment is not necessary.

In case your bank issued an LC with field 42C and field 42a and now it agrees to amend the LC as requested by the applicant, it may issue an amendment adding clause “Drafts / bill of exchange not required” to field 47A and deleting field 42C and field 42a.

Best regards,

Mr. Old Man