Home Mr Old Man CAN AN SBLC BE AVAILABLE WITH A NOMINATED BANK OTHER THAN THE CONFIRMING BANK ?

CAN AN SBLC BE AVAILABLE WITH A NOMINATED BANK OTHER THAN THE CONFIRMING BANK ?

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QUESTION

Dear Mr. Old Man,

My company, as applicant has request our bank to issue a SBLC and a international branch of the issuing bank confirmed such LC. The confirmation was needed because of the lower credit rating of the Brazilian entity. The beneficiary of the SBLC requested us to include its bank as advising bank and it was done as well.

The problem is that after having the SBLC issued, the advising bank is requesting us to change the field “available with” from the confirming bank to itself (advising bank). Our bank (issuing and confirming) is saying that such request is wrong because the credit is available with the confirming bank. However, the issuing bank is insisting on that and the beneficiary is saying that will only accept the SBLC if we allow such change. In your point of view and experience, what is right? Or at least, what is the most common market standard? The advising bank says that is requesting such change in order to allow the beneficiary to present the documents to its bank (the advising) and not our bank (issuing/confirming).

I really appreciate your help. Keep safe.

Best regards,

Matteo
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ANSWER

Hi,

A confirmed LC can be issued available with the confirming bank or with a nominated bank other than the confirming bank.

If it is available with the confirming bank by payment, then the confirming bank must pay when the presented documents constitute a complying presentation.

If it is issued available with the nominated bank by payment and states that reimbursement is to be obtained by a nominated bank claiming on the confirming bank, that nominated bank may pay when the complying documents are presented and is entitled to reimbursement from the confirming bank. If it does not pay, the confirming bank must pay.

In your case, the advising bank is not a nominated bank and the LC is available with the confirming bank, hence, the beneficiary must present the documents directly to the confirming bank for payment. It can also present the documents to the confirming bank via its bank (the advising bank) and the advising bank in this case is acting as a presenter making presentation to the confirming bank on behalf of the beneficiary.

It is common practice that the confirming bank would insist the LC be available with themselves rather than with another nominated bank. As the LC was issued available with the confirming bank, I am afraid the confirming bank would not agree to an amendment allowing the LC to be available with the advising bank.

I guess the beneficiary would agree if the confirming bank is located in the same country as the beneficiary.

Kind regards,

Mr. Old Man
—————–

Dear Mr. Old Man,

Thank you so much. That helped a lot. The confirming bank is not in the same country of the Beneficiary, but as the beneficiary may present documents through the advising bank I believe it should not be a problem.

Wonderful explanation, very clear.

Have a good day.
Best,

Matteo.

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2 Comments

  1. Charles

    December 12, 2020 at 2:31 pm

    Dear Mr Old Man

    My buyer has suggested assigning the proceeds of his export LC to me (received from his buyers bank) as payment for the sale I made to him under open accounts. We both work with different banks so is it possible to ask my buyers advising bank to assign to my advising bank who will then pay me the money? Is it possible for me as assignee to add confirmation to the LC?

    Reply

    • Mr Old Man

      December 13, 2020 at 8:18 am

      In theory, the beneficiary can assign the proceeds under the export LC to any party by providing his bank with a written instruction instructing the bank to remit the proceeds receiving from the issuing bank to the account of the assignee. However, this must comply with the foreign exchange control regulation that requires the beneficiary to provide documents evidencing the assignment is legal.

      Reply

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