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CONFIRMATION

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On the summit of Hai Van Pass

QUESTION

Dear Mr. Old Man,

We need your expertise opinion on the following case:

LC issued by ABC Bank states:

– Field 41a: (Available With …. By…)

ANY BANK BY NEGOTIATION

– Field 49 (Confirmation instructions)

CONFIRM

We as the advising bank advised the LC as received to the beneficiary without adding our confirmation to the LC. However, we forgot to inform the issuing bank of the same.

Our questions:

  1. Is our bank deemed to have confirmed the LC?
  2. Must our bank negotiate without recourse if the documents presented are complying?

Thank you in advance.

Best regards,

PN

—————

ANSWER

Hi,

My quick answers are:

  1. No.
  2. No.

What I understand from your description is that  your bank is requested  to confirm the LC and  it was not prepared to do so, but it  failed to inform the issuing bank of its decision not to confirm the LC, and that it advised the LC to the beneficiary without confirmation.

As it advised the LC without confirmation, it is not the confirming bank, and hence, it is not obliged to negotiate the documents.

(The beneficiary should know that the code “CONFIRM” in Field 49 does not signify that the LC has been confirmed.  It is just a request or an authorization by the issuing bank for the advising bank/the receiver to add its confirmation to the LC and the advising bank may or may not agree to act on that request or authorization).

By failing to inform the issuing bank of its decision not to confirm the LC, the advising bank did not comply with UCP 600 sub-article 8 (d). However, this failure does not cause the advising bank to become the confirming bank that must negotiate the documents and/or drafts.

Kind regards,

Mr. Old Man

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5 Comments

  1. Crazy Cricketer

    April 12, 2016 at 9:43 pm

    Regarding to the above question,Would advising bank issue any written notice to beneficiary whether they have confirmed the credit or not??

    Reply

    • mroldman

      April 13, 2016 at 8:23 am

      Of course, the LC is deemed to have been confirmed by the advising bank when the advising bank includes in its LC advice a statement that it has added its confirmation to the LC and that the LC is restrictedly available with it. The same content may be also stamped on the reverse of the LC.

      Reply

      • Crazy Cricketer

        April 13, 2016 at 10:37 pm

        Thank you Mr. Old Man..You are awesome.

        Reply

  2. M.C

    May 3, 2016 at 4:54 pm

    Hi

    Relating to confirmation of the letter of credit, please kindly advise us the following questions:

    1. When issuing bank instructed us (nominated bank) to add our confirmation to the letter of credit, confirmation charges is born by the ben’s request. We already added our confirmation. However the beneficiary immediately refused the confirmation, what should we do? whether we can continue our confirmation or which way we can recover confirmation charges (from issuing bank)?

    2. Anther situation is that we already added our confirmation. However because of political/violation/ whether we can remove our confirmation? in case it is yes, what should we do (seek the beneficiary’s consent or issuing bank’s consent or both)
    .
    Thanks for your help in advance!

    Reply

    • mroldman

      May 3, 2016 at 6:09 pm

      Hi,

      1) You may claim confirmation fees from the issuing bank as per sub-article 37 (c) UCP 600.

      2) According to sub-article 8 (c) UCP 600, a confirming bank is irrevocably bound to honour or negotiate as of the time it adds its confirmation to the LC. So, you cannot cancel your confirmation unless the beneficiary agrees. If the beneficiary agrees toyour cancelation of your confirmation, you should inform the issuing bank of the same.

      Kind regards,
      Mr. Old Man

      Reply

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