Confirmation Added via MT710 – Is a Separate Confirmation Letter Required?

Intro

In practice, a confirming bank may receive a request to add its confirmation under an MT700, but subsequently advise the credit to the beneficiary through another bank using an MT710.

This may raise questions regarding:

• the treatment of Field 49 in MT710,
• whether the confirming bank must issue a separate confirmation letter, and
• how the beneficiary understands the scope of the confirming bank’s undertaking.

The following case illustrates these issues.

QUESTION

Dear Mr. Old man,

Seeking your expert views on below mentioned case. I had posted in some other expert group but didn’t get any convincing or logical answer. Request if you can help, please.

A deferred payment LC was issued by the issuing bank in MT700 format and sent to Bank “CB” as the requested confirming bank.

• Field 49 of the MT700 stated: CONFIRM.

CB agreed to add its confirmation.

Instead of advising the credit directly to the beneficiary, CB forwarded the credit to a second advising bank using MT710.

In the MT710:

• Field 40B stated: IRREVOCABLE ADDING OUR CONFIRMATION
• Field 49 stated: WITHOUT

CB refused to:

• change Field 49 to “CONFIRM” in the MT710, arguing that doing so would imply requesting the second advising bank to add its confirmation; and
• issue a separate confirmation letter to the beneficiary, arguing that the wording “ADDING OUR CONFIRMATION” in Field 40B is sufficient.

The questions are:

1. Is CB entitled to change Field 49 to “WITHOUT” in the MT710 without breaching Article 9(b) UCP 600?
2. Is CB required under UCP 600 to issue a separate confirmation letter?
3. How does the beneficiary determine the scope of the confirming bank’s undertaking?

Best,
Arun Ambar
New Delhi, India

______

ANSWER

Dear Arun,

Thank you for your well-structured query. My views are as follows.

1. Treatment of Field 49 in MT710

CB’s approach is correct.

Field 49 in an MT700 contains the issuing bank’s confirmation instruction to the requested confirming bank.

Field 49 in an MT710 serves a different function. It reflects confirmation instructions from the sender of the MT710 to the bank to which the message is addressed.

Once CB has added its confirmation, it is no longer requesting confirmation from the second advising bank. Therefore, inserting “WITHOUT” in Field 49 of the MT710 is appropriate.

The MT710 does not amend the credit. It merely reflects that no confirmation is being requested from the second advising bank. Accordingly, Article 9(b) UCP 600 is not breached.

2. Is a Separate Confirmation Letter Required?

No.

UCP 600 does not require a confirming bank to issue a separate confirmation letter.

Where the MT710 expressly states “ADDING OUR CONFIRMATION” in Field 40B, this constitutes the confirming bank’s communication that it has added its confirmation.

No additional confirmation letter is required.

3. Scope of the Confirming Bank’s Undertaking

Once a confirming bank adds its confirmation, Article 8 UCP 600 governs its undertaking.

The confirming bank undertakes to honour or negotiate, as applicable, provided that a complying presentation is made in accordance with the terms of the credit.

In the case of a deferred payment credit:

• If the credit is available with the confirming bank, it must honour and may prepay its deferred payment undertaking.
• If the credit is available with another nominated bank, it must honour if that bank has not honoured and reimburse a nominated bank that has honoured.

The beneficiary’s rights are therefore determined by Article 8 UCP 600 and the availability structure stated in the credit.

Best regards,
Mr. Old Man