LC Amendment at the Last Minute: Can an Overdrawn Invoice Still Be Covered?

Intro

Dear friends, sometimes in trade finance we face the “extra cargo” problem: the ship takes a little more than expected, the invoice comes out higher than the LC value, and the documents are presented. The question is—can the LC still be amended at this stage? Let’s unpack this based on UCP 600 and ICC practice.

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Question

Sir,

What is the last stage do you amend the LC?

I have received a document which value is higher than LC value, i.e. value overdrawn. But yet to release the documents.

Can we amend the LC? It is mentionable here that goods are LPG and at the time of filling tanker vessel, received some LPG more.

Your valuable opinion based on ICC opinion.

Obidur

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Answer

Hi Obidur,

An amendment is usually issued before shipment and before the presentation of documents. However, it may also be issued after shipment if it is required to cure a discrepancy that cannot otherwise be corrected when documents are presented. An invoice showing an amount higher than the LC value is one such uncurable discrepancy. In this case, the beneficiary may ask the applicant to arrange an amendment increasing the LC value so that the presentation becomes compliant.

Please note that an LC cannot be amended without the consent of the issuing bank, the confirming bank (if any), and the beneficiary (UCP 600, Article 10(a)). For the issuing bank to agree to such an amendment, the applicant must satisfy any additional requirements of the bank—for example, providing additional deposit or collateral (if the LC is funded by the applicant), or issuing a new promissory note covering the increased exposure (if the LC is financed by the bank).

Once the applicant provides such waiver and satisfies the bank’s conditions, the standard approach is for the issuing bank to issue an amendment increasing the LC amount. In practice, however, some banks may, with applicant’s authorization, send an authenticated SWIFT message to the beneficiary’s bank confirming their acceptance of the overdrawn amount. While this is not the textbook method under UCP, it is a pragmatic solution sometimes applied in the market.

I hope these notes help.

Best regards,

Mr. Old Man