MAY ADD

QUESTION

Hi Mr. Old Man,

We issued an L/C available with any bank by negotiation and without confirmation. The applicant asks us to amend as may add and the L/C is now only available with bank B. Bank B may add its confirmation to the L/C at the request of beneficiary.
The term T/T reimbursement is not allowed stays unchanged. Our bank does not have a credit line with bank B (only keeps a small balance at bank B).

My question is that what is the point of this amendment? I think maybe Bank B will add its confirmation to the L/C (silent confirmation type) later without any responsibility on our part. Bank B will then check docs and honour if they comply then forward the docs to us and wait for payment. I can see no difference in our bank's responsibility in two cases (before and after the amendment)

Besides, please enlighten me with the knowledge of "through B/L". When is it used? What are the risks of allowing a through B/L?

Thank you so much.
TT
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ANSWER

Hi,

1) The issuing bank, under L/C available by negotiation with a nominated negotiating bank including a nominated confirming bank, must reimburse that negotiating bank if the documents presented comply. So, your payment obligation towards the negotiating bank remains unchanged whether the L/C is confirmed or not.

So, why does the applicant request such an amendment? In fact it is the beneficiary or his bank that requests for such an amendment. The reason could be that the advising bank has provided pre- export financing to the exporter/beneficiary and now it wants the L/C to be available restrictedly with its bank in order for it to be able to control the transaction and recover the funds given to the beneficiary. With this type of availability the advising/confirming bank can also earn fees from the transaction, e.g., confirmation fees, handling fees…

It is quite common that a confirmed L/C would be available restrictedly with the confirming bank. So, the instruction “may add” allows the advising bank to add its confirmation, if it agrees to do so, to make the L/C available with it.

2) Regarding Through Bill of Lading, click the following link:
http://www.maritimeknowhow.com/English/Know-How/Bill_of_Lading/types_of_bill_of_lading/through_bill_of_lading.html

Best regards,
Mr. Old Man