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PARTIAL CONFIRMATION

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QUESTION

Dear Mr Nguyen,

I hope all is well on your side. I have a query on L/C confirmation and was referred by some Vietnamese counterparts to you as you are the Trade Finance expert in Vietnam.

I wanted to ask you if you have across partial confirmation for L/Cs. According to some colleagues, that have told me that according to UCP 600, partial confirmation is not allowed.

Assuming that there is a case of an L/C for the construction of a big infrastructure project. The L/C amount is more than USD100mil and the expiry of L/C is approx. 30 months. Will it be possible for confirming bank to add partial confirmation to the L/C assuming that the beneficiary only wants to cover partial risk of the L/C?

Appreciate your kind assistance and help. Really appreciate it.

Best regards,

David

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ANSWER

Hi,

Why not?

Below  is what I answered to a similar question on Letter of Credit Forum in 2007:

Quote

Partial confirmation is not covered under UCP 600, hence, if partial confirmation is allowed by the LC, the bank that wishes to add partial confirmation to the LC should have a specific agreement with the beneficiary and the issuing bank with regards to its confirmation obligation and the issuing bank’s reimbursement obligation and so on.

Unquote

Now I would like to quote herewith a scenario where a confirmation is deemed to be a partial confirmation:

Bank I issued a confirmed L/C for USD100,000 in favour of  XYZ Company. Bank C added its confirmation to the L/C and advised the same to XYZ Company.

One month later Bank I issued an amendment to increase the L/C amount by USD100,000. However, Bank C advised the amendment to the beneficiary without adding its confirmation to the increased amount, and informed the issuing bank of the same in accordance with sub-article 10 (b) UCP 600.

The L/C amount after amendment  is USD200,000 but only USD100,000 is confirmed by Bank C. So, this is a partial confirmation, isn’t it?

Back to your case. The fact that UCP 600 is silent as to partial confirmation does not signify that it prohibits confirmation for part of the L/C amount. So, Why not? If requested and agreed by the beneficiary and/or the issuing bank. the confirming bank may add its confirmation to part of the L/C amount.

Kind regards,

Nguyen Huu Duc

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6 Comments

  1. naima dakki

    November 17, 2016 at 4:36 pm

    Good Day,, Please i want to be sure that i can submit an amendment of the L/C  which is an MT799 with the original one when submitting the documents to the bank for payment. Note :We received only the MT799 as an amendment and not the one that is signed. 

    Reply

    • mroldman

      November 20, 2016 at 3:42 pm

      It depends on the content of the MT799 to determine if it is an amendment. If it is the amendment to the L/C, then you must present the original L/C and any amendment thereto to your bank or the nominated bank for negotiation or payment.

      Reply

  2. naima dakki

    November 26, 2016 at 6:39 pm

    Good day,, Please who is the consignee in the L/C Is it the issuing bank or the bank in the bill of lading to order ,  Thank you Sent from Yahoo Mail on Android

    Reply

    • mroldman

      November 27, 2016 at 2:19 pm

      It depends but normally the issuing bank would require BL to be issued to its order to control the goods. Where the L/C is secured 100% by cash deposit, the B/L may be required to be issued to the order of the applicant. B/L can also be issued to order blank endorsed. If so, the issuing bank may require full set of original BL to be presented to the bank.

      Reply

  3. SUBHASH

    November 27, 2016 at 2:33 pm

    Thanks for your reply Mr. Old Man,

    My point in this case is that if LC is partially confirmed, to which amount this partial confirmation will apply – first invoices which will make up the amount of partial confirmed value or last ones or as per the choice of the beneficiary or bank. How this can be decided if there are multiple invoices and which invoices will be covered for LC confirmed value.

    Hope my question is clear.

    regards, SUBHASH

    Reply

    • mroldman

      November 29, 2016 at 8:47 am

      As said, the bank that wishes to add partial confirmation to the L/C should have a specific agreement with the beneficiary and the issuing bank with regard to its confirmation and the issuing bank’s reimbursement obligation and so on.
      Assuming the L/C amount is USD100,000 with no partial shipment allowed and the confirming bank agrees to confirm upto USD50,000 only. If the beneficiary presents the documents for USD100,000, the confirming bank will honour or negotiate USD50,000 only.
      Where partial shipment is allowed, the confirming bank may agree to pay or negotiate in proportion to the drawing amount.

      Reply

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