When we need to add confirmation to L/C and how to add confirmation? Do we need add confirmation to every L/C?
In field 49 : (confirmation instruction) some said "without" some said "may add" or this is the quide for beneficiary to add or not add confirmation.
Confirmation of LC as well as the confirmation charges are the understanding between the buyer and seller.
If field No-49 of the LC : Confirm and field No. 71 B is saying “the confirmation charges are on account of applicant”. The advising bank will automatically add the confirmation upon receipt of LC from the issuing bank. (confirmation charges on A/C of applicant)
If field No-49 of the LC : May Add and field No. 71 B is saying “the confirmation charges are on account of beneficiary”. In this case either the advising bank will contact to the beneficiary or the beneficiary has to request in writing to the advising bank or any suitable bank for adding the confirmation. (Confirmation charges on A/C of Beneficiary if required). After adding confirmation of the LC the filed will change as “ Confirm”.
If field No-49 of the LC : Without and field No. 71 B is saying “the confirmation charges are on account of beneficiary” or silent on the confirmation. In this case either the advising bank will contact to the beneficiary or the beneficiary has to request in writing to the advising bank or any suitable bank for adding the confirmation. (Confirmation charges on A/C of Beneficiary only)
After adding confirmation of the LC the filed will change as “ Confirm”. All document need to present to the counter of confirming bank only and the drafts drawn on confirming bank.
The meaning of confirmation : the issuing bank asks another bank to add its own engagement to the undertaking due to issue a L/C. Normally this engagement covers so called Country Risk and / or Issuing Bank default. A l/c could be advised by a bank, usually located in beneficiary's Country:
-WITHOUT confirmation by the advising bank,
-CONFIRM, the advising bank added its own confirmation,
-MAY ADD, the advising bank is requested to add its confirmation on beneficiary' request.
To remember that confirmation means fees to pay .
In many Countries, there is a Governamental Export Guarantee Agency that helps banks in confirming L/c by sharing the risks, for about 80 %, and banks have to pay an insurance premium too.
Thanks , how about 'silent confirmation'
We got L/C term 180 days after B/L date and would like to do discount L/C when negotiation, our bank said we have to add confirmation to this L/C . They said that we can do by add silent confirmation.
Would you please advise?
Thank you so much
Silent confirmation is outside the UCP 600. You have to find a bank or a financial institution that is ready to cover risks as in confirmed L/C, IMHO it is more expensive as the issuing bank has not requested such credit facility. However Silent confirmation and "Del credere" transactions are available in the market.
Other comments appreciated
Could you kindly advise me whether confirmation instruction ie MAYADD or CONFIRM is consider a request to the bank to perform their services covered under UCP Article 37C OR it is only an Undertaking request?
Is the Issuing Bank liable for any charges including LC confirmation charges not collected from Beneficiary. Thanks
Charges will be applicable following the proper instructions in L/C: Naturally the issuing bank is responsible for any charges incurred, but in some cases it is possible to avoid misunderstanding, i.e.:
-confirm, the bank will invite beneficiary to pay confirmation charges.
-may add, the bank will request beneficiary to pay confirmation charges.
Confirming bank will get money before confirming.
Other comments appreciated
Need Urgent advise please.
If the field 49 stated MAYADD, & special conditions stated that LC confirmation are for beneficiary account.
If may add, the bank will request beneficiary to pay confirmation charges. Does the Confirmation Bank have the right to claim on Issuing Bank under UCP Acticle 37c if refuse by beneficiary? Any expect can advise me whether I can found any international banking practise posted on any website?
IMHO the ssecond sentence of your quoted Art. 37 c make's it clear:
"If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges."
So, suggested the credit is advised, the beneficiary first asked for a confirmation but did not make any presentation lateron, nothing could be "deducted from proceeds". In this case, IMHO issuing bank is liable.
-Each long journey starts with a small step-
Tell me whether my understanding is right
Field 49 : CONFIRM : without asking the beneficiary, can the advising bank
confirm the LC irrespective of confirmation charges mentioned in LC
Field 49 : MAY ADD : Advising bank will expect beneficiary's request and
then confirm if they wish irrespective of confirmation
charges mentioned in LC
Field 49 : WITHOUT : They dont confirm. If the bene requests advising bank
may decide about silent confirmation
Your understanding is correct on all 3 points.. Under the first two points, the confirming bank has full recourse to the issuing bank (under the UCP), should the confirming bank be unable to recover charges from the beneficiary or from proceeds of utilisation.