confirmed l//c

3 replies [Last post]
vivek
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Joined: 01/20/2008
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Hi.

 Can a L/C  , (field  49 says  :confirm )  be available with,  field  41  : any bank, by negotiation  or it  has to be available only with the confirming bank ?.

 Further is it necessary that  in a confirmed lc the drawee should be the confirming bank .Can the drawee be the issuing bank in a confirmed L/C

 

Please elaborate the above in both case of sight lc and usance lc .

Thanks .

Vivek

 

Abrar
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Joined: 03/12/2009
Confirmed LC

The main obstacle to the above scenario, is the confirming bank's requirement under Sub-Art. 8 d of UCP600. Without nominating a specific confirming bank, the issuing bank will never be in a position to ensure compliance with the sub-article.

This issue aside, if "any" bank wished to exercise its right to act as a confirming bank, in theory, this could be done. However, the confirming bank would be wise to advise the issuing bank that it has acted on its nomination as negotiating bank, and furthermore, had added confirmation, so as to ensure that it was protected under all rights afforded to a confirming bank under UCP600.

To protect the confirming bank's position with the beneficiary, it would also be wise for the confirming bank to clause its confirmation to the effect that its confirmation would only conditional upon the LC being thereafter restricted for negotiation with the confirming bank only. This would ensure that the confirming bank is not unnecessarily exposed under sub-art. 8 C.

As the confirmation agreement  would be a private contract between the beneficiary and the confirming bank, such restriction as part of its confirmation agreement would not require an amendment from the issuing bank.

As regards "drawee", I assume you are referring to an LC available by acceptance. It is of course not necessary for the drawee to be the confirming bank, but on the basis that the beneficiary is seeking to engage the confirming bank's, rather than the issuing bank's engagement to pay at maturity, it seems highly unlikely that it would ever be desirable to draw the draft on the issuing bank.

Of course, it is well recognised that the requirement for a sight draft under a sight LC, whether on the confiming bank, or the issuing bank, serves no useful purpose.   

sundharannair
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Joined: 03/26/2010
Confirmed Lc

Dear Sir,

 

Suppose negotiating bank add their confirmation, is it right that drafts to be drawn on confirming bank? Coz as per article 2 of UCP says Negotaion means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank)

Sundharan Nair

prem_kumaran
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Joined: 10/24/2007
Hi

The only scenario where drafts are drawn on the nominated bank is when the LC is available with them by acceptance  in order to facilitate the prepay/purchase of their own acceptance undertaking.

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