Confirmation And Draft Drawn On Issuing Bank

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OOIOK
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Confirmation And Draft Drawn On Issuing Bank

Post by OOIOK » Sat Apr 19, 2014 12:09 pm

Good Day!

Appreciate your comments on the below queries:

a) ABC Bank has added its confirmation to an LC which issued with tenor of 180 days after sight and make available with DEF Bank by negotiation. LC stipulates that the draft is to be drawn on issuing bank. Documents subsequently submitted to ABC Bank and found to be clean and presented to issuing bank for acceptance. Is confirming bank liable to honour DEF Bank if issuing bank default in payment upon maturity date?

b) ABC Bank has added its confirmation to similar scenario except that draft drawn on confirming bank. Is confirming bank liable to honour payment to DEF Bank if issuing bank default in payment upon maturity date?

c) If the answer in both scenario (a) & (b) are YES. Then what would be the consequences of the confirming bank in the event of fraud case? Is the confirming bank still liable to pay DEF Bank?

Appreciate your comments.

hachem
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Yes,...

Post by hachem » Tue Apr 22, 2014 7:41 pm

Hi OOIOK,

If the docuements presented to the confirmng bank are complying with the credit terms and conditions of the L/C, the confirming bank must honour whether the issuing bank default on payment or not.

If the documents are found complying with the credit terms and conditions, the confirming must honour a draft drawn on it at maturity whether the issuing bank default on payment or not.

As per sub-article 14(a),
A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the document alone, whether or not the document appear on their face to constitute a complying presentation
So the confirming still liable to pay DEF bank even in the event of fraud document.

Regards
H Jallouli

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