discounting of docs under export LC

[TFLT]

Hello,

Please share your experience regarding confirmation of LCs in case you discount docs.
From my point of view confirmation makes a sense only in cases when documents comply with LC terms, discounting is effected at sight basis. For example if I have customer which by default presents docs with discrepancies, LCs payment condition "xx days after shipment date", from my point of view in such case it is enough to set limit to the issuing bank, to sign with customer respective discounting agreement and to state in it that bank discounts docs only after receiving confirmation of payment date from the issuing bank. What is your opinion on this?
Another one example: first advising bank adds it confirmation, and advise such LC to the second advising bank. LC payment condition is 'xx days after shipment date'. Do we need in such case to add extra silent confirmation? Customer agrees to discount docs upon receiving by second advising bank of payment date from the confirming bank (first advising bank).
For me adding confirmation for these two cases is just extra charging of customer. What is your opinion?

[dinesh2476]

Hi,

The confirming bank under no obligation to discount the transaction unless their internal policies on discount comply.

I hope you would agree with me that irrespective of document status, still banks expect IB confirmation on maturity date before they do the discount.

With article 12b, A bank may discount the transaction if they are ready to accept the draft or incur a deferred payment undertaking and as quoted by you rightly, banks will not accept/incur a deferred payment if the presentation is discrepant

and there is no reason why does a bank not accept/incur deferred post confirmation on maturity date from the issuing bank.

so. to me the confirmation has nothing to do with a discount and it is bank internal policy and even unconfirmed LC, a bank can do a discount by complying with article 12B.

and to explanation to your example- have seen cases where the beneficiary wanted the LC to be confirmed by their own bank(second advising bank) and 2nd advising bank wanted the LC to be confirmed by some recognized bank before they add confirm to the LC(it is just to protect themselves from nonpayment, they are not ok with LC being issued by xxxxxx(IB).

of course, the beneficiary has to bear the confirmation charges for both banks.


Thanks & Regards
Dinesh Kumar.

[TaiOanlan]

@TFLT
It depends on situation. In case of we have credit limit for discounting documents for the customer and in case of the L/C is confirmed by us. We definitely discount the bill without recourse in case of clean documents. We discount the bill with recourse in case of discrepant documents if the customer can't fix discrepant documents and request us to send documents as it is.
It is basically up to relationship between the bank and the customer.

Regards,

[dinesh2476]

Dear Tai,

Does the below statement say that we discount that transaction despite discrepancies before issuing bank acceptance on discrepancies? Are we trying to put reserve/guarantee term

We discount the bill with recourse in case of discrepant documents if the customer can't fix discrepant documents and request us to send documents as it is.

Thanks & Regards
Dinesh Kumar