Is 2nd Advising Bank An Advising Bank Under UCP600?

[mahtab]

Dear All,
is 2nd advising bank always advising bank according to article 2 definition of advising bank under the UCP framework?
regards
mahtab

[jmitra]

dear mahtab,

i am not sure about your question. anyway, the job of 1st and 2nd advising bank or any other subsequent advising bank is precisely the same. the reason way UCP600 has included the definition of 2nd advising bank at a different article is due to its new entry. just to avoid possible confusion. i believe in future UCP version, we will have them under one article.

Mitra

[picant]

Hi Pals,

IMHO, advising bank is the one that the issuing bank chooses to reach the beneficiary, the second advising bank is utilized by the first advising bank when it needs to do so. I have an idea, first drafts of new UCP included parties, authorized to issue L/C and not only banks, than, at the end, only banks survive, but someone forgot to modify this article, in fact how a non-bank l/c issuer could reach beneficiary by swift, using its own bank in his country to advise beneficiary in a foreign country ???, with this article the first advising bank could use the services of another bank, located in beneficiary country to advise the l/c to beneficiary, avoiding to effect a direct advice, sometimes not accepted .

Someone agrees?

Ciao

[shahriar]

dear Ciao,

yes, i agree with you. the non bank issuer can reach the beneficiary by swift. but im not sure about the last part of your post. do you want to say that by doing so the non bank issuer can disguise itself? if yes, a 2nd advising or any subsequent bank bank cannt help since the information of the issuer will remain the same. so if the bebeficiary fails to understand the name of the issuer, a single advise will serve the job. it has been also suggested by the ICC experts that the advising bank should clearly mention the non bank status of the issuer on their advice.

regd

shahriar

[picant]

Hi Pals,

I just want to say that IInd advising bank was only necessary by the first advising bank in case of l/c issued by non bank issuer. In swift message if i send a MT700 to bank A, indicating in field 57 bank B,
bank b is the advising bank, and bank a is a swift message receiver, and in theory, the latter has to sen d a MT710 to bank B, and not to advise directly beneficiary, and then consider bank B, eventually the IInd advising bank. IInd advising bank is a first advising bank choice.

Happy to receive further comments

Ciao

[jmitra]

dear ciao,

nice analysis. i am bit confused with the non bank issuer relation, over all very nice. but UCP definition does not say that advising means to advise to the beneficiary. it simply says Advising bank means the bank that advises the credit at the request of the issuing bank. nowhere in UCP it is written what is the definition of advising. however UCP does say the duties of the advising bank. the duties of the advising bank does not also mention that advise must be done to beneficiary. in fact while the first advising bank is advising a credit it the second advising bank, it has to go perform the same job as it would be the case for a advise to the beneficiary. thus a first advising bank is always an advising bank whether the issuing bank has chosen the 2nd advising bank or not.

regd

mitra

[picant]

Dear Pals,

A banker involved in L/c transaction has to follow many rules, one is to follow SWIFT Rules, the bank indicated in field 57 is the advising bank, if the issuing bank has not BKE or RMA, will reach it via a correspondent bank. The behavior of many banks is to consider thie fact that they got a MT 700, not as a service to the issuing bank, but the way to get commissions and,may be, to contact beneficiary to start a relationship. We all have to do business, but charges and commissions may bring customers to another mean of payment.

Nice discussion to be continued.

Ciao

[shahriar]

i think we need to answer one important question. is it the act of advising a credit that makes a bank nominated bank? if yes, the advising to whom?

in FAQ volume 2, colyer said that An 2nd advising bank is still an advising bank even if the credit is directly advised to the beneficiary.

this gives me a feeling that advising means some kind of nomination by the issuing bank.

regd

shahriar

[iLC]

A quote from "The Comparison of UCP 600 & UCP 500" by Professor James E. Byrne

Page 101 point 12a (ii) & (iii)

12a(ii)
"Where, however, the issuer requests that the advising bank advise the credit through another bank, using, for example, SWIFT MT700 field 57a ('Advise Through' Bank), the bank can be said to fall within the definition of an 'advising bank' since it has advised (indirectly) at the request of the issuer. Arguably, it is also a second advising bank since that request has been relayed through and by the advising bank."

12a(iii)

"The better interpretation of this provision is that the second advising bank is one that acts exclusively at the request of the advising bank and not at the request, directly or indirectly, of the issuer. The implication of the reference to the advising bank utilizing the services of another bank is that it is the advising bank that is the actor. Were it merely acting on the request of the issuer, it would be less correct to say that the second advising bank was utilizing the service of the second advising bank."

iLC

[dholat]

what type of swift message should be used

1. if the issuing bank mentions a advise through bank
2. if the advising bank selects an advising bank on its own behalf

should we use MT 710 for both?