The Concept Of Second Advising Bank

[shahriar]

dear nesar,

i think finally i have found an answer to your question -
"the concept of second advising bank is not clear and needs approval from issuing bank since as per article 2 advising bank is the bank that advises the credit at the request of the issuing bank"

my position is 2nd advising bank has a separate definition; employed by the first advising bank. this is a authority vested to advising bank from the UCP. because of its unique characteristics and no reference in other articles, the definition is put in article 9 instead of article 2.

you further argued that the responsibilities of 2nd advising bank is the same. yes, there are. but the point of performance is different. the first advising bank advises the lc when it satisfies itself as to the authenticity of the lc; that is whether the issuing bank has actually issued the lc or not. once this is done there is no need to do that again. therefore the second advising bank will only check whether the first advising bank actually advised the credit or not. if the second advising bank breaks this chain, the consequences could be fatal.

shahriar

[nesarul]

Dear Sir,
Thanks for your comment. Now who will bear the charge of second advising bank.
thanks
nesar

[shahriar]

dear nesar,

it depends on the lc terms. as our zakir bhaia and armagedo discussed, "all charges outside issuing country are on beneficiary's account

shahriar

[nesarul]

Dear Shahriar,
I am taiking about who is the ultimate[emphasis added] charge bearer of the second advising bank. is it issuing bank or advising bank. [where the second advising bank can not collect its charge from the beneficiary although credit stipulate that all charge outside the issuing bank's country are for the beneficiary's account.]
thanks
nesar

[shahriar]

dear nesar,

Article 37C
A bank instructing another bank to perform services is liable for any commissions, fees, cost of expenses ("charges") incurred by that bank In connection with its instructions.

shahriar

[nesarul]

Dear Shariar,
According to your quotation, since an advising bank select another bank (second advising bank) so definately the charge will have to bear by the advising bank.
But if you look into same sub article 37(c) paragraph 2:
"If a credit state that charge are for the account of the beneficiary anf charge cannot be collected or deducted from the proceeds, the issuing bank remains liable for payment of charges."

So I think in my case, ultimate liability(for charge) are on the account of issuing bank not the advising bank.

do you agree???????????????????
thanks
nesar

[shahriar]

dear nesar,

yes i do agree. the ultimate charges are on the issuing bank if remain unpaid by the beneficiary

shahriar

[nesarul]

Dear Sir,
Same situation two different answer from two paragraph of same article:
According to sub article 37(c) paragraph 1, advising bank is ultimate charge bearer.
According to sub article 37(c) paragraph 2,Issuing bank is ultimate charge bearer.
But we have agreed that Issuing Bank is ultimate charge bearer.

I don't know what your reason (pls mentioned here.....] but my reason behinds it for sub article 37(a)...
thanks
nesar

[shahriar]

dear nesar,

ofcourse issuing bank and therefore applicant is the ultimate charge bearer. while advising bank is employing a second advising bank, it is doing so for the issuing bank. therefore any related charges will ultimately drain to the the applicant.

shahriar

[Md.zakir Hossen]

Nice question and nice opinions . I want to add something as I use the second advising Bank in the name of re-advising bank in some L/C issuing where my bank has no swift arrangement.

I want to reproduce from the Commentary on UCP-600 about the topics: Please See Page No-46 of Commentary on UCP-600.

“Sub-article (c) introduces the concept of a second Advising bank. Whilst the use of, and reference to, a second advising bank has been practice for a number of years, the UCP never previously acknowledge its role. The new sub-article states that the second advising bank has much the same role as the advising Bank in satisfying itself as to the apparent authenticity of the advice that it has received from the advising bank, and that its advice of the documentary credit or amendment accurately reflects the advice of the documentary credit or amendment received from the advising Bank.


What I d o in practice is that I mention in the credit the name of re-advising Bank in the credit (if necessary).

Regarding Second Advising Charges: It will depend according to the terms of the credit.But remember in all cases Issuing Bank is liable to re-imburse the charges if same could not be realized from beneficiary.

I have a query in this case, Can the Advising Bank use one of its Branches as Second Advising Bank?(where advising Bank and Second Advising Bank is on same country)

[shahriar]

dear zakir,

as per ucp, branches of a bank in different countries are separate bank. but within the country they are the same bank. therefore a branch of the first advising bank has no question of being second a second advising bank

shahriar