advising of lc without confirmation

[dholat]

We issued an LC and request a bank in Germany to confirm it. The bank however refused to confirm and sent us a swift to this effect. On the same day we received another swift which says that they have advised the credit without confirming it. Later we negotiated with another bank to confirm the credit. But that bank demanded that any LC and amendment must be advised through them. Now has the LC been already advised, how we can change the advising bank? what can we do against the mistake of the 1st confirming bank in advising the LC, without confirming it, without taking our consent.

[picant]

Hi Pals,

IMHO, when an issuing bank has no credit line with another bank and needs a confirmation by that bank, has to contact it asking for permission. First advising bank, unfortunately, actted correctly as per article 8 d UCP 600. The first advising bank, opportunately instrcted by issuing bank, will send "original" Documentary Credit to the bank that will confirm, stating that it is fully discharged in that transaction. The issuing bank will amend the documentary credit accordingly, and the new advising/confirming bank will issue its own engagement by confirm the documentary credit. Issuing bank will incurr in some charges, may be "out of pocket" costs to be refund to first advising bank.

Good luck.

Other comments and advices appreciated

Ciao

[shahriar]

i agree with what picant has pointed out. however i think that the credit has already been advised to the beneficiary. to send back the original credit to the confirming bank by the first beneficiary's bank will require the beneficiary to surrender the original credit back to the first advising bank. personally i think it is still possible to get the credit confirm by the new confirming bank without getting it involved in advising.

[nhduc]

Hi,

If the beneficiary refuses to accept L/C without confirmation, he may return (or may be asked to return) the original L/C to the advising bank. The advising bank shall inform the issuing bank of the same. Then the issuing bank may:
(i) EITHER cancel the L/C and re-issue a new one to be advised to the beneficiary through the bank which has agreed to confirm the L/C;
(ii) OR issue an amendment to the L/C indicating that the L/C is to be advised to the beneficiary through the second advising bank (which has agreed to confirm the L/C).

Of course, the issuing bank/the applicant must incur charges payable to the first advising bank in connection with L/C amendment or cancellation.

Best regards,
Nguyen Huu Duc