Confirmation Ceases For Discrepant Documents

[dinesh2476]

Dear Experts,

please provide your opinion on the below.

''confirmation ceases for discrepant documents''

we had received discrepant documents for the confirmed LC which we forwarded to issuing bank as per presenter instrucitons. Post authority, we made the payment deducting our charges and one of the charges were confirmation charges which was booked at the time of LC advise/additing confirmation.

beneficiary now referring our standard verbiage which we usually send it to the beneficiary at the time of adding confirmation ''no confirmation undertaking for discrepant documents'' to refute the confirmation charges deducted.

How do banks cover this. By adding confirmation to this credit, they might have lost other lucrative business keeping in mind of the risk exposure taken for this particular letter of credit.

Just because beneficiary presented discrepant documents, should bank be in position to waive these confirmation charges?

Regards.
Dinesh

[picant]

Hi Pal,

confirmation charges are due till the expiry date of the l/c and may continue together with
acceptance/deferred payment charges to the maturity.
If a discrepant presentation is made, after having tried all the possibilities to adjust documents a confirmimg bank is not authorized to honor the availment as per art 8 UCP 600.
But the confirmation existed and ceased by an action of the beneficiary.
The wording you used is just a notice that only in case of compliant documents the bank will act as confirming bank.
One thought, charges have to be debited at the time the bank added confirmation.
Other comments appreciated
Ciao

[liviuc]

From my opinion the confirmation comm should start on the date on which you added your confirmation till the date discrepant documents have been dispatched to the issuing bank.

[cristiand969]

As per art. 8 b, the undertaking of confirming bank is valid as of the time it adds confirmation to the credit and stays unchanged until payment to beneficiary provided a complying presentation is presented to them (art 8 a) . Therefore confirmation ceases on the date when discrepancies were found and notified to beneficiary and the said benef decided not to replace docs.
From the two a/m articles the commission for confirmation is due for the period calculated from adding confirmation to the date of communication the discrepancy but only for the utilized amount. For the remaing amount (in case credit allow partial drawing and only a part of L/C amount utilized) the credit stays confirmed!