Second advising Bank

[dinesh2476]

Dear Experts,

Please share your opinion on the below.

LC was issued to XXX to advise it to YYY(Beneficiary). YYY is a client of advising bank XXX.

However, YYY(beneficiary) wanted to advise the LC to another bank AAA which is also their banker.

Since beneficiary requested to route the LC through another bank, advising bank XXX advised the LC through AAA to beneficiary and updated about issuing bank of the involvement of another bank.

after some time, we received concern on the uncollected charges which we relayed it to the issuing bank, However, issuing bank refuses to pay these charges as they have not nominated second advising bank in the LC and that amendment should have been sought before advising it to the AAA.

Please opin.

Thanks & Regards
Dinesh

[cristiand969]

Issuing bank is correct. Is the art 37c applicable to issuing bank ? NO! Case solved

[picant]

Pals,

I agreed with Cristand969, it is an action required by beneficiary. This is not the case of second advising bank, but I assume that the beneficiary prefers to avail the l/c with another bank, so what kind of fees
result in this transaction?
Let me know.
Ciao

[dinesh2476]

Hi Cris and Picant,

2nd advising bank is looking for remittance of advising charges.

Please let me know how this case is different from the advising bank advising the LC to beneficiary using correspondent bank located in Beneficiary country giving value to the applicant/issuing bank instructions.

Applicant/issuing banks should have performed necessary due diligence by checking the LC conditions that 1st advising bank have corresponding relationship with beneficiary.

More ever, in UCP there is no clarity that issuing bank has to nominate 2nd advising bank in that LC to further using 2nd advising bank and transferred it to the beneficiary. It states only

Article 9:
c. An advising bank may utilize the services of another bank(second advising bank) to advise the credit and any amendment...... It stands that advising bank may take call to select 2nd advising bank though there is no such instructions in the LC.

Referring Article 37 sub point a and C(1st paragraph)

Thanks & Regards
Dinesh Kumar

[picant]

Hi Pals,

In my opinion, the first advising bank may utilized the services of another bank only if it has no relationship with beneficiary. If the l/c has already advised to beneficiary and the latter needs to availed it through another bank is a question of beneficiary, not a bank.
In this case the position of the advising bank will play a role depending on the availability, if by payment, by def. payment, by acceptance or by negotiation.
Then, in which way the advising bank has transmitted the l/c to the improper called second advising bank?
Let me know and further ideas/comments welcome.
Ciao

[dinesh2476]

Chief,

Hope, we would agree with the fact that advising bank need not always be LC available with
Bank and it is not mandatory that second advising bank always be LC available with Bank.

Beneficiary wanted to ensure that authenticity of the LC and have control over LC and
documents through his own bank before send it to LC available with bank.

Please support clarifying your statement '' 2nd advising bank comes into picture only when advising bank
does not have relationship with beneficiary''

Thanks & Regards
Dinesh Kumar

[cristiand969]

Dear Dinesh,
I assume you are the first advising bank and unfortunately you have to pay second advising bank claiming charges. Is that right?
In my opinion , as per art 9, the first advising bank may utilize the services of a second advising bank to give effect to he instructions of the issuing bank and not of the beneficiary. I assume you have informed issuing bank that it was the beneficiary request. Even so, it is a customary practice that if the beneficiary is not your client, you have to seek for further instructions from issuing bank so as to protect yourselves of incurring additional costs as it were the case. From the legal point of view , 1st advising bank artificially increased the debt of the issuing bank by forcing it to pay additional cost just because the beneficiary asked you to incur another advise of the credit. In my opinion , this is not fair before issuing bank and UCP article should not be interpreted as a way of escaping from responsibilities of each parties involved . Any disclaimer of UCP art should be interpreted in conjunction of the facts that are beyond one's party control such us: the beneficiary is not the advising bank's customer or advising bank advise through other bank (not stated) but with which it has RMA so that the latter to advise the credit to the beneficiary bank.
Thanks