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Dear LC experts,

Would like to hear expert opinions on this one.

A transferable LC of EUR 1000 is issued to bank X for advising to first beneficiary.The issuing bank's intructions are 'confirm'. The LC is restricted for transfer to bank X. The LC is to be transferred to second beneficary for EUR 5000.The first beneficiary requests for a confirmation of the LC.

1. To what extent would bank x add its confirmation for the first beneficiary. Would it be for EUR 5000. What good does that make for the bank x to confirm as the performance of the credit would depend on the second beneficiary docs eventually ?

2. Can bank X transfer the credit without adding its confirmation for second beneficiary or does the confirmation of the LC for he first bene automatically forces the bank for second beneficiary as well?.

3. Can a part confirmation be done for the second beneficiary while transfer.

Hello

to answer your question -
1. you would not transfer a letter of credit for a value greater than the original l/c.
2. the confirmation is only extended to the original l/c - not the transferred portion
3. bank X only advises the l/c to the 2nd beneficiary. L/Cs may only be transferred once. Although they may at time of first transfer be transferred partially to more than one 2nd beneficiary if so required. (this is not a good practice)

Unfortunately the performance of the 2nd beneficiary is not covered by the confirmation. In a lot of cases, the documents received from the 2nd beneficiary are not in compliance with the original l/c and therefore the confirmation is of little value.
Thanks Jackie

hi elly,

i think the value should be 10000 and not 1000. taking 10000 as correct, here is my opinion;

1. confirmation is added to the credit and not the beneficiary . its not necessary to confirm transferred credit separately. if the original credit is confirmed then transferred credit is also confirmed. UCP 600 article 38 g.

g. The transferred credit must accurately reflect the terms and conditions of the credit, including, confirmation, if any, with the exception of:

bank x should be only concern about the credit confirm document. no matter whether it is by 1st beneficiary or 2nd beneficiary.

2. however it may be possible to choose to keep transferred credit out of the confirmation. but why would someone do that as the total liability of the confirming bank would remain same if the credit is confirmed in full.

3. its possible to confirm part of the credit.

Agreed with Jackie that confirmation of the credit be done on the original value of the original LC. The conformation request is to provide security for the first beneficiary against country risk of the issuing bank.

Good morning.
Let't look at example. LC is issued and transfered by ABC bank to DEF bank (second bnf's bank). Is it possible that bank DEF add its confirmation to the credit?

Hi Pal,

the bank required to add confirmation, will send MT720 stating in field 40B adding our confirmation but having confirmed the whole credit.
Othr comments appreciated
Ciao