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dear all,

Is the advising bank responsible to go through the terms and condition of the LC before advising it. Commentary on UCP600 says that the advising bank may refuse to advise LC which has one or more proforma invoice as attachment. however for swift LC, how the advising bank would understand whether the LC has any attachment to be followed unless it go through the terms and condition of the LC? further its not uncommon when the issuing bank put extra responsibility on the advising bank and such instruction may be written in deep inside LC. is the advising bank responsible for such clauses?

regd

shahriar

Dear shahriar,
UCP600 Art 4 b. An issuing bank should discourage any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like.
Art 1 The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication no. 600 (“UCP”) are rules that apply to any documentary credit (“credit”) (including, to the extent to which they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded by the credit.
In this case, the issuing bank in fact has modified some clauses by the credit. The beneficiary needs to call for amendment, otherwise it really makes the advising bank bear extra responsibilities.

there is no explicit instruction in UCP600 that the advising bank has to study the terms and condition of the credit. however from various opinions where ICC cries that the advising bank should inquire with the issuing bank give a sense that the advising bank should study the terms and condition of the LC.