Will Second Beneficiary's Bank Confirm the Letter of Credit

dinesh2476 · Post by **dinesh2476** » Tue May 29, 2012 11:11 pm

Dear Experts,

ARTICLE 38-Transferable Credits
g. The transferred credit must accurately reflect the terms and conditions of the
credit, including confirmation, if any, with the exception of:

1.How to avoid second beneficiary bank confirming bank of letter of credit.

2.Will the second beneficiary bank confirm the letter of credit though payment will be received from the issuing to transferring bank,upon receipt of credit complying documents

Thanks&Regards
Dinesh

aspirant11 · Post by **aspirant11** » Tue May 29, 2012 11:53 pm

confirming bank's confirmation is only materialized when presentation is made to the confirming bank only. docs can be directly sent to issuing bank, but in that case confirming bank's undertaking is not utilized.

your first point is not clear to me

for second query, confirming bank's confirmation agreement depends on the communication between the IB n Conf. Bank. so, whether the confirming bank is also the banker of the second benef bank is not relevant in my opinion.

................................
my query

lc is restricted to transfer by advising bank and the transferring bank must inform the IB of second benef. docs must be presented by the transferring bank.

I got the lc for lien to open BTB lc, i refused to lien the lc.
in my opinion, the lc must be amended to open the presenting bank for negotiation, transferring bank should submit the communication message with the IB regarding transferring clause.

what is your opinion, please share......

thanks and regards

picant · Post by **picant** » Wed May 30, 2012 12:03 am

Hi Pal,

I undestand that if the advising bank confirms the l/c to first beneficiary when transferring it will comunicate that the l/c is confirmed by including in SWIT MT720 field 40B "adding our confirmation", without instructing second beneficiary bank to provide confirmation.
Other comments appreciated
Ciao

abrar · Post by **abrar** » Wed May 30, 2012 3:51 am

As picant indicates, the UCP requirement is for the confirming transferring bank to extend its confirmation undertaking to the second beneficiary, and not for the second advising to add its own confirmation when advising the second beneficiary.

nesarul · Post by **nesarul** » Wed May 30, 2012 12:02 pm

Dear,
Few days ago i made same qury to LCviews..
have a look
http://www.lcviews.com/swq_28.htm
regards
nesar

dinesh2476 · Post by **dinesh2476** » Thu May 31, 2012 3:30 am

Dear Nasarul,
Thanks for your update
The said link is very useful.

1.I am clear that lc avaiable with bank(xxx) and transferring bank(yyy) can be different bank (Abrar has confirmed earlier post)
2.Lc can be confirmed by another bank before advising or transferring bank when the relationship with issuing bank is not fine.

Dear Nesarul/Abrar/Picant
Article 38g
g. The transferred credit must accurately reflect the terms and conditions of the
credit, including confirmation, if any, with the exception of:

Quote ''Including confimation''

Is that UCP allows other bank to add confirmation to letter of credit. As abrar said this can be undertaking to beneficiary but when the lc received by the second beneficiary bank which states ''CONFIRM'' there could be reason for second beneficiary bank to add confirmation. Is not it?

Thanks&Regards
Dinesh

dinesh2476 · Post by **dinesh2476** » Thu May 31, 2012 9:12 pm

Dear Experts,

Please correct me if i am wrong

Thanks&Regards
Dinesh

abrar · Post by **abrar** » Thu May 31, 2012 9:27 pm

dinesh2476 wrote:Dear Nasarul,
Thanks for your update
The said link is very useful.

1.I am clear that lc avaiable with bank(xxx) and transferring bank(yyy) can be different bank (Abrar has confirmed earlier post)
2.Lc can be confirmed by another bank before advising or transferring bank when the relationship with issuing bank is not fine.

Dear Nesarul/Abrar/Picant
Article 38g
g. The transferred credit must accurately reflect the terms and conditions of the
credit, including confirmation, if any, with the exception of:

Quote ''Including confimation''

Is that UCP allows other bank to add confirmation to letter of credit. As abrar said this can be undertaking to beneficiary but when the lc received by the second beneficiary bank which states ''CONFIRM'' there could be reason for second beneficiary bank to add confirmation. Is not it?

Thanks&Regards
Dinesh

Following the rule as under 38 (g), if the incoming MT700 indicates "CONFIRM" under field 49, and the transferring bank has confirmed the master LC , it must transfer to the transferee under the same condition. That is to say, the transferring bank must indicate on its MT710 to the second advising bank (or in its mail advice to transferee) that the transferred credit bears the confirmation of the transferring bank, i.e . in field 40B :"ADDING OUR CONFIRMATION".

This is the intent behind this sub-article, and not that the second advising bank should add its secondary confirmation. Although the second bank advising bank may decide to add its own confirmation, this would fall outside the scope and protection of the UCP.

Also, it must be remembered that a second advising bank may not be required or may not be appropriate in all cases, and if the transferring bank were to advise the transferee direct by mail, the application of the sub-article becomes clearer, and there should be no confusion over the interpretation of "including confirmation" as applied to a second advising bank.

dinesh2476 · Post by **dinesh2476** » Fri Jun 01, 2012 4:51 am

Dear Abrar,

Thanks.

Dinesh

berry · Post by **berry** » Sat Jun 02, 2012 12:20 am

agree with abrar. well explained.

smithyp1 · Post by **smithyp1** » Tue Aug 28, 2012 9:01 am

Hi,

I have a situation which relates to the above but i am having difficulty understanding. Can you please help?

We are the transferring bank and we received LC from IB stating confirmation "may add". We sent LC on to 2nd bene bank also stating "may add"

We have not addedd confirmation and do not wish to add confirmation.

2nd Bene bank has asked to add their confirmation and want us to confirm we will pay on maturity.

how do we handle this?? We will not pay until we receive funds from IB

Any help appreciated

abrar · Post by **abrar** » Tue Aug 28, 2012 3:27 pm

smithyp1 wrote:Hi,

I have a situation which relates to the above but i am having difficulty understanding. Can you please help?

We are the transferring bank and we received LC from IB stating confirmation "may add". We sent LC on to 2nd bene bank also stating "may add"

We have not addedd confirmation and do not wish to add confirmation.

2nd Bene bank has asked to add their confirmation and want us to confirm we will pay on maturity.

how do we handle this?? We will not pay until we receive funds from IB

Options :

1. Contact the 2nd bene bank, and explain that the "MAY ADD" was directed to yourselves by the issuing bank, and that such instruction was not intended to be transferred on to the 2nd bank. However, you may seek issuing bank's agreement for the 2nd bank to add confirmation, and if approved, you agree to convey same to the bank. Until such time, the 2nd bank confirms at their own risk

2. If the 2nd bank refuses to retract confirmation, you will need to stress that as you are not a confirming bank, the payment undertaking is given by the issuing bank and not your bank In case of recourse being needed to be exercised, this must be directed to the issuing bank. However, you will only pay at maturity (without engagament) subject to receipt of covering funds.

he123 · Post by **he123** » Tue Aug 28, 2012 9:45 pm

Dear All

Can we remove field 49: Confirmation "May add" at time of transferring the L/C. if we are the transferring bank.

abrar · Post by **abrar** » Tue Aug 28, 2012 9:49 pm

he123 wrote:Dear All

Can we remove field 49: Confirmation "May add" at time of transferring the L/C. if we are the transferring bank.

My view is that this should be stated as "WITHOUT" under the transferred LC

Sabrina · Post by **Sabrina** » Wed Aug 29, 2012 1:24 pm

Agreed with Abrar. If the transferring bank do not wish to add confirmation to the credit, they may simply transfer the credit without adding confirmation and inform the IB about it.

Other Comments Appreciated.

abrar · Post by **abrar** » Wed Aug 29, 2012 5:18 pm

nitinkp wrote:Agreed with Abrar. If the transferring bank do not wish to add confirmation to the credit, they may simply transfer the credit without adding confirmation and inform the IB about it.

Other Comments Appreciated.

Agreed. In this case the transferring bank should indicate in field 40b of its MT710 : " IRREVOCABLE WITHOUT OUR CONFIRMATION". However, in respect instructions to the 2nd bank as to whether or not it should add confirmation, this field should also indicate : "WITHOUT"

dinesh2476 · Post by **dinesh2476** » Tue Sep 04, 2012 11:16 am

Dear Abrar,

We often receive letter of credit with ''its MT710 : " IRREVOCABLE WITHOUT OUR CONFIRMATION''. Please confirm if we can change lc clause to WITHOUT to second beneficiary where the original lc states ''CONFIRM''

g. The transferred credit must accurately reflect the terms and conditions of the
credit, including confirmation, if any, with the exception of:
?? the amount of the credit,
?? any unit price stated therein,
?? the expiry date,
?? the period for presentation, or
?? the latest shipment date or given period for shipment,

Regards
Dinesh

abrar · Post by **abrar** » Tue Sep 04, 2012 11:51 pm

dinesh2476 wrote:Dear Abrar,

We often receive letter of credit with ''its MT710 : " IRREVOCABLE WITHOUT OUR CONFIRMATION''. Please confirm if we can change lc clause to WITHOUT to second beneficiary where the original lc states ''CONFIRM''

g. The transferred credit must accurately reflect the terms and conditions of the
credit, including confirmation, if any, with the exception of:
?? the amount of the credit,
?? any unit price stated therein,
?? the expiry date,
?? the period for presentation, or
?? the latest shipment date or given period for shipment,

Regards
Dinesh

In the example given, I am assuming the instructions in field 49: CONFIRM is directed by the MT710 issuing bank to the next bank. So it is expected that the second bank (transferring bank) will add its confirmation before issuing the MT720, and that it will state field 49 as WITHOUT.

abdulawal · Post by **abdulawal** » Thu Jun 22, 2017 12:42 am

Dear Experts,
I have a similar situation. A confirmed L/C needs to be transferred.

When the issuing Bank issued the L/C to Bank-2 [confirming bank]
and in clause 47A: mentioned that " Bank-2 Authorized to transfer"
and in clause 57A: Advising through Bank-3
and in clause 41A: Available with Bank-2

Whereas, Bank-2 is the confirming Bank, and Bank-3 is the advising bank having to transfer the L/C to the 1st beneficiary/Seller.

Questions:
1. Is this sufficient for the Bank-3 to transfer the L/C to the seller?
2. Will the confirmation by Bank-2 remain valid if Bank-2 transfer the L/C to the seller?
3. With the 41A [Credit available with Bank-2], will the seller present the document to Bank-3 or Bank-2?

Thanks in advance.

Regards,Awal

LOAN · Post by **LOAN** » Thu Jun 29, 2017 9:40 am

Dear,

"ARTICLE 38-Transferable Credits
g. The transferred credit must accurately reflect the terms and conditions of the credit, including confirmation, if any, with the exception of:"

Confirmation said above is made by the confirming bank (the bank confirms the transferable l/c) not by the 2nd bene's bank.

Rgds,

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