Best Trade Solution

Could someone possibly explain to me what this clause on a letter of credit means:

"The amount of each drawing must be noted on the reverse of this credit by negotiating bank"

Does this mean that the total amount needs to be noted on the reverse side of the original letter of credit? I am quite clueless on this sort of thing, so please do speak in idiot terms!!

Thanks
Leo

Hi,

This is a clause used for especially freely negotiable L/Cs by some issuing banks. When it is added in the LC, the advising bank is expected to sign and stamp the the original LC and advise it to beneficiary. As the beneficiary is free to present documents to any bank in his country (in freely negotiable LC), he also submits the original LC together with the documents. The negotiating bank endorse the amount of the presentation on the original LC and return it to beneficiary. For further presentaion, this process repeats. The purpose is to ensure that over presentation not made by beneficiary.

other comment appreciated.

If the instrument is a mail LC, then theoretically the LC would be required to be presented and endorsed for the drawing amount, and returned, on each drawing.

On a general point, for SWIFT transmissions it is clear that such a transmission is not an "original " document, and is simply an electronic text output, which can be reproduced by the recipient. The authenticity and validity of the instruction is derived through the inter-bank SWIFT validation, and not for example, through the possession of the transmitted copy itself. Therefore, my view is that the concept of an "original" LC instrument is redundant, and the absence of which should not render a presentation discrepant.

However, nothwithstanding the above, if the LC is restricted and not freely available, a photocopy of the incoming MT700 may be made, duly endorsed for each drawing effected, and included by the nominated bank as part of the beneficiary's presentation.