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We are purchasing some lab equipment on a letter of credit. The foreign company requires that confirmation must be added on the L/C from their local bank and they are also bearing the additional cost it. This L/C is available with the foreign bank by payment. The foreign bank asked us to delete following point from L/C in order to add confirmation:

Field 42C: Drafts at Sight
Field 42D: Drawee (which is our bank)
Field 47A:
1. All the drafts under this credit must be marked drawn under (our bank name, LC number) must accompany documents.
2. In the field 41A read "By Payment" as "by Negotiation".
Field 78:
Amount of each drawing must be endorsed on this letter of credit.

I need to ask what risk is involved in the deletion of these points?

Regards,
Fahad

Hi Pal,

confirming bank correctly need deletion of some particulars that are for a "by negotiation" i/o
"by payment" so drafs are no more necessary. I dare say that the confirming bank need something more:
the authorization to debit your account or claim reimbursement from you or one of your correspondent.
This is necessary to manage the documentary credit properly.
So your additional risk would be that the documents are paid, before you receive them.
This is normal when the foreign bank adds its confirmation, naturally you may claim refund if documents,
received by yourselves, will show discrepancies.
other comments appreciated
Ciao

Thank Ciao for your prompt reply.

I would like to know why drafts are not necessary when L/C is available by payment? And what makes them important for L/C by negotiation?

Fahad

There is no risk to the applicant. You can go ahead with the amendment request. As rightly said by Mr picant, the only risk is that the issuing bank's nostro may get debited before the arrival of docs in case if reimbursement is made available and you have to look for refund if docs are discrepant