Draft under Confirmed Lc

DMShetty_ · Post by **DMShetty_** » Sun May 10, 2009 1:00 am

We received an Export Lc available by Negotiation and to be confirmed by us. We advised the Issuing Bank to amend the Lc with Draft to be issued on Issuing Bank to comply with article 2 of UCP600. The issuing Bank (a reputed international bank) refused stating it is 'the practice' to issue Draft on Confirming Bank. Can somebody explain why this 'practice' continues even though it is contradicting Article 2.

ThuHoangAnh_ · Post by **ThuHoangAnh_** » Sun May 10, 2009 1:00 am

Hi,

I think this practice may have its origin from the fact that the confirming bank would want to ensure that the LC will be available restrictedly with it.

Please note that if the draft is drawn on the confirming bank, the confirming bank must PAY, not NEGOTIATE though LC is available by negotiation.

Other comments are appreciated.

Best regards,
N.H. Duc

[edited 5/10/2009 5:37:30 PM]

DanielD · Post by **DanielD** » Tue May 12, 2009 1:00 am

If the draft is drawn on the confirming bank, the credit is available by acceptance by the confirming bank and not available by negotiation. On that matter see also TA661rev
Daniel

ThuHoangAnh_ · Post by **ThuHoangAnh_** » Wed May 13, 2009 1:00 am

Dear Daniel,

That the draft is requested to be drawn on the confirming bank under the credit available by negotiation with the confirming bank is a quite common practice . From my own experience, nine out of ten confirmed negotiation credits issued by my bank are requested by the confirming bank to amend the credit with the draft to be drawn on and available with the confirming bank.

It is recognized that this bad practice can not be changed in just a few days.

Best regards,
N.H. Duc

[edited 5/13/2009 4:27:39 AM]

DanielD · Post by **DanielD** » Thu May 14, 2009 1:00 am

N.H. Duc,

A few days is optimistic

Daniel