Confirmation for part of LC amount
Confirmation for part of LC amount
UCP does not prohibit confirmation for part of the LC amount, so a bank should be able to accommodate such request by the beneficiary. To avoid disputes, the confirming bank should make it explicitly clear in its confirmation advice that the bank's confirmation obligation is on a pro-rated basis in the event of partial drawings. Further, the confirming bank should inform the issuing bank accordingly. Could I have your comments please?
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GlennRansier_olsABN
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Confirmation for part of LC amount
You are correct. Partial confirmation or any type of limited confirmation is acceptable. In example, your confirmation could be limited to only reviewing documents in English, etc. As long as the confirmation is clearly communicated and does not change any existing LC terms you would be considered a confirmer.
Confirmation for part of LC amount
Hi,
I must say I would be reluctant to say so. I am unsure if absence of any prohibition in UCP allows such action.
Of course there is a freedom of contract between the confirming bank and the beneficiary. But a request for confirmation is rather a mandate contract between issuing bank and confirming bank. Issuing bank mandated confirming bank to add its confirmation on the terms and conditions of the credit. If the confirming bank is unable to do so on the terms of the existing credit, it should come back to the issuing bank.
Confirming the credit for a lower amount (or limiting the number of acceptable languages) amends in fact the terms in narrowing the scope of the confirmation - the terms of the credit are different from the terms of the confirmation. I am quite unsure if confirming bank may do so under a clear mandate as outlined above.
In order to ensure "legal perfection" of a limited confirmation I would recommend contacting the issuing bank for approval.
But supposing the credit is available with the confirming bank (to-be), it may agree to act upon its confirmation without de iure confirming the credit in terms of UCP 600 art. 8. In such case the freedom of contract with the beneficiary is, in my opinion, clear.
Radek
I must say I would be reluctant to say so. I am unsure if absence of any prohibition in UCP allows such action.
Of course there is a freedom of contract between the confirming bank and the beneficiary. But a request for confirmation is rather a mandate contract between issuing bank and confirming bank. Issuing bank mandated confirming bank to add its confirmation on the terms and conditions of the credit. If the confirming bank is unable to do so on the terms of the existing credit, it should come back to the issuing bank.
Confirming the credit for a lower amount (or limiting the number of acceptable languages) amends in fact the terms in narrowing the scope of the confirmation - the terms of the credit are different from the terms of the confirmation. I am quite unsure if confirming bank may do so under a clear mandate as outlined above.
In order to ensure "legal perfection" of a limited confirmation I would recommend contacting the issuing bank for approval.
But supposing the credit is available with the confirming bank (to-be), it may agree to act upon its confirmation without de iure confirming the credit in terms of UCP 600 art. 8. In such case the freedom of contract with the beneficiary is, in my opinion, clear.
Radek
Confirmation for part of LC amount
In my opinion, art. 8d is also valid when a bank is not prepared to confirm "part" of the credit".
Daniel
Daniel
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GlennRansier_olsABN
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- Joined: Fri Apr 05, 2019 5:18 pm
Confirmation for part of LC amount
It is not for me to convince anyone however, I consider the following:
1. ISBP Paragraph 23 discusses limiting the language a nominated bank will accept
2. Opinion R663/TA613 discusses partial negotiations.
3. Nothing expressly prohibits a partial confirmation. There are installment LC’s or LC’s are received when full bank and/or country limits are not immediately available. I see no reason why a partial confirmation cannot be provided as long as it is clearly communicated. The beneficiary can make their decision based on the communication.
1. ISBP Paragraph 23 discusses limiting the language a nominated bank will accept
2. Opinion R663/TA613 discusses partial negotiations.
3. Nothing expressly prohibits a partial confirmation. There are installment LC’s or LC’s are received when full bank and/or country limits are not immediately available. I see no reason why a partial confirmation cannot be provided as long as it is clearly communicated. The beneficiary can make their decision based on the communication.
Confirmation for part of LC amount
Confirmation for part of the LC amount is still a confirmation that is subject to the UCP. By confirming part of the LC amount, it does not alter the credit terms. We need to understand that sometimes a beneficiary may not need confirmation for the full amount, when it is able and willing to take the risk for part of the amount. Issuing bank should be informed of the "partial" confirmation, but its approval should not be required.
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Confirmation for part of LC amount
Hi,
Let’s assume that the credit is available by payment/negotiation with the confirming bank that added its confirmation for part of the credit amount; and full credit amount were drawn.
The questions are:
Would the confirming bank pay part or whole of the credit amount when documents presented are complying?
Could it negotiate part of the L/C amount without recourse and the rest amount on a with recourse basis?
I’m afraid that part confirmation practice conflicts with Artcile 8 UCP 600.
However, I tend to agree with Radek that this can be done based on the express agreement between the confirming bank and the beneficiary.
Regards,
Duc N.H
[edited 6/11/2011 5:33:13 AM]
Let’s assume that the credit is available by payment/negotiation with the confirming bank that added its confirmation for part of the credit amount; and full credit amount were drawn.
The questions are:
Would the confirming bank pay part or whole of the credit amount when documents presented are complying?
Could it negotiate part of the L/C amount without recourse and the rest amount on a with recourse basis?
I’m afraid that part confirmation practice conflicts with Artcile 8 UCP 600.
However, I tend to agree with Radek that this can be done based on the express agreement between the confirming bank and the beneficiary.
Regards,
Duc N.H
[edited 6/11/2011 5:33:13 AM]
Confirmation for part of LC amount
Dear Duc N.H.
Assuming there is a complying presentation for the full amount of the LC, and if the LC is available by negotiation, the confirming bank is obligated to negotiate without recourse to the extent of the amount of its confirmation.
The practice does not conflict with article 8. Regarding sub-article 8(d), the confirming bank will inform the issuing bank of confirmation being added for part of the LC amount.
Gabriel
Assuming there is a complying presentation for the full amount of the LC, and if the LC is available by negotiation, the confirming bank is obligated to negotiate without recourse to the extent of the amount of its confirmation.
The practice does not conflict with article 8. Regarding sub-article 8(d), the confirming bank will inform the issuing bank of confirmation being added for part of the LC amount.
Gabriel
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Confirmation for part of LC amount
Dear Gabriel,
Sub-article (a)(ii) neither provides partial confirmation nor partial negotiation without recourse, hence, the fact that the confirming bank negotiates without recourse to the extent of the anount of its confirmation (and the rest amount on a with recourse basis) conflicts with its provision. So, partial confirmation (if any) should be based on the agreement between the confirming bank and the beneficiary, and the issuing bank may be informed of this effect.
I must admit that during my twenty years experience with L/C I have not yet come across a case where the confirming bank adds partial confirmation and negotiates a complying presentation partially without recourse and partially with recourse. Have you ever ...?
Regards,
Duc N.H
Sub-article (a)(ii) neither provides partial confirmation nor partial negotiation without recourse, hence, the fact that the confirming bank negotiates without recourse to the extent of the anount of its confirmation (and the rest amount on a with recourse basis) conflicts with its provision. So, partial confirmation (if any) should be based on the agreement between the confirming bank and the beneficiary, and the issuing bank may be informed of this effect.
I must admit that during my twenty years experience with L/C I have not yet come across a case where the confirming bank adds partial confirmation and negotiates a complying presentation partially without recourse and partially with recourse. Have you ever ...?
Regards,
Duc N.H
Confirmation for part of LC amount
Dear Duc N.H.
"Partial negotiation" is not inconceivable. You may want to refer to Official Opinion R663 / TA613.
Let us consider a situation where a bank does not add confirmation to an amendment for increase of LC amount, and the LC is available by negotiation. When a complying presentation is made for the full amount (original LC + amendment), what is the confirming bank's obligation? The confirming bank is obligated to negotiate without recourse to the extent of its confirmation (which is the amount of the original LC prior to amendment).
Regards
Gabriel
"Partial negotiation" is not inconceivable. You may want to refer to Official Opinion R663 / TA613.
Let us consider a situation where a bank does not add confirmation to an amendment for increase of LC amount, and the LC is available by negotiation. When a complying presentation is made for the full amount (original LC + amendment), what is the confirming bank's obligation? The confirming bank is obligated to negotiate without recourse to the extent of its confirmation (which is the amount of the original LC prior to amendment).
Regards
Gabriel