Amendment of a confirming bank due to prolongation of the va

[AnastasiaZykova]

I would like to discuss the following situation: issuing bank is in the process of making the following amendment of a standby L/C (subj to UCP 500): prolongation of the expiry date and amendment of a confirming & nominated bank (it is known beforehand that the present confirming bank is not in a position to add its confirmation to the period extended till the new expiry date, and that is why the issuing bank has to amend it). Out of the applicant's preliminary conversation with the beneficiary the issuing bank learnt that the beneficiary agreed to amend the expiry date and confirming & nominated bank, but he is not sure that the new confirming bank will confirm the standby L/C (if not than the beneficiary will have the issuing bank's undertaking without confirmation).What may the issuing bank propose to the applicant to reduce beneficiary's risk in this case and make the scheme acceptable to him. It will be highly appreciated if you could share your point of view in respect to this matter.

[MaximPankratov]

I think the Issuing Bank should issue
another L/C confirmed by another
Confirming Bank before the expiration
of the first one indicating in
'additional conditions' that the L/C
is available for drawing only from
Xdate (being the date of expiry of the
first L/C plus seven banking days).

[T.O.Lee]

We consider that immediately before expiry of the original LC, the issuing bank may issue an amendment to extend the expiry date and then request another bank to add confirmation to the extended part of the LC, after the original confirming bank has issued its notice that he is no longer interested to add confirmation to the extended part of the LC.

There is no need to issue another LC. An amendment to extend the expiry date and a notice from the original confirming bank not to extend its confirmation should achieve the same purpose.

We have to declare that our above opinions are solely for education purpose as we have not seen the actual documents. The parties should consult an LC expert by presenting all the documents to him for an expert's opinion and should not rely on or act upon our opinions, which we are not held responsible.

We are from www.tolee.com

[edited 6/15/01 5:40:40 PM]

[larryBacon]

Another option to consider would be to include in the amendment an instruction that the extended balance of the L/C is subject to open negotiation. This will allow a variety of banks to be considered for negotiation. In this case, an approach should be made to an appropriate bank or banks, in advance of the amendment, to seek silent confirmation.

Laurence A. J. Bacon