ICC Digital Library Forum

We have received a request from a customer to add our confirmation to his export LC, for a maximum liability of one-third of the total LC value. LC allows for partial shipments.

Has anyone come across such requests. If yes,how do you reflect this in your books and documentation to secure the right of recourse for the unconfirmed balance?

One for Neil Chantry?

Dear Susan,

We have seen similar; and it is a bit tricky. You of course have to agree the details with your customer; e.g. is the “balance” of the confirmation reduced via the same ratio (percentage) as the balance of the credit? Or is the balance of the confirmation “fixed” until the balance of the credit is lower.
And – is the full presentation covered – or just one third?
As for the bookkeeping (which I guess was your question) then we do this manually, so that the relevant line (according to the agreement) is booked. So the way that we do this, is to handle it as two separate cases; one keeping track of the L/C balance – and one keeping track of the confirmation balance. Not sure if this is 100% correct – but it seems close enough

This was the “short version” – I hope this helps.

Best regards
Kim

A few thoughts on this unsual request.

Looks like the LC calls for partial shipments and the exporter is looking to get the first shipment covered .... after which, if it works well, possibly the exporter may not look for additional cover later.

Or is it that the exporter is looking to save some money by getting confirmation for each partial shipment done separately ?

A good starting point may be to understand the logic behind the request and address it accordingly.

Technically if the LC allows partial shipments, the request for partial confirmation can be met.



Kersi Patel

From : Lakshmanan Sankaran, CBD, DUBAI
----------------------------
I agree with the view that the beneficiary request for adding partial confirmation is unusual and complicated, but can be accomodated; the Confirming bank needs to be cautious, may be a separate agreement would help considering the points raised by Kim Christensen.
Anothe poser on the same subject - what if a bank requested to add full confirmation, is willing to add only partial confirmation relating to amount,tenor etc. - the reverse scenario? any views?

Well, I am not sure there is a straight answer to this one. In the first place, I guess you could argue that this is in a grey zone when it comes to article 9,b (request or authorisation from the issuing bank). When it is the “confirming bank” that is not willing to add a “full” confirmation, this grey zone is extracted to article 9,c (Confirming bank not prepared to confirm).

I dare not say what the position from a legal point of view is here. However, in such a case my view is that the bank should make a choice:

1) Not to confirm the L/C, or
2) to cover a part of their risk e.g. via another bank or credit insurance institution – i.e. providing a full confirmation to the beneficiary.

Best regards
Kim

I agree with Kim,the case is in the grey area.
In order to serve the client, I suggest the following:
an agreement between the confirming bank and the beneficiary to outline the partial confirmation terms clearly.
pre-approval from the issuing bank to comply with article 9.