confirming bank

[narisa]

Dear all !!
We have received l/c which requested our bank to add confirmation but l/c show available with us by negotiation and require draft drawn on us.
Is it comply with ucp art 2, indicated that negotiation means purchase by nominated bank (in this case as our bank) of draft drawn on a bank other than the nominated bank
looking forward for your reply.

[picant]

Hi Pal,

in this case as per a.m. UCP Art 8 the confirming bank will negotiate without recourse and will claim reimbursement from issuing bank, independently of draft . So,IMHO, draft could be drawn on nominated confirming bank.

Other comments appreciated

Ciao

[cristiand969]

The problem here is that confirming bank cannot add its confirmation as it cannot negotiate under given structure of the credit.
So either seek for an amendment to amend drawee or leave the credit unconfirmed and do not negotiate.
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In this situation you can at the best discount

[iLC]

i would like to keep the case simple. you should seek amendment. otherwise its in direct conflict with the applicable rules. by the way, i was thinking if the requirement is listed in 46a instead of 42a, then i think i will go with picant

[nesarul]

Dear,
Theoretically:
First of all we have to consider TA 569:[which was now approved official opinion]
Where ICC confirms that Reimbursement authority with a credit available by negotiation is conflicting approach.
However one can argue that it can be achieved through mixed payment.
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However, If one look into the entire availability[for payment], then one can see that it has two broad head: i.e. Honour or negotiation. Honour can be catagorized in three types:i.e.payment, acceptance, deferred payment.
The function of Honour is issuing bank's function[don't mean that other bank can not honour] and therby always without recourse irrespective of this function performed by issuing bank, confirming bank or nominated bank.
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on the other hand, the function of negotiation can either be without recourse or without recourse [such as :confirming bank]
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So this two function has got sharp distinction and should not be mixed up between two.
.
This has been further confirmed by Commentary of UCP 600:

"A documentary credit, when issued, will state the method of availability, which is one of the three options, or use a combination of the options (termed “mixed payment”) included in the term “honour” OR [EMPHASIS ADDED] by indicating that the documentary credit is available by negotiation."

.
So , under a credit available by negotiation with a draft drawn on Confirming bank [by payment approach,if the credit is on sight basis]. surely , its conflicted with each others.
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Practically:
When a credit requires confirmation then its automatically assume that issuing bank's and applicant has least burgeoning power on beneficiary and confirming bank. On the other hand, issuing bank can also tremendous pressure to execute this type of transaction in a very short time due to price volatility and so on. Here strict on the standard practice, doesn't expedite the transaction.
I personally look after one of my case and point out logic from UCP according to narisa but failed to convince them on it. Unfortunately, they are the leading banks worldwide.
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Surprisingly, the same bank does duel practice from two different part of the world.
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The matter which cause concern to me:
Now most of the issuing bank officer think that in order to confirm a L/C the following requirement must be abide by [as like as rule]: for specific reason:
.1. draft drawn on confirming bank [irrespective of credit availability]
2. must reimbursement authorization[irrespective of credit availability]
.
WHo ractify it
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Sorry for long posting.
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regards
.
nesar

[narisa]

Dear all ,
Thks for all of your reply.