Confirmed LC With 41a By Negotiation

[lemonselo]

Hi
we are issuing a confirmed LC to supplier which we agreed on 60 days LC from BL date.Our supplier is asking 41A and 42A as below

41A
confirming bankXXX BY NEGOTIATION
42C
60 DAYS AFTER BL DATE
42A
confirming bank

Our bank insist that since there is draft, 41A should be "by acceptance" and 42A should be "issuing bank". Till now we have issued all LCs to this supplier on above basis and faced no problem. I do not believe that this time it will also be problem but we are having difficulty our bank to make those changes.

please give me some hint or details to convince our bank to do.

Regards

[Navi]

Hi,

For an LC to be issued available by negotiation, drafts should be drawn on the bank other than nominated bank as per definition of negotiation. Therefore, if 41A is available with CONFIRMING BANK BY NEGOTIATION then 42A should be ISSUING BANK or any third bank other than CONFIRMING BANK.

If not, it is better to issue available with CONFIRMING BANK BY ACCEPTANCE and 42A to be CONFIRMING BANK. In my opinion both serve the same purpose.

Another alternative is to issue deferred payment L/C, without drafts. If the supplier requests prepayment the confirming bank/nominated bank is authorised to do so as per UCP 600, 12b.

And personally I prefer LCs without draft as deferred payments LCs mostly serve same purpose. No need to issue and presents drafts.

other comments appreciated
Regards

[shafi865]

Agreed with Navi

[bodebowale]

can we conclude that the following is same with what you have expalined above

41 Available with ........................................ By Negotiation

42C Drafts At ............................................... At Sight

Thanks

[lemonselo]

Our Supplier is always asking 41A .... By Negotiaon and 42C drafts at 60 days after BL and this request is almost unbreakable because they are partially owned by government and have strict rules that they even dont think on it, just put on action. however using deferred payment instead of draft is better option if i can convince them thanks for your comments.

[Navi]

UCP600, article 12b may help you to convince them

I often use it...