Why they change the consignee

[ghubshawi]

DCs expert,

Being as applicant I requested issuance of a CILC to one of my suppliers for importing of break-bulk commodity, however, the LC is calling for a B/L to be issued or endorsed to the order of issuing bank.
At the time of advisng of LC to my supplier through his advising bank the consignee name was changed to read;"BL to be issued to the order of the confirming bank" on the ground that the confirming bank is financing the transaction.

Now my supplier is requsting an amendment for BL to read; "BL to be issued or endorsed to the order of the confirming bank".
P.S
The above amendment was initiated by the confirming bank.

Please help with your comments including advices to avoid any risks.

Tks & rgds,

Ghubshawi

[cristiand969]

Art. 10 of UCP states:
Amendments
a. Except as otherwise provided by article 38, a credit can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary.
.
In order to facilitate a prefinancing to your customer his bank can ask him to request the applicant to amend the credit. The confirming bank cannot amend by itself the credit, it must receive and amendment from issuing bank, which ultimatelly should be accepted both by confirming bank and beneficiary.
However, the strange situation here is that the confirming bank seems to have wrongly understood this particular transaction because when the B/L is issued to its order how then the merchandise be taken up by you as you are not the right consignee. In case the BL is further endorsed to you or issuing bank it would be a discrepancy as the B/L will be no longer by endorsement to the order of confirming bank.
The original credit is well constructed and protect the confirming bank , it is better to leave BL as it was requested
Other comments appreciated.

[ldt5205]

By requesting BL to be issued to the order of the confirming bank, the confirming bank wants to gain DOUBLE COMFORT when financing the transaction.
The confirming bank will get reimbured if the dox complies with the terms and conditions of the LC.It seems it is not necessary for the confirming bank to control the title of the goods.
I get puzzled at the way the confirming bank dealt with the transaction.
More comment PLS

[ajoy]

Hi

There is no need for confirming bank to insist on this amendment.

As rightly pointed out if the BL is endorsed to the Confirming bank the actual buyer i.e you will not be able to get possession of the goods unless the confirming bank endorses the B/L in your favour in the first place.

So when the issuing bank recieves the B/L from the confirming bank you have 3 situations:

1) BL is still endorsed in favour of confirming bank .

So it is of no use to you and Issuing bank of course has no constructive control over the goods.

2) BL is endorsed in favour of the Issuing bank by the confirming bank already :

Now this might make the BL discrepant at the counters of the Issuing bank as it is no longer as per the LC which asks for the BL to be issued or endorsed in favour of the confirming bank .. (This can of course be disputed but why leave open a possibility like this.)

3) BL is endorsed by Confirming bank in your favour already:

Again, in this case Issuing bank has no constructive control over the goods.

I think the confirming bank may be worried that they if BL is endorsed or consigned to Issuing Bank they will not be able to endorse the BL to a third party to protect their interests if the situation so demands. If so they should ask for an amendment as follows:

BL to be issued to order and blank endorsed.

The above amendment will take care of any concerns they have and is doable.

I donnot think the CB has thought through the risks and avaible options for them and I do not think the Issuing bank and /or you should agree to the proposed amendment in its current state.

Comments welcome. I hope I am not missing something.

cheers

Aj

[jmitra]

agree with the comments given. its starange that the confirming bank is doing so much just safeguard itself. i wonder what the CB would do if this was a air shipment.
in addition to financing issue, in some foreign currency deficit currency, transport document are by law required to be issued to the order of a bank in the exporting country.
apart from the given solution, it is also possible to add condition seeking further endorsement by the confirming bank to the order of the issuing bank or applicant.