Unconfirmed Irrevocable L/C At Sight (Urgent)
Post 1 of 3
We have got an irrevocable l/c at sight but without confirmation from our buyer. Although it was requested as confirmed.
Since it is our first business with this buyer, we dont want to put any negative effect by demanding amendment on the opened l/c. On the other hand, we need to know; how we can be sure that payment ll be made by the issuing bank? because now we have only guarantee from issuing bank if no any discrepancy on the required documents.
Awaiting for your kind replies
Thanks,
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14 Mar 2009 02:49
Post 2 of 3
I am going through the same situation.
1) First, evaluate who is the originating client bank. Is this a little knwon or no body? Some banks are private and can be used to issue fake Letter of Credits with no money deposit.
2) Who is the advising bank? Ask your advising bank how has been relationship with this corresponcent originating bank.
3) CASH FLOW... It also rest down as to how you are willing to wait for payment. Unconfirmed means you have to wait longer becuase the advising bank will wait untill get money from the issuing bank. This can be a delay of weeks.
My experience has been that the reason your buyer send unconfirm is because it is a small order and confirmation is expensive. Depending on the situation, consider offering the 2% bond. This means that is you do not deliver the goods, then the bond will reimbursed the money spend opening a confirmed LC to you.
Jose E. Calderon
1) First, evaluate who is the originating client bank. Is this a little knwon or no body? Some banks are private and can be used to issue fake Letter of Credits with no money deposit.
2) Who is the advising bank? Ask your advising bank how has been relationship with this corresponcent originating bank.
3) CASH FLOW... It also rest down as to how you are willing to wait for payment. Unconfirmed means you have to wait longer becuase the advising bank will wait untill get money from the issuing bank. This can be a delay of weeks.
My experience has been that the reason your buyer send unconfirm is because it is a small order and confirmation is expensive. Depending on the situation, consider offering the 2% bond. This means that is you do not deliver the goods, then the bond will reimbursed the money spend opening a confirmed LC to you.
Jose E. Calderon
18 Mar 2009 05:41
Post 3 of 3
First and foremost, what is the purpose of confirmation? Confirming bank which confirms the credit will stand as the issuing bank the the country of the seller. Secondly, does this mean that the confirming bank will honour discrepant documents?
As a matter of principle, no bank will pay against the discrepant documents including a confirming bank, if any. Therefore, this is not the purpose of obtaining a confirmed letter of credit.
Secondly, even if the letter of credit specifically requested it to be confirmed by the confirming bank in the country of the seller, the confirming bank may advise the said letter of credit to the seller without adding its confirmation. It may sound a bit illogical, but adding a confirmation is not an obligation to the confirming bank. The confirming bank on the other hand, may add it confirmation even if the letter of credit specifically says 'without'. This practise is quite rampant purposely to collect confirmation fee.
Thirdly, as far as confirmed letter of credit is concerned, it only facilitates negotiation in the country of the seller where such negotiation undertaken by the confirming bank is without recourse to the seller. The same goes to the issuing bank in the country of the buyer.
As such, you need not worry about the payment as long as your documents are in compliance with the terms and conditions of the letter of credit.
I hope this will enlighten you on the purpose and function of confirmation in letter of credit operations.
As a matter of principle, no bank will pay against the discrepant documents including a confirming bank, if any. Therefore, this is not the purpose of obtaining a confirmed letter of credit.
Secondly, even if the letter of credit specifically requested it to be confirmed by the confirming bank in the country of the seller, the confirming bank may advise the said letter of credit to the seller without adding its confirmation. It may sound a bit illogical, but adding a confirmation is not an obligation to the confirming bank. The confirming bank on the other hand, may add it confirmation even if the letter of credit specifically says 'without'. This practise is quite rampant purposely to collect confirmation fee.
Thirdly, as far as confirmed letter of credit is concerned, it only facilitates negotiation in the country of the seller where such negotiation undertaken by the confirming bank is without recourse to the seller. The same goes to the issuing bank in the country of the buyer.
As such, you need not worry about the payment as long as your documents are in compliance with the terms and conditions of the letter of credit.
I hope this will enlighten you on the purpose and function of confirmation in letter of credit operations.
24 Mar 2009 21:01
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