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LC ACKNOWLEDGEMENT

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Wed, 02/09/2011 - 02:49
Kitan
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Dear all,

I would need your prompt answer if possible.

Could L/C be considered LIVE or in function, if the advise through bank hasn't sent acknowledgement back to the issuing bank. This is all made by SWIFT.

 Thanks in advance.

‹ Mark to Market DIFFERENCE BETWEEN BANK GUARANTEE AND STANDBY LETTER OF CREDIT ›
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Wed, 02/09/2011 - 05:52
#1
prem_kumaran
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LC ACKNOWLEDGEMENT

Hi,

I don't get the meaning of LC considered 'live'. If you intend to mean is the LC operational, yes, Until the LC expiry, the L/C is not dead . Else it has to be cancelled with the consent of issuing bank, confirming bank if any and beneficiary.

The L/C is operational as of the time it is issued by the issuing bank and the issuing bank's undertaking to pay the beneficiary(till the expiry) is of the moment it issues the credit. This undertaking to pay is not dependent on whether the acknowledgement has been received from advising bank(Think you have used advise through)

Why would 'advising through bank' send an acknowledgement to a bank from whom it has not received the credit directly. It would have received the LC in MT710 format from the first advisng bank and not MT700 from the issuing bank.

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Thu, 02/10/2011 - 00:57
#2
Kitan
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Hi, Thanks for your reply.

Hi,

Thanks for your reply. Yes, I meant operational, but does the advising bank has an obligation to reply to the issuing bank with MT 730 acknowledgement, as a way the LC is to be considered accepted from both sides.

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Thu, 02/10/2011 - 03:46
#3
Abrar
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MT730

The short answer is, no. There is no obligation.

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Wed, 02/09/2011 - 03:33
#4
Creromagna
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Joined: 09/29/2008
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in my opinion

this is irrelevant. If the credit is not confirmed, the only engagement is by the issuing bank towards the beneficiary,and the only duty of the advising bank is to advise the credit, and to inform the issuing bank if they cannot do that.Then in my opinion lc is valid since the swift network has acknowledged the MT700 message. You should consider that banks in east asia are used to advise the beneficiary directly,whichever the advising bank you have requested in field 57,so it is also possible that the bank stated in that field is not informed about the credit

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