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Confirmation

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Thu, 10/16/2008 - 00:51
tsotetsit
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Greetings to all,

I am Tsepo from South Africa, I find this site very useful and will be engaging from time to time,

Given the current global financial crises and credit crunch, where an affected Bank had issued an unconfirmed documentary credit - what's the beneficiary recourse when compliant documents are presented?

Secondly, in a sight confirmed documentary credit ,when is payment due, is it upon presentation of compliant documents to the confirming bank OR upon presentation of compliant documents upon receipt of reimbursement from the reimbursing bank but not later than stipulated reimbursement period?

My understanding is that essentially confirmation does not guarantee immediate payment but only non payment by the issuing bank,

Hoping to hear from you,

‹ Insurance (ICC A & B) THE ADVISING BANK REPORTS THAT THE LC IS NULL AND VOID ›
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Sun, 07/18/2010 - 23:59
#1
jack skellington
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Joined: 07/18/2010
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Nice post about

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Fri, 07/23/2010 - 02:31
#2
phoenix
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Joined: 07/23/2010
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lend today

Does anybody know where I can ask this (another forum?) Gucci handbags it still carry the same meaning i.e we can't claim more than the LC value. Gucci bags not exceeding' and left blank, can beneficiary drawn a larger amount? Gucci outlet any additional costs due to events Tiffany Jewellery makes a partnership men gucci shoes

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Thu, 10/16/2008 - 14:21
#3
LC Sam
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Joined: 08/09/2007
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Welcome to the Forum

Greetings Tsepo,

Welcome to the forum. 

I will try to answer both of your questions.

Under any unconfirmed documentary credit, the beneficiary has no additional recourse other than the issuing bank under the letter of credit, unless the effective bank is taken over (purchased) by another bank. In this case, the beneficiary would still have recourse to the new bank.

The beneficiary still has recourse on the applicant under the original sales agreement, even if the issuing bank fails. That is however outside of the scope of the letter of credit. 

You must also remember that the availibility of documents may also be in favor of the beneficiary. If the applicant needs to get the documents in order to get the goods, then the beneficiary may be able to do a documentary collection with a surviving bank.

 

Now for the confirmed letter of credit question.  Payment timing by a confirming bank will be at the discretion of the confirming bank.  This should be spelled out in the confirmation letter from the confirming bank. It should not be only upon receipt of funds, but may be delayed for the "normal" receipt of funds. By this I mean that if the reimbursement clause states that the letter of credit will be paid in 3 days, then I would expect to be paid in 3 days. 

You are correct in that the confirming bank must pay in the event of non-payment of the issuing bank for credit conforming documents. However, the confirming bank guarantees payment according to their terms of confirmation.  So if there is a delay in payment, say the reimbursing bank does not have a reimbursement authorization, the confirming bank should pay within a reasonable time as if there was a reimbursement authorization.

I hope this helps you out.

 

LC Sam

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