Article 11, UCP-600-Teletransmitted and Pre-Advised Credits and Amendments

A preliminary advice of a credit, known as ‘pre-advice’, rarely used now a days, such an advices were designed to provide early notice to a beneficiary that a documentary credit had been issued and that full details, in letter form, were being forwarded by airmail or courier, it may also be the case to issue a pre advice, that applicant or beneficiary are not sure for all the terms of the credit or few separate contractual terms yet to be decided between them, in that case, an operative credit may be issued at future date as early as possible. With the widespread use of the SWIFT MT700 message, the issuance of documentary credits in letter form is declining, and remains prevalent only for local or domestic transactions in which the applicant and beneficiary are located in the same country. The reason to issue a pre-advise may be that beneficiary can start preparing the goods or gets ready to ship and acquire the necessary documents to fulfil the demand for an applicant at time.

General meaning of teletransmission is transmission of data over a telecommunication system or any network, mail, couriers etc. 

Article 11, UCP-600-Teletransmitted and Pre-Advised Credits and Amendments

a. An authenticated teletransmission of a credit or amendment will be deemed to be the operative credit or amendment, and any subsequent mail confirmation shall be disregarded. If a teletransmission states "full details to follow" (or words of similar effect), or states that the mail confirmation is to be the operative credit or amendment, then the teletransmission will not be deemed to be the operative credit or amendment. The issuing bank must then issue the operative credit or amendment without delay in terms not inconsistent with the teletransmission.

An operative instrument means, workable, able to be used; in use or valid. If a credit or an amendment are issued in the form of SWIFT message or any other (paper) authenticated format (advising bank is able to satisfy authenticity via signature/superimposition/stamps etc., in case of paper credit) will be considered an operative credit or amendment and if in case issuing bank sends a postal mail or courier confirmation later on, shall be disregarded. However, if that particular teletransmission (authenticated) credit or amendment contains wording “full details to follow” or similar words or any specific sentence stating “mail confirmation is to be the operative credit or amendment” which means that the issuer itself put an inoperative clause in credit or amendment and that particular issuing bank must has to issue the separate operative credit or amendment without delay in terms not inconsistent with the one they earlier issued.

b. A preliminary advice of the issuance of a credit or amendment ("pre-advice") shall only be sent if the issuing bank is prepared to issue the operative credit or amendment. An issuing bank that sends a preadvice is irrevocably committed to issue the operative credit or amendment, without delay, in terms not inconsistent with the pre-advice.

An issuing bank must need to ensure that they are in the situation to issue the operative credit or amendment before issuing a “pre-advice” there could be many reason which an issuing bank may check, like regulatory, exposure, willingness, credit worthiness etc. of an applicant. Issuing a “pre-advice” of a credit or an amendment may be insecure for an issuing bank; that is why usually a bank neglects to avoid such an issuance. However, once an issuing bank has issued the “pre-advice” and if simultaneously does not issue in paper format then, one must have to issue it in future dated without delay and the content of a credit or amendment should not be inconsistent with the earlier issued pre-advice.

Example:

Pre-advice of a credit issued as below:

27         1/1

40A       Irrevocable

20         XX11X22X

31C       XX11X22X

40E       UCP-600

31D      XX11X22X

50         ABC LTD

59         XYZ LTD

32B       USD 50,000

41A       With any Bank BY 90 Days after B/L

49         WITHOUT

While issuing an operative credit issuing bank cannot change or amend any of the above field used in pre-advice, however, they may add other fields or additional details to support this documentary credit.

An issuing bank may also use “field 23” Reference to Pre-Advice in MT 700 while issuing an operative credit. This is an optional field and gives a reference to the pre-advised letter of credit, only if a pre-advised credit has been previously sent to the beneficiary. In most cases this field is not utilized.

A preliminary advice of the issuance of a credit or amendment (“pre-advice”) shall only be sent if the issuing bank is prepared to issue the operative credit or amendment because an issuing bank that sends a pre-advice is irrevocably committed to issue the operative credit or amendment, without delay, in terms not inconsistent with the pre-advice.

One of the reason could be to issue a pre-advice in SWIFT format stating “consider mail confirmation or paper credit as an operative credit” usually a SWIFT message (MT705) may be transmitted immediately wherein the following mail confirmation may take a week or more to be received so in that case, beneficiary can get ready for their performance well before receiving an operative credit.

Usually MT705 SWIFT Message is used for pre-advice.