Trade Finance Expertise

Once a credit is issued by an issuing bank and advises by advising bank to the beneficiary; beneficiary must need to check the terms and conditions of the credit which should be as per pre-decided sales contract between beneficiary and applicant, if it doesn’t meet the beneficiary pre-agreed terms through sales contract; they may ask applicant to modify the same by an amendment. A bank previously agreed to issue a credit at the request of its customer does not mean that it is required to amend it as requested by that customer, there is no obligation to an issuing bank to issue the amendment and that is their sole discretion. For example, a customer may submit a request for an amendment that does not meet bank policy or which contravenes the applicable regulatory requirements. Sometimes bank may also chose not to extend further credit to its customer by increasing the amount of the documentary credit or extending its validity or by agreeing to extend the payment terms. Article 10 of UCP

An ‘advising bank’ is the bank that advises the credit or amendment upon request of an issuing bank.  For an international transaction, an issuing bank will usually electronically transmit a documentary credit to a bank in the beneficiary’s country with which it maintains a correspondence  banking relationship, requesting to advise it to the beneficiary. A documentary credit is sent to an advising bank usually in the form of MT700 (SWIFT) but it could also be transmitted by telex, fax, email or letters, depending upon the arrangements that are in place between the two banks for advising of an amendments and credit. Article-9, UCP-600 a. A credit and any amendment may be advised to a beneficiary through an advising bank. An advising bank that is not a confirming bank advises the credit and any amendment without any undertaking to honour or negotiate. A credit and any amendment may be advise to a beneficiary directly or through an advising bank, in most of the cases it is an usua

A bank that adds its confirmation to a documentary credit, upon the authorisation or request of an issuing bank which provides a beneficiary with an additional irrevocable and independent undertaking to cover the credit risk of an issuing bank and their country, difference between an issuing and confirming bank’s undertaking are, an issuing bank bears the credit risk of applicant and confirming bank bears the credit risk of issuing bank, an issuing bank only honours the complying presentation wherein a confirming bank may negotiate as well. It is common for a confirming bank to also act in the role of an advising bank and nominated bank, but this is not an absolute requirement of UCP 600. Because an issuing bank issues an irrevocable undertaking and liable to honour the complied presentation from or on behalf of beneficiary, cannot negotiate, wherein, a confirming bank issues similar separate undertaking by confirming the credit, however,  this article of UCP 600, provides an advanta

Issuing Bank (basically applicant/mporter’s bank) is the bank who opens Letter of credit  on behalf of applicant (importer/buyer) and takes responsibility to make the payment upon receipt of complied documents from beneficiary (exporter/seller) or on behalf of the beneficiary by their bank, an issuing bank may open letter of credit for themselves on their own behalf as well. Article 7 of UCPDC 600:   a. Provided that the stipulated documents are presented to the nominated bank or to the issuing bank and that they constitute a complying presentation, the issuing bank must honour if the credit is available by: An issuing bank issues an undertaking in form of letter of credit to honour the complied presentation, they must have to honour as per availability term given in field 41a of letter of credit, point to remember here that beneficiary has always an option to bypass nominated bank and present documents directly to issuing bank as nominated bank concept is to make beneficiary life easi

a. A credit must state the bank with which it is available or whether it is available with any bank. A credit available with a nominated bank is also available with the issuing bank. Field 41a Available With … By … is a field in MT 700 swift message type that is used to identify the bank with which the credit is available (the place for presentation) and indicates of how the credit is available. This is a mandatory field, which means that it must be stated in all of the letters of credit issued via MT 700 swift format. This is designed in a way to help the beneficiary to present the document at their convenience before or well within presentation period mostly in their country itself to avoid the late presentation and get paid early or at time. Last sentence says that credit is always available with issuing bank and nominated bank may be bypassed if beneficiary wants to present document directly to the issuing bank as the final liability of the credit is on opening bank only and the

  Article-4 Credits v. Contracts   -a. A credit by its nature is a separate transaction from the sale or other contract on which it may be based.  Banks are in no way concerned with or bound by such contract, even if any reference whatsoever to it is  included in the credit. Consequently, the undertaking of a bank to honour, to negotiate or to fulfil any other  obligation under the credit is not subject to claims or defences by the applicant resulting from its  relationships with the issuing bank or the beneficiary. Explanation: Let’s first understand what are credit and contracts, letter of credit is one of the payment method in trade business, sales contracts is a written consent between importer and exporter when there is a trade going to take place, these contracts will include that, what, when and how will be done and both parties remain agree with those terms. That is one of the main reason we mostly look for a copy of sales contracts, purchase order or profroma invoice (will

Where applicable, words in the singular include the plural and in the plural include the singular. We can accept the document if given in singular in letter of credit and presented documents shown as plural or vice versa, however, that should not change the meaning of the word.   -A credit is irrevocable even if there is no indication to that effect. It says that even if we don’t mention in field 40A of letter of credit as “irrevocable” it will deemed to be irrevocable and can’t be cancelled or amended without the consent of all the parties of the letter of credit.   -A document may be signed by handwriting, facsimile signature, perforated signature, stamp, symbol or any o ther mechanical or electronic method of authentication. Let’s first understand what facsimile and perforated signature is- Facsimile:  a facsimile signature means the reproduction by engraving, imprinting, stamping, or other means of the manual signature, we can refer in below example: Perforated signature: sig