l> Letter of Credit - Advised vs.
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LETTERS OF CREDIT- ADVISED vs. CONFIRMEDThe letter of credit transaction usually involves two banks: the buyer"s ngân hàng issuing the letter of credit và a ngân hàng in the seller"s country, which advised the letter of credit khổng lồ the beneficiary. The advising ngân hàng may also assume the role of confirming ngân hàng. Whether advising and/or confirming, the seller"s ngân hàng assumescertain responsibilities.AdvisingAn advising ngân hàng acts as the agent of the issuing bank. The function of the advising bank is lớn take reasonable care khổng lồ verify the authenticity of credits received và then accurately transmit them to their beneficiaries. When advising a letter of credit, the bank assumes no other liability. On receipt of the documents for examination and payment, the advising ngân hàng will pay the seller only if it has received good funds from the issuing bank, even if it was specifically named as paying bank in the letter of credit.ConfirmationBy confirming a letter of credit, the advising or another ngân hàng assumes the same responsibilities as the issuing ngân hàng, including the obligation khổng lồ pay against presented documents if they are in order & all of the letter of credit terms are met. In effect, the beneficiary has the individual promise of two banks to lớn pay against conforming documents; the issuing bank và the confirming bank.How is a Letter of Credit Confirmed?When negotiating the terms of sale, the seller would require a letter of credit requesting the advising ngân hàng lớn add its confirmation. The buyer includes this request when submitting the application for L/C issuance to lớn his bank. In most instances the issued credit states: "Please advise beneficiary adding your confirmation" or words to lớn similar effect. Note: This is a request, not a requirement. The advising bank for various reasons may decline khổng lồ add its confirmation and simply advise the L/C without engagement onits part. When adding confirmation, typical language included in the cover letter would be, "We hereby confirm this credit và thereby undertake that all drafts drawn under, & in strict compliance with the terms stated therein (và any further terms stated herein) will be duly honored on presentation & delivery of documents as specified, if presented, at this office on or before the expiry date."Why Request Confirmation?The beneficiary may have sầu concerns about the political or economic stability of the buyer"s country, or the strength và reputation of the issuing ngân hàng. Confirmation by a ngân hàng known và convenient to the seller promotes the commercial utility of letters of credit. Also in the sự kiện of a dispute, jurisdiction will be determined by the confirming bank"s location. | ||