A confirmed letter of credit includes a second bank’s independent undertaking to honor a compliant presentation in addition to the issuing bank’s undertaking. Confirmation can reduce the exporter’s exposure to the issuing bank or its country, subject to the confirming bank’s terms and fees.
How is Confirmed Letter of Credit used?
The issuing bank opens the letter of credit for the buyer. A second bank adds its confirmation and undertakes to honor a complying presentation in addition to the issuing bank’s obligation. The exporter presents documents to the nominated or confirming bank, which examines them against the credit terms. Confirmation covers the bank obligation, not the quality of the goods.
What should a business document for Confirmed Letter of Credit?
Record the credit, confirmation wording, bank charges, document requirements, shipment deadline, presentation period and discrepancy decisions.
What should a business verify before relying on Confirmed Letter of Credit?
Confirmation protects against specified bank and country risks, not defective goods or documentary discrepancies.
