Clause a
Clause: 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.
Explanation: An advising bank acts as an intermediary that passes the credit and any amendments to the beneficiary. If the advising bank is not a confirming bank, it does not provide any guarantee or obligation to honor or negotiate the credit; it simply forwards the information received from the issuing bank to the beneficiary.
Example: Bank A (the issuing bank) issues a letter of credit for $100,000 to Beneficiary X. This credit is sent through Bank B (the advising bank). Bank B, which is not confirming the credit, forwards this letter of credit to Beneficiary X without any promise to pay the $100,000 itself.
Clause b
Clause: By advising the credit or amendment, the advising bank signifies that it has satisfied itself as to the apparent authenticity of the credit or amendment and that the advice accurately reflects the terms and conditions of the credit or amendment received.
Explanation: When the advising bank forwards the credit or amendment to the beneficiary, it indicates that it has verified the apparent authenticity of the document and confirms that the details provided to the beneficiary match those received from the issuing bank. However, advising bank does not verify genuineness of the LC. “Apparent authenticity” means that the letter of credit should appear to look authentic from the face. If LC is transmitted through swift then authenticity automatically verified by checking if it is received in MT700 format and in swift application as this application is secured.
Example: Bank B receives an amendment to the letter of credit from Bank A. Before advising Beneficiary X, Bank B checks the authenticity of the amendment and ensures that the details match those sent by Bank A. Once verified, Bank B advises Beneficiary X of the amendment.
Clause c
Clause: An advising bank may utilize the services of another bank (“second advising bank”) to advise the credit and any amendment to the beneficiary. By advising the credit or amendment, the second advising bank signifies that it has satisfied itself as to the apparent authenticity of the advice it has received and that the advice accurately reflects the terms and conditions of the credit or amendment received.
Explanation: An advising bank can use a second advising bank to forward the credit or amendment to the beneficiary. The second advising bank must also verify the authenticity of the document it received and ensure the details are accurate before advising the beneficiary.
Example: Bank A issues a credit and sends it to Bank B, which then uses Bank C (second advising bank) to advise Beneficiary X. Bank C verifies the authenticity of the document received from Bank B and advises Beneficiary X.
Clause d
Clause: A bank utilizing the services of an advising bank or second advising bank to advise a credit must use the same bank to advise any amendment thereto.
Explanation: If an issuing bank uses an advising bank or a second advising bank to advise a credit, it must use the same advising bank for any subsequent amendments to that credit to ensure consistency and reliability in communication.
Example: Bank A issues a credit through Bank B to Beneficiary X. Later, if there is an amendment, Bank A must again use Bank B to advise Beneficiary X of this amendment.
Clause e
Clause: If a bank is requested to advise a credit or amendment but elects not to do so, it must so inform, without delay, the bank from which the credit, amendment or advice has been received.
Explanation: If a bank chooses not to advise a credit or amendment, it must promptly notify the bank that sent the credit or amendment of its decision not to advise it. This ensures transparency and allows the issuing bank to take necessary actions. Please note here the word “immediately” is not defined anywhere about how long it means. So we need to consider this as soon as possible.
Example: Bank B receives a credit from Bank A but decides not to advise it to Beneficiary X. Bank B promptly informs Bank A of its decision not to advise the credit.
Clause f
Clause: If a bank is requested to advise a credit or amendment but cannot satisfy itself as to the apparent authenticity of the credit, the amendment or the advice, it must so inform, without delay, the bank from which the instructions appear to have been received. If the advising bank or second advising bank elects nonetheless to advise the credit or amendment, it must inform the beneficiary or second advising bank that it has not been able to satisfy itself as to the apparent authenticity of the credit, the amendment or the advice.
Explanation: If an advising bank cannot verify the authenticity of the credit or amendment, it must inform the bank that sent it. If the advising bank still decides to advise the credit or amendment, it must notify the beneficiary or second advising bank that it could not confirm the authenticity.
Example: Bank B receives a credit from Bank A but is unsure of its authenticity. Bank B informs Bank A of this uncertainty. If Bank B decides to advise the credit despite this, it must inform Beneficiary X that it could not verify the credit’s authenticity.