LC Confirmation has the advantage that the payment obligation of the confirming bank is freelance of the supply bank. Consumers might get injunctions against the supply bank in their home country to stop the bank from compliance the LC. Getting associate injunction in an exceedingly foreign country is harder.
Silent LC confirmation is taking risk by a bank in export country towards a bank supply a documentary credit situated in import country. Usually a confirmation is requested between the documentary credit terms, in Swift MT 700 in field forty nine by indicating make sure or might ADD. Some bank and a few Countries forbade confirmation, by political, legal spiritual grounds. During this case the bourgeois can raise a bank in his Country to require a risk by silent confirmation. The documentary credit are going to be handled sometimes, however the bourgeois are going to be guaranteed to get the return, naturally against compliant documents.
The documentary credit beneficiary has another opportunity; the appointed bank may notice another bank that insures the bank and therefore the Country against economic condition. This bank can "protect" and can intervene just in case of bank or Country default. This can be a DEL CREDERE cowl. Distinction from silent confirmation is that the appointed bank can act sometimes, by giving notice that everyone is ok.
LC Confirmation, customary Example:
1) vendee and marketer sign a procurement contract that stipulates payment by letter of credit. it's smart follow to agree already within the contract that documents the Seller/Beneficiary needs to gift.
2) The Buyer/Applicant goes to his bank (so known as issue bank) gap the credit to the good thing about the vendor, specially the client tells his bank that documents the Beneficiary needs to gift, wherever and the way, and therefore the quantity of the credit and details of payment (by sight, postponed sight payment, against acceptance or negotiation of drafts).
3) The issue Bank that is often situated in a very foreign country advises the Beneficiary through a correspondence bank situated within the country of the Beneficiary of the credit. Therefore in step # three, the issue Bank problems the L/C and forwards it to the Advising Bank.
4. The Advising Bank checks the apparent believability of the L/C and advises the L/C to the Beneficiary
5) The Seller/Beneficiary checks if the L/C complies with the industrial agreements and if all terms and conditions per the L/C are often happy, then the vendor ships the products
6) The Beneficiary assembles the documents per the L/C Confirmation, checks the documents for discrepancies with the L/C, attracts the draft and presents the draft and therefore the documents to the Advising Bank and presents the required documents to his native bank that pays him once examining them.
7) The Advising Bank bears the draft and therefore the documents against terms and conditions of the L/C and forwards them to the issue Bank
8. The issue Bank checks if the documents accommodate the L/C and makes a payment forthwith (if the L/C is offered by sight) or on an exact date (if L/C is offered by postponed payment).