Trade Finance
LC Confirmation from Offshore Banks (2026): How Exporters Get Confirmed LCs
A confirmed LC replaces single-bank risk with two-bank risk — the confirming offshore bank pays you even if the issuing bank in a higher-risk market does not. How to get it, what to negotiate before the LC is issued, and what banks check.
Introduction — the LC that looks funded but is not bankable
An Indian exporter receives an irrevocable LC for USD 500,000 from a buyer’s bank in Bangladesh or Nigeria. On paper the order is covered — a bank promises to pay against a complying presentation. In practice the exporter’s AD bank may be uneasy about that issuing bank’s credit standing or the country’s transfer risk, and may decline to discount the usance bill on that LC without a second bank’s undertaking. The LC is valid but not bankable for liquidity or without-recourse finance.
This is the gap LC confirmation fills — especially for higher-risk corridors such as Bangladesh, Nigeria, Burkina Faso and similar markets where country risk, bank limits or compliance friction make a single-bank guarantee insufficient for the exporter’s risk appetite. An offshore or international confirming bank adds its own payment promise on top of the issuing bank’s, turning a locally issued LC into an internationally confirmed one that is far easier to finance.
What is LC confirmation?
Under UCP 600 Article 2, confirmation is a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation. That undertaking is separate, irrevocable once added, and conditional only on a complying presentation to the confirming bank or to any other nominated bank (UCP 600 Articles 7, 8 and 12).
- Who confirms: the confirming bank — a bank that adds its confirmation to a credit upon the issuing bank’s authorisation or request (field 49 in MT700: CONFIRM as a request, MAY ADD as an authorisation). Usually an international or offshore bank in Dubai, London, Singapore or the exporter’s centre.
- What it undertakes: to honour on sight, incur a deferred-payment undertaking, or negotiate without recourse, as its confirmation requires, against a complying presentation — even if the issuing bank fails to pay or its country imposes payment restrictions.
- When it bites: only against a complying presentation within LC validity and within the 21 calendar days from shipment presentation window and all LC documentary conditions (strict compliance). Discrepant documents trigger refusal — the confirming bank’s obligation for that presentation ends unless it states otherwise, regardless of the issuing bank later waiving the same discrepancies.
- Irrevocability: a credit can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary (UCP 600 Article 10). Confirmation does not automatically extend to future amendments unless the confirming bank agrees to confirm each amendment.
Advice is not confirmation
An advising bank authenticates and advises the LC to the beneficiary but does not, merely by advising, undertake to pay. Parties often mistake a reputable advising bank’s presence for a payment guarantee — that assumption is wrong unless the advising bank has expressly added its confirmation.
Why exporters need confirmation for higher-risk markets
Confirmation is requested by the beneficiary at the pre-contract stage where the issuing bank, the issuing bank’s country or the availability of foreign exchange makes the original bank undertaking uncomfortable to carry alone. For corridors such as Bangladesh, Nigeria and Burkina Faso, four drivers recur.
| Risk driver | What the exporter worries about | How confirmation helps |
|---|---|---|
| Issuing bank risk | Ability of the issuing bank to honour its undertaking or maintain confirmation lines | Second bank’s independent obligation to honour or negotiate without recourse |
| Country risk | Transfer risk, political risk, or country-wide foreign exchange availability | Payment can be claimed on the confirming bank notwithstanding the country position, subject to sanctions law |
| Documentary risk | Issuing bank finding a discrepancy and withholding payment | Confirming bank bears documentary risk — if it finds a complying presentation it must honour even if the issuing bank later disagrees |
| Financeability risk | Exporter’s bank unwilling to discount a usance bill on that acceptor alone | Confirmed LC is discountable without recourse, often at finer pricing, because the acceptor for finance is the confirming bank |
Practical trigger
Confirmation is most relevant where the deal is large, is cross-border, and involves a jurisdiction where bank risk, country risk or compliance screening is not trivial — the exporter’s sale that looks good on paper becomes cash that actually lands where confirmation bridges the payment-risk gap.
Can an offshore bank confirm an LC?
Yes — and in many India-to-higher-risk-corridor trades it is the standard structure. An offshore confirming bank may be an international bank in a financial centre such as Dubai (often booked via a DIFC or ADGM entity), London, Singapore or another correspondent centre that holds a confirmation line on the issuing bank and the issuing country.
- No automatic confirmation: the offshore bank makes a credit decision on each LC — it must have an open confirmation line on that issuing bank and appetite for that country, tenor, currency, amount and goods, and must clear sanctions, AML and transaction bona fide checks.
- Location matters for law and screening: a London confirming bank engages English law for the confirmation undertaking and screens against the OFSI consolidated sanctions list; a Dubai confirming bank in DIFC or ADGM operates under English-law infrastructure in the UAE and screens against UAE and UN lists — build that screening time into the timeline.
- Field 49 signals intent: CONFIRM means the confirming bank is requested to add its confirmation (give it to the beneficiary together with its confirmation); MAY ADD means the confirming bank may add confirmation at its discretion upon beneficiary request, advised initially unconfirmed; WITHOUT means no confirmation requested.
- Multiple confirmations are possible: in some structures two confirming banks can chain, but each bank’s confirmation is a separate irrevocable undertaking — do not assume that advising equates to confirming in any link of the chain.
How the LC confirmation process works — step by step
- Agree confirmation at contract stage: proforma invoice and sale contract state that payment is by irrevocable LC confirmed by an offshore or international confirming bank acceptable to the beneficiary, with all LC confirmation lines, charges and tenor pre-understood.
- Buyer applies to its issuing bank: buyer requests the issuing bank to issue an irrevocable LC available with a nominated bank specified in the credit, with confirmation instructions per Field 49 — CONFIRM where the buyer wants the confirming bank to confirm outright, MAY ADD where the beneficiary will request it.
- Issuing bank issues and transmits MT700: the issuing bank sends the LC via SWIFT to the advising bank, which authenticates the message and advises the LC to the beneficiary, adding its confirmation at this stage where requested or authorised and where it is willing to confirm.
- Offshore confirming bank reviews and confirms: the offshore bank reviews the LC wording, the issuing bank, the credit line, the tenor and compliance — then communicates its confirmation to the beneficiary, typically as an advice or amendment containing the statement that it has added its confirmation.
- Exporter ships and presents a complying presentation: exporter ships strictly per LC terms and presents the invoiced documents — commercial invoice, bill of lading or airway bill, packing list, certificate of origin, insurance and any LC-specific documents — within LC validity and within the presentation period.
- Confirming bank honours or negotiates without recourse: on a complying presentation the confirming bank honours on sight, incurs its deferred-payment undertaking or negotiates without recourse as its confirmation requires, and later claims reimbursement from the issuing bank under UCP 600 and the reimbursement authorisation — the exporter is paid without resort to the issuing-bank leg.
Reimbursement path
Documents examined strictly under UCP 600 Article 14 within a maximum of 5 banking days after the day of presentation; reimbursement to the confirming bank follows under the reimbursement undertaking — document risk on a complying presentation sits with the confirming bank, not the exporter.
What banks check before confirming an LC
A confirming bank does not approve confirmation by headline country alone. It scores several layers at once — each layer can cause a decline or a pricing and tenor adjustment.
| Factor | What the bank looks at |
|---|---|
| Issuing bank | Credit quality, its own bank rating, correspondent relationships and existing confirmation-line availability on that bank |
| Country risk | Country rating, transfer risk, political risk and amount of aggregate country exposure already on the bank’s books |
| Bank limits or confirmation lines | Whether an open, partially open or closed line exists on the issuing bank or country — no open line usually means decline or a risk-sharing referral |
| LC amount | Single-ticket size relative to the line and to aggregate country or bank concentration limits |
| Currency | Currency availability and volatility for settlement at maturity |
| Tenor | Sight versus usance period — short, clean tenors are easier; long tenors or large single exposures consume more line and trigger deeper committee review |
| Underlying transaction | Goods type, trade corridor, Incoterms 2020, shipment route, transshipment permissions and performance risk |
| Exporter or buyer | Know-your-customer package for the exporter and key principals, and the buyer or applicant profile, plus prior LC discrepancy history |
| Compliance and sanctions | Sanctions-list screening by confirming-bank jurisdiction (OFSI for London, UAE or UN lists for Dubai, plus other applicable lists), vessel and port checks where relevant |
| Documentary terms | LC wording that is complete, achievable, consistent with the contract and with Form M, PAAR and the Bangladesh, Nigeria or other corridor’s import control pack where applicable |
- Confirmation is never automatic even where the offshore bank advised the LC — advising alone does not create a payment undertaking.
- Tenor and amount interact with price: a large, long-tenor LC on a weaker issuing bank consumes more capital and prices wider than a small sight LC on an accepted name.
- Practical tip: share the draft LC and the contractual pack before issuance with the confirming bank that will be asked to confirm — that early review catches impossible documentary conditions while wording is still negotiable.
How to structure the LC before it is issued
Most confirmation failures are preventable at the LC drafting stage. Get the structure right before the issuing bank issues, and the path to adding confirmation — and later to discounting — is smoother and cheaper.
- Write confirmation into the contract: state that the LC shall be confirmed by an offshore or international confirming bank acceptable to the beneficiary, and allocate who pays the confirmation charge (88), advising fee, negotiation fee and any usance or acceptance commission.
- Lock Field 49 correctly: use CONFIRM where you require outright confirmation, MAY ADD where you want the advising bank to confirm on your request, not WITHOUT — check this in the MT700 before you ship.
- Align LC wording with the issuing-country import pack: for Nigeria, Form M details, PAAR and LC description must match; for Bangladesh, Form LCAF and the LC’s HS code, description and Incoterms must mirror the importer’s registration, quantity and price data — mismatches feed discrepancies that confirmation cannot cure.
- Define availability and nominated bank consciously: state where the credit is available (for example with the confirming bank for payment or negotiation) so the confirming bank’s honour or negotiation mechanics under UCP 600 Article 8 are clear.
- Avoid impossible documentary terms: transshipment clauses must reflect the actual feeder route (for example Jebel Ali or Singapore transshipment), document lists must be completable within 21 days from bill-of-lading date, and shipment windows must be realistic — these are the most common reasons for discrepant presentations.
- Negotiate tenor for bank appetite: where the buyer needs usance but the seller wants sight cash, specify UPAS or deferred payment with discounting by the confirming bank — the seller gets sight cash, the importer repays at the deferred date, but this still needs a bank willing to fund the usance period and its length will shape confirmation pricing charged per quarter or pro-rata.
One line to insist on
Put the confirming bank’s name or an acceptable confirming-bank shortlist, the requirement to confirm, and the charge allocation in the proforma — the exporter who negotiates confirmation after the LC is already outstanding is already in a weaker bargaining position.
Can an already-issued LC be confirmed?
Yes — where the issuing bank amends the credit to authorise or request confirmation and the prospective confirming bank agrees to add its undertaking. This is common where an LC was initially advised without confirmation but market conditions or the exporter’s bank appetite now requires it.
- For MAY ADD credits: the advising bank already noted that it was authorised to add confirmation on beneficiary request — the beneficiary requests confirmation, the advising bank reviews the credit and either confirms or declines and notifies the issuing bank without delay.
- For WITHOUT credits: the issuing bank must issue an amendment authorising or requesting confirmation — all parties including the beneficiary must agree the amendment per UCP 600 Article 10 before confirmation can be added.
- Confirmation does not automatically extend to subsequent amendments — the confirming bank must review and agree to confirm each later amendment that changes amount, validity or terms; until it does, the original confirmation remains but the amendment is unconfirmed.
- Practical cost: adding confirmation late often means a new MT710 or MT707 advising message and a fresh compliance and credit check on the amendment — allow for a new fee calculation per quarter from the original LC opening date through the extended validity plus usance period.
LC advising vs LC confirmation
| Feature | Advising bank | Confirming bank |
|---|---|---|
| Main function | Authenticates and advises the credit to the beneficiary via SWIFT MT700 | Adds its own confirmation, in addition to the issuing bank’s, to honour or negotiate a complying presentation |
| Independent payment undertaking? | Usually no — without adding confirmation the advising bank does not undertake to pay merely by advising | Yes — separate, irrevocable undertaking to honour or negotiate without recourse on a complying presentation (UCP 600 Article 8) |
| Commercial relevance | Message authenticity and communication channel so the exporter knows the credit is genuine | Additional risk protection so the exporter relies on two banks, not one |
| When it matters | Always — every LC is advised | Where issuing-bank or country risk makes the original undertaking uncomfortable to carry alone |
| Becomes confirming bank? | Only if it expressly adds its confirmation upon authorisation or request — reputable advising alone does not equal confirmation | By definition upon adding its confirmation, communicated via an advice or amendment containing the confirmation statement |
Confirmed LC vs silent confirmation
A private arrangement between a bank and the beneficiary where the bank adds a conditional guarantee of payment to the beneficiary without the knowledge of the issuing bank — and without the issuing bank’s authorisation or request — is called silent confirmation. It is the flip side of confirmation, and the distinction matters for risk, cost and enforceability.
| Feature | Confirmed LC (UCP 600) | Silent confirmation (contractual) |
|---|---|---|
| Basis | Issuing bank authorises or requests confirmation via Field 49; confirming bank acts on that instruction | Beneficiary privately asks a bank to add its undertaking; issuing bank is not a party and is not informed |
| Covered by UCP? | Yes — UCP 600 Articles 2, 8 and 10 and the issuing bank’s responsibility to the confirming bank applies | No — outside UCP; anticipated only by UCP 600 sub-article 12(a) as an express agreement between a nominated bank and beneficiary |
| Issuing bank’s responsibility to confirming or silently confirming bank | Exists — issuing bank reimburses the confirming bank under the LC structure | Does not exist as a LC reimbursement undertaking — the silent confirmer’s recourse is on its private agreement with the beneficiary |
| Exporter’s added protection | Exporter can claim on the confirming bank against a complying presentation, independently of the issuing bank | Exporter can claim on the silent confirmer against the private agreement’s documentary standard — usually mirroring UCP but contractual, not a LC confirmation |
| Use case | Standard where the Lc’s Field 49 permits or requests confirmation and the issuing bank and confirming bank have a correspondence relationship | Where the issuing bank has not requested confirmation or the confirming bank does not want to act as confirming bank on that issuing bank, but will cover the exporter privately |
Practical implication
For most Indian exporters facing higher-risk corridors, a confirmed LC with an issuing-bank request is preferable to a silent confirmation because the reimbursement route to the issuing bank is embedded in the LC structure. Silent confirmation can still be useful where that route is not available, but it is priced and documented as a bilateral arrangement, not as a UCP confirmation.
Can a confirmed LC be discounted or financed?
A confirmed LC is bankable in a way an advised-only LC on a higher-risk issuing bank typically is not. Once a complying presentation is made to the confirming bank, the confirming bank’s own undertaking to honour or negotiate without recourse makes the receivable discountable without resort to the issuing bank’s leg — which is why confirmed LC discounting is usually without recourse.
- Sight confirmed LC: confirming bank honours on presentation — cash in roughly 5–10 banking days after the confirming bank determines the presentation complies within its 5-banking-day examination window.
- Usance or deferred-payment confirmed LC: confirming bank incurs its deferred-payment undertaking on a complying presentation and, where the exporter wants early cash, discounts the accepted or negotiated bill without recourse at a discount margin — collecting the full amount from the issuing bank at maturity.
- Unconfirmed LCs can also be discounted in many corridors but typically remain with recourse in Indian market practice — confirmation is what buys the risk transfer from with-recourse to without-recourse pricing on a complying presentation.
- Draft LCs under SBLC or standby structures and transferable or back-to-back LC structures follow the same confirmation logic but re-route availability — a transferable LC’s confirmation implications change once the credit is transferred; check nominated-bank availability first.
Sight vs usance — what your LC tenor costs
Sight LC vs usance LC difference, 100% LC at sight meaning and 60/90/120-day cash-flow math.
Read LC payment terms →How much does LC confirmation cost?
There is no single LC confirmation rate — the cost is a case-by-case stack: a confirmation fee typically charged per quarter or pro-rata on the LC value, plus the usual advising, amendment, SWIFT, handling and discrepancy fees, and where usance is discounted a separate discount margin on the acceptor bank’s credit plus money-market conditions.
| Charge component | Typical basis ⚠️ | Who usually pays |
|---|---|---|
| Confirmation fee | 0.2%–0.5% p.a. for low-risk bank or country; 0.5%–2.0% p.a. for higher-risk issuing bank or country such as Bangladesh, Nigeria or Burkina Faso; some schedules 0.1%–0.5% per quarter or up to 3% p.a. for thin lines — per deal, never a tariff | Exporter where confirmation is for exporter’s benefit, unless LC or contract says applicant bears all bank charges |
| Advising fee | INR 2,000–5,000 per advice or amendment; electronic versus manual tariffs differ | Exporter or as LC allocates |
| Amendment fee | Flat per amendment, plus value-enhancement commission where amount is increased | Depends on amendment type |
| SWIFT or transmission or handling | Flat per message or per set of documents | Per LC or amendment, as allocated |
| Discrepancy fee | Per set of discrepant documents | Beneficiary on discrepant presentation |
| Discount or negotiation margin where usance discounted | Discount margin on tenor plus accepting or confirming bank’s credit plus money-market conditions — indicative SBI 1-year MCLR around 7.9–8.85% June 2026 as a funding anchor; confirming-bank discount after confirmation is usually on the confirming bank’s risk | Beneficiary where early cash is taken |
- Charge structure indicative and dated September 2026 — exact price is deal-specific by issuing bank, country, tenor, currency and confirmation line availability and is confirmed only in the bank or trade-finance provider’s sanction or fee letter.
- Period for confirmation fees is calculated from the date of opening of the LC to the last date of its validity plus the usance period of the bill, with part of a month construed as a completed month in many schedules — check whether the bank measures per quarter or per annum.
- Who pays what should be addressed at contract stage: importers typically pay LC issuance commission (often 0.75%–2.0% per quarter) to their issuing bank; exporters typically pay confirmation and negotiation or discounting; SWIFT or handling is often shared per the LC’s charges clause — silence in the contract is how disputes start.
Example: Indian exporter receiving a USD 500,000 LC from Bangladesh
A Tiruppur garment exporter secures a USD 500,000 order from a Dhaka buyer who will pay by irrevocable LC at sight, valid 90 days, latest shipment 60 days from issue. The buyer’s Bangladeshi bank is not on the exporter’s AD bank’s automatic acceptance list for without-recourse discounting, so the exporter requires confirmation by an offshore bank acceptable to its financing bank — for example a DIFC or ADGM-bank or a London confirming bank.
- Proforma demands confirmation: exporter’s sale contract states that the LC shall be irrevocable, advised through a named Indian AD bank, confirmed by an offshore bank acceptable to the beneficiary, Field 49 CONFIRM, with confirmation charges for the beneficiary’s account and all charges outside Bangladesh for the beneficiary’s account — the buyer agrees and secures an LC limit with its Bangladeshi issuing bank.
- Issuing bank issues MT700: the Bangladeshi bank issues and transmits the LC via SWIFT to the offshore confirming bank with a confirmation request; the confirming bank reviews the issuing bank, country risk, LC amount and wording, and where acceptable communicates its confirmation to the exporter via the advising bank, stating that it has added its confirmation.
- Exporter ships and presents a complying presentation: exporter ships within the shipment window, prepares commercial invoice strictly matching the LC goods description, and presents the document set within LP validity and within 21 days from bill-of-lading date; the confirming bank examines under strict compliance within 5 banking days.
- Confirming bank honours without recourse: on a complying presentation the confirming bank honours on sight net of any agreed handling charges, reimburses itself from the issuing bank via the LC reimbursement path, and the exporter’s working capital is unlocked — where usance was chosen instead, the exporter could discount the confirmed usance bill without recourse at the confirming bank’s discount margin.
- What changes if confirmation is declined: if the offshore bank’s line on that Bangladeshi issuing bank is exhausted or its country appetite is closed, the exporter asks the buyer to change to a larger international issuing bank with an open correspondent line, or accepts silent confirmation where available from a willing bank, priced bilaterally rather than as a UCP confirmation, with reimbursement not flowing via the issuing bank.
Burkina Faso and Nigeria variant
For Nigeria, the same LC also needs the Form M and PAAR pack to align with the LC wording — Form M package alignment is mandatory for clean LC issuance in that corridor and LC wording that diverges from Form M drives discrepancies that confirmation cannot cure. For Burkina Faso, where confirmation lines are often thinner, offshore banks in Dubai or London frequently require a short tenor or a lower single-ticket amount, or a collateral or risk-sharing element, before pricing confirmation — segmenting buyers and tranches by ticket size often makes an LC confirmable where a single large ticket is not.
Common reasons banks reject LC confirmation
- No open confirmation line on the issuing bank or the country — the most frequent reason for higher-risk corridors; some corridors are accepted only with tight limits or short tenors, and some are closed unless a risk-sharing structure is added.
- Mismatched LC wording — beneficiary name not matching the proforma exactly, LC amount or currency not matching the Form M or LCAF pack where applicable, or latest shipment date or transshipment clause that conflicts with actual feeder routing via Jebel Ali or Singapore.
- Impossible documentary terms — a document the beneficiary cannot produce within 21 days, an insurance certificate the carrier does not issue, or a certificate of origin format not available in the exporting country.
- Tenor, amount or commodity not fitting appetite — a long-tenor LC for a capital-goods export where the confirming bank’s short-term LC desk does not handle medium-term deferred payment, or a sensitive product that triggers tighter scrutiny.
- Compliance and sanctions flags — buyer, exporter, vessel, port or goods hitting an OFSI, UAE or UN list, or a buyer or intermediary failing KYC or AML checks on the confirming bank’s jurisdiction’s rules.
- Late request for confirmation — a confirming bank asked to confirm an LC already issued with WITHOUT instructions and no import-control-pack alignment expects an amendment and a fresh credit and compliance check, which takes time and can re-price the deal.
LC confirmation checklist before you ship
- Contract states the LC shall be irrevocable, confirmed by an offshore or international confirming bank acceptable to the beneficiary, with Field 49 CONFIRM or MAY ADD, and who pays issuance, advising, confirmation, negotiation and discount charges.
- LC received via authenticated SWIFT MT700 and its fields checked before shipment: beneficiary name as on proforma, amount, currency, expiry place, latest shipment date, availability clause, nominated confirming bank availability and the confirmation added statement.
- Draft documentary pack rehearsed: commercial invoice description strictly matches LC, other documents do not conflict with LC or with each other, originals are available, and the full set fits within the LC validity plus 21 days from shipment presentation period.
- Import-control pack aligned where corridor requires it: Form M and PAAR for Nigeria or LCAF and HS code data for Bangladesh mirror the LC contract, HS code, Incoterms 2020 and unit prices — no variance that could be read as a discrepancy at examination.
- Confirming bank confirmed before cargo sails: advice or amendment stating that confirmation has been added is in hand, not merely that the LC was advised — advice without confirmation leaves single-bank risk on the table.
- Discounting plan agreed where usance or deferred payment was chosen: confirmed LC is available with the confirming bank for honour or negotiation without recourse, so the tenor, usance commission and discount margin are known, and the exporter knows whether the confirming bank will discount without recourse on a complying presentation.
Share the LC before you ship
If your buyer is in Bangladesh, Nigeria, Burkina Faso or a similar market, share the draft LC, issuing-bank details and shipment window — check whether an offshore confirming bank can add its undertaking and whether the confirmed LC can be financed, before cargo sails.
Check if LC can be confirmedFrequently asked questions
What is LC confirmation?
LC confirmation is a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation under a documentary credit (UCP 600 Article 2). When a bank adds its confirmation, it becomes irrevocably bound to pay the beneficiary without recourse against a complying presentation, even if the issuing bank fails to pay or its country blocks payment. Confirmation creates a separate, independent obligation of the confirming bank to the beneficiary and is distinct from merely advising the credit, which carries no payment undertaking.
Can an offshore bank confirm an LC?
Yes — a bank outside the issuing-bank country, often an international bank in Dubai, London, Singapore or another financial centre, can act as confirming bank where it has a confirmation line on the issuing bank and country risk appetite for those issuing-bank obligations. Confirmation is a credit decision, not automatic: the offshore bank assesses issuing-bank quality, country risk, tenor, currency, amount, documentary terms, underlying transaction and compliance screening before agreeing to confirm. No bank is obliged to confirm every LC it is asked to advise.
How can an Indian exporter get an LC confirmed?
Negotiate confirmation at the contract stage — write confirmation by an acceptable offshore or international bank into the proforma invoice and sale contract, specify Field 49 as CONFIRM or MAY ADD in the MT700, and ask the buyer to have its issuing bank request or authorise confirmation. The exporter then approaches its AD bank or an offshore confirming bank (or a trade-finance provider that routes to one) with the draft LC, issuing-bank details, buyer profile, goods, tenor and volume. The confirming bank reviews the LC against its internal limits and, if acceptable, adds its confirmation before shipment — or amends the credit to add confirmation if the LC was already issued but has not yet been utilised.
Can an LC from Bangladesh, Nigeria or Burkina Faso be confirmed?
It can, but confirmation appetite varies by issuing bank, country risk and tenor — it is not guaranteed for every bank or every LC. LCs from banks in markets perceived as higher-risk may be confirmable where the confirming bank has an open confirmation line on that issuing bank and where country risk, compliance and transaction bona fides clear screening. Some corridors price higher or require short tenors or added conditions; some issuing banks may have no open line and confirmation may be declined or available only via silent confirmation or with a risk-sharing structure. Each LC is assessed on its own wording and issuing-bank mix.
Who pays LC confirmation charges?
By UCP 600 practice and market convention, the beneficiary typically pays confirmation charges unless the sale contract or LC specifies that the applicant bears all bank charges including confirmation — the parties must agree and state it clearly in the LC (for example Field 71 charges clauses). In practice, confirmation is often for the exporter’s benefit where issuing-bank or country risk drives the need, so exporters frequently bear it, while LC issuance, advising and negotiation charges are allocated per the LC. What matters is that the contract allocates confirmation explicitly before the LC is issued.
Can a confirmed LC be discounted?
Yes. A usance or deferred-payment LC that is confirmed can typically be discounted or negotiated without recourse by the confirming bank on a complying presentation — the confirming bank honours or negotiates without recourse and then collects from the issuing bank at maturity under UCP 600 Article 8. Unconfirmed LCs can also be discounted in many corridors but remain with recourse in most Indian market practice; confirmation is what converts the discounting from with-recourse to without-recourse. Discounting is priced on the tenor, the acceptor bank’s credit and money-market conditions, separate from the confirmation fee.
What is the difference between an advised LC and a confirmed LC?
An advised LC is an irrevocable undertaking of the issuing bank that has been authenticated and passed to the beneficiary by an advising bank — the advising bank has no payment obligation merely because it advised. A confirmed LC is an advised LC to which a second bank has added its own independent undertaking to honour or negotiate a complying presentation without recourse. With an advised-only LC the exporter relies solely on the issuing bank; with a confirmed LC the exporter can claim against the confirming bank where the presentation complies, regardless of the issuing bank’s or its country’s later position, subject to document compliance.
Can an LC be confirmed after it has already been issued?
Yes, where the LC is available for amendment and the confirming bank agrees. If Field 49 was MAY ADD, the advising bank advises unconfirmed with a note that confirmation can be added on beneficiary request. If Field 49 was WITHOUT, the issuing bank can amend the LC to authorise or request confirmation — all parties including the beneficiary must agree to the amendment under UCP 600 Article 10. The confirming bank then reviews the amended credit and decides whether to add its confirmation; confirmation does not automatically extend to future amendments unless the confirming bank agrees to confirm each amendment.
What happens if the issuing bank is not acceptable to the confirming bank?
The confirming bank will decline to add its confirmation — this is common where the issuing bank, country, tenor or amount exceeds the confirming bank’s internal exposure limits, or where compliance, sanctions or documentation risk fails the bank’s checks. Options then include asking the buyer to change to a different issuing bank on the confirming bank’s approved list, routing via a larger correspondent bank in the issuing country, shortening tenor, reducing amount or tranche, using a silent confirmation where available, or requiring cash margin or a risk-sharing structure. An LC that cannot be confirmed can still be advised and used without confirmation, with recourse discounting, or replaced by a different payment instrument.