Confirmed letter of credit

A confirmed letter of credit is an irrevocable credit to which a second bank, the confirming bank, adds its own firm undertaking to pay the beneficiary. This bank is usually located in the seller's country.

Confirmation is recommended in the following situations:

High country risk: political or economic instability in the buyer's country
Bank risk: issuing bank is poorly rated or unknown
Exchange restrictions: countries imposing controls on currency transfers
Large amounts: transactions exceeding normal comfort thresholds

The seller presents documents to the confirming bank, which pays directly and then seeks reimbursement from the issuing bank. The seller benefits from a local commitment in their own jurisdiction.

The cost of confirmation (0.2 % to 2 % per quarter depending on risk) is added to the L/C fees. This mechanism is governed by Article 8 of UCP 600.

Questions on this topic

is this listed on annex I?

Nécessité mise en place IST sur Delta I pour un import en 40 00 (MLP + MAC)

Qu'est-ce que le CBAM et qui est concerné ?

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