1) Confirmation of Letter of Credit
Confirmation of letter of credit may be caused by the beneficiary’s dissatisfaction with the credit standing of the issuing bank, or by the issuing bank’s active request. However, in any case, only the issuing bank has the right to instruct another bank to add confirmation to the letter of credit. The bank that receives the invitation for confirmation should decide whether to confirm based on the credit standing of the issuing bank and its relationship with the bank. Once a confirmation is made, the confirming bank shall bear the same primary payment responsibility to the beneficiary as the issuing bank, without recourse. If the confirming bank cannot obtain reimbursement from the issuing bank, it will be in a very passive and unfavorable situation. Because the confirming bank has no contractual relationship with the applicant for the letter of credit, it cannot force the applicant to pay for the redemption of the bill. It can only deal with the bills and goods, or make a claim for repayment against the issuing bank as a creditor of the issuing bank. Therefore, banks generally only provide confirmation for letters of credit opened by affiliated banks or agency banks with which they have a good business relationship.
2) Amendment of Letter of Credit
If the beneficiary is dissatisfied with the terms of the letter of credit, he may request the issuing bank to make an amendment through the applicant, or the applicant may take the initiative to make an amendment. But no matter who proposes it, in the current situation where irrevocable letters of credit are widely used, each amendment must be unanimously agreed by the issuing bank, the beneficiary and the confirming bank (if any) before it can take effect. If the issuing bank does not agree to amend the letter of credit, it will refuse to issue the amendment, but once it agrees and issues the amendment, it will be bound by it. Since it is not clear whether the beneficiary will accept the amendment at this time, the issuing bank must make two preparations: if the beneficiary accepts, the document will be examined according to the amended terms of the letter of credit; if the beneficiary refuses, the document will be examined according to the original terms of the letter of credit. In addition, the issuing bank must also notify the amendment of the letter of credit through the original notifying bank, otherwise the issuing bank shall be responsible for the consequences arising therefrom. If the letter of credit is confirmed, and the confirming bank is not the notifying bank, the issuing bank must also notify the confirming bank of the amendment. If the confirming bank agrees to the amendment, it will extend its confirmation liability to the amendment letter and, like the issuing bank, be prepared to assume liability according to the original terms or the amended new terms. If the confirming bank disagrees with the amendment, it should immediately notify the issuing bank and the beneficiary, and the confirming bank will not be bound by the amendment. If the beneficiary wants to continue to enjoy the protection of the confirmation, it must handle the letter of credit business according to the original terms.