How Is Unconfirmed Letter Of Credit Confirmed?


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Lily James answered
An unconfirmed letter of credit is basically when the letter of credit has the guarantee of only the issuing bank. The function of the advising bank in this case is only to provide exporter about the terms and conditions of the Letter of Credit and it does not add its obligation to pay.

On the other hand, a confirmed letter of credit has the guarantee of the advising bank as well. The letter of credit is routed through the advising bank with its undertaking that the beneficiary will pay according to the terms of the LC.

Now it is very simple to change the status of the Letter of Credit. The buyer takes the guarantee of another bank which is mostly the advising bank itself. They advising bank adds on its undertaking that the payment and supply will be made according to terms. The advising bank in return is paid service fees.

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