A Confirmed Letter of Credit (Confirmed L/C) refers to another bank (the confirming bank), other than the issuing bank, which, at the request of the issuing bank, adds its confirmation to an irrevocable letter of credit and undertakes to assume payment liability independently of the issuing bank. Usage scenarios: When the beneficiary has doubts about the creditworthiness of the issuing bank or the political and economic risks of the issuing country, it may request the issuing bank to have a reputable bank (usually the advising bank or a bank in the exporter's country) confirm the credit, thereby obtaining dual payment protection. Points to note: The confirming bank assumes an independent payment liability rather than a guarantee liability, and its payment obligation does not depend on whether the issuing bank pays; after making payment, the confirming bank has recourse against the issuing bank. The difference from an unconfirmed letter of credit is that an unconfirmed letter of credit is payable only by the issuing bank, and the beneficiary bears the risk of the issuing bank; compared with a revocable letter of credit, a confirmed letter of credit must be irrevocable. In addition, the confirming bank usually charges a confirmation fee, and the confirmation is irrevocable and may not be amended or revoked without the consent of the confirming bank.
📝 Examples
1. Due to the high political risk in the country where the issuing bank is located, we require the counterparty to open an irrevocable letter of credit confirmed by Citibank Shanghai Branch to ensure safe receipt of payment. (Note: In countries with high political risk, the confirming bank is used to reduce the risk of payment collection.)
2. This confirmed letter of credit is confirmed by the advising bank. The confirming bank undertakes to pay independently when the documents comply with the terms. Even if the issuing bank refuses to pay, we can still obtain payment from the confirming bank. (Note: The confirming bank assumes independent payment responsibility, providing dual protection.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
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