Is Single-Window LC Banking Possible and Desirable?

LC VIEWS, Special Edition, May 2005

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Question:
UCP 500 says "a credit may be advised to a beneficiary through another bank....". It also says " a confirmation of an irrevocable credit by another bank....". Further, it says "unless the credit stipulates that it is available only with the issuing bank, all credits must nominate the bank....". Meaning in one single LC transaction more than one banks may be involved, i.e. issuing bank, nominated bank, confirming bank, negotiating bank. The involvement of multiplicity of banks, or multiple LC banking windows, may lead to costs, delays and litigations. One solution to cut costs, delays and litigations could be single window LC banking in which the LC requirements are met from one single window - the single window of the issuing bank. To save costs in terms of time and money, can we think of an alternative to "another bank as advising bank" for determining apparent authenticity of an LC? Can the safeguards be built right into the LC itself for use by the beneficiary for determining its authenticity? Can issuing bank get added another bank's confirmation on LC where confirmation is required and then issue the LC instead of stipulating permission of confirmation? In short, let the LC carry confirmation instead of carrying confirmation stipulation at the time of issue. Is single window LC banking possible? Is it desirable? Does the trader like to have a nominated bank in his country or should he obviate this arrangement fort single window arrangement? Which is safe and convenient for the trader - nomination or single window? Can UCP, which allows, facilitates or necessitates, multiple window LC banking, can be revised to usher in single window LC banking. The LC VIEWS asks the LC specialists for their views on this alternative.

T. O. Lee Says

Some Articles in the UCP 500 are ...
To ..., it is important to ....
Theoretically, it is not necessary to ...
UCP 600 is not written for ... but for ...

His suggestion:

If ... is the prime objective of UCP 500 revision, then we should ...

His fears

But at the same time he fears that:

Single window concept may lead to ...

T.O. Lee FAE, MCIArb, MITD
Managing Director

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