- the negotiating bank is not able to obtain reimbursement from the issuing bank or from the applicant, that is the buyer because they have become insolvent
- rejection of documents as a result of discrepancies in documents for which the negotiating bank is either holding an indemnity or has negotiated under reserve.
It is a norm within banking industry worldwide that banks other than confirming bank, upon receipt of the documents from the seller, would redirect the said documents to the issuing bank for payment. Once the documents are found to be in order, the issuing bank will reimburse the negotiating bank and the seller will be paid. This may take some time before the seller could get his payment because the payment is made by the issuing bank in the country of the buyer.To cut short the traveling time of the documents as well as to avoid negotiation with recourse, the seller could ask for confirmation to be added to the said LC. By doing this, seller is entitled for his payment by tendering the documents to the confirming bank in his country.