LC SWIFT Format: Field 41D (Available with...by...)

Field 41D (Available with…by…) is a mandatory field which must present. ‘Available with’ refers to the bank which is a nominated bank, in the country of the seller, authorized by the issuing bank to make payment to the seller. The name of this bank must be expressly indicated either by indicating its’ Bank Identifier Code, which is the SWIFT address or the full name and address of that particular bank. In most cases, this bank is the correspondent bank of the issuing bank and normally an advising bank. However, it could also be the issuing bank which is in the country of the buyer.

For example, the nominated bank is Citibank N.A. London. It can be identified as CITIGB2L, which is the SWIFT address of Citibank, London. This is option ‘a’ for field 41 (41a).

The other option is to indicate the nominated bank under this field by expressly indicates the name of the bank with the full address. For example,

Citibank N.A.,
No 88, The Strand,
London WC2R 0DW.

This is option ‘D’ for field 41 (41D).

In the case where the LC is made available by ‘freely’ negotiation or ‘non-restricted’ negotiation, the nominated bank would not be named. This field will be indicated with ‘any bank’. This wording, ‘any bank’ refers to any bank in the country of the seller which is willing to take up the documents and negotiates. Seller may present the documents to any bank of his choice in his country. If the seller decides to present the documents to Union Bank of California, New York instead of his other bank, Chase Manhattan, New York, The Union Bank of California, New York is deemed to be the nominated bank (Article 2, UCP600).

The word ‘by’ here refers to the availability of the LC, either by payment, acceptance, deferred payment or by negotiation. If the LC is made available by payment, acceptance, deferred payment or ‘restricted’ negotiation, the name of the nominated bank must be expressly indicated under this field either using option ‘a’ or option ‘D’.

One of the following codes must be indicated under 'by...':

BY ACCEPTANCE

BY DEF PAYMENT

BY MIXED PYMT

BY NEGOTIATION

BY PAYMENT

LC SWIFT Format: Field 50, 59 and 32B

Field 50 (Applicant) is another mandatory field which requires bank to expressly indicate the name of the applicant or buyer together with the address. (Sample of LC issued: SWIFT Format).

Field 59 (Beneficiary) is also a mandatory field where the the name of the buyer is to be indicated with full address.

Field 32B (Currency Code, Amount) is where the amount of the credit should be indicated. The currency code used in this field is ISO approved codes such as GBP (Great Britain Pound), USD (United States Dollar), MYR (Malaysian Ringgit), NLG (Netherland Guilder), FRF (French Franc), HKD (Hong Kong Dollar), SGD (Singapore Dollar), EUR (Euro) etc. This field is a mandatory field.

LC SWIFT Format: Field 31D (Date and Place of Expiry)

Next field is field 31D (Date and place of expiry). As I mentioned in the earlier post (SWIFT Format: part 3), the date format is written as yy/mm/dd. For example, the date is indicated as 070424, the date is read as April 24th, 2007.

The additional information here is, the name of the country where the LC is to expire must also be indicated, for example, Malaysia, United Kingdom, United States of America etc. It is only the name of the country should appear in this field, name of district should not be indicated.

It is a practice in international trade, where the place of expiry is normally in the country of the seller. This is so because, it provides some cushion to the seller where seller has longer time frame to prepare the goods for shipment, obtain related documents, conduct pre checking of the document to ensure consistency and present them to his bank.

There are also cases where the place of expiry is in the country of the buyer. But this is very rarely. This would shorten some time for the seller to get things ready and present the documents. In this case, the LC must reach the issuing bank which is in the country of the buyer before the expiry of the LC. The time taken for the documents to travel by air courier to the final destination is an additional factor to be considered.

Whereas, if the LC is to expire in the country of the seller, the documents must reach the nominated bank in the country of the seller before the expiry of the LC.

Today, to keep up with the vast global development in trade, most LCs is issued available with any bank by negotiation and place of expiry is always in the country of the seller.

LC SWIFT Format: Field 40E (Applicable Rules)

The next mandatory field is field 40E (Applicable Rules) which must present in every LC issued. This field is customarily indicated by the issuing bank which corresponds to the type of the LC issued, either commercial LC or standby LC. This field must contain one of the following codes:

EUCP LATEST VERSION

The documentary credit is subject to the version of the supplement of the ICC Uniform Customs and Practice for Documentary Credits for Electronic Presentations, International Chamber of Commerce, Paris, France, which is in effect on the date of issue.

EUCPURR LATEST VERSION

The documentary credit is subject to the version of the supplement of the ICC Uniform Customs and Practice for Documentary Credits for Electronic presentations and the version of the Uniform Rules for Bank-to-Bank Reimbursements.

ISP LATEST VERSION

The standby letter of credit is subject to the version of the ICC International Standby Practices, International Chamber of Commerce, Paris, France, which is in effect on the date of issue.

OTHR

The credit is subject to any other rules.

UCP LATEST VERSION

The documentary credit is subject to the version of the ICC uniform Customs and Practice for Documentary Credits, International Chamber of Commerce, Paris, France, which is in effect on the date of issue.

UCPURR LATEST VERSION

The documentary credit is subject to the version of the ICC Uniform Custom and Practice for Documentary Credits and the version of the Uniform Rules for Bank-to-Bank Reimbursements.

The incorporation of either of the codes mentioned above into the LC forms the text of the LC and therefore governs the LC primarily, but of course not solely. Such incorporation will also form a parol of evidence rules in the court of law. Courts and arbitration tribunals applies the UCP because it is the most universally followed set of customary documentary credit rules. However, it does not prevent a court from applying its country’s national law.

For the purpose of this example, which refers to commercial letter of credit, the appropriate code to be incorporated is UCPURR LATEST VERSION or to indicate the full narration only instead of the code.

LC SWIFT Format: Field 20 (Documentary Credit Number)

Next MT700/701 field is field 20, Documentary Credit Number. This field is a self explanatory field. Every LC issued by the issuing bank must bear an ‘identity’ which is recognizable by the LC number. This LC number is a unique number assigned to an LC where every LC issued bears a different LC number.

LC number or identity is normally computer generated or in some banks the number is manually assigned by the issuing bank. It is a combination of alphabet and numeric characters subject to a maximum of 16 characters. The presence of this field is mandatory.

This number will be used as a reference number for payment, enquiry and amendment, if there is any which refers to that same LC. It carries important implications to the whole LC operations. There are cases where multiple LCs issued by the same issuing bank, at the request of the same buyer, addressed to the same seller, with the same amount and same currency. Therefore, the only way to identify which LC is to be paid, accepted or negotiated is by identifying the LC number.

Field 31C (Date of issue) on the other hand, signifies the date on which the LC is issued by the issuing bank. The undertaking to make payment by the issuing bank takes effect from this date. This field must contain 6 numeric characters only with no alphabet in the following manner, yy/mm/dd. For example, if the date is indicated as 070104, it is read as January 04th, 2007.

This date format is also applied to field 31D (Date and place of expiry) and field 44C (Latest date of shipment).

LC SWIFT Format: Field 40A (Form of Documentary Credit)

The second field in MT700/701 is field 40A. This is also a mandatory field where it must present and must be expressly stated to indicate the form of the Documentary Credit or LC. This field must contain one of the following codes:

IRREVOC TRANS STANDBY – The standby letter of credit is irrevocable and transferable

IRREVOCABLE – The documentary credit is irrevocable

IRREVOCABLE STANDBY – The standby documentary credit is irrevocable

IRREVOCABLE TRANSFERABLE – The documentary credit is irrevocable and transferable

REVOCABLE – The documentary credit is revocable

REVOCABLE STANDBY – The standby documentary credit is revocable

REVOCABLE TRANSFERABLE – The documentary credit is revocable and transferable

Article 3 of UCP600 stated that “…a credit is irrevocable even if there is no indication to that effect”.

This article says that, if none of the above codes are expressly indicated in field 40A of the SWIFT format, the LC is deemed irrevocable. Since field 40A is a mandatory field, it is a practice by banks worldwide to expressly indicate a code under this field. Article 3 of UCP600 is merely discouraging the practice of issuing a revocable LC to protect the interest of the seller. But this does not however, prohibits the practice of issuing a revocable LC. By virtue of article 1 which says, “…they are binding on all parties thereto unless expressly modified or excluded by the credit”.

This article allows both parties to modify or exclude some or part of the articles where a revocable LC may be an option.

LC SWIFT Format: Field 27 (Sequence of Total)

As I mentioned in the previous post, LC is a message containing ‘to do list’, information, instruction which forms what is called terms and conditions. As LC is practiced worldwide, the terms and conditions expressly indicated must be arranged in a systematic order so as not to raise any misunderstanding and confusion. Therefore, they are arranged in a sequence order applied worldwide in a format developed by Society for Worldwide Interbank Financial Telecommunication or in short, SWIFT. LC messages travel from bank to bank electronically and finally delivered to seller in hard copy. There are various SWIFT Message Types (MT) used for a different purposes:

Category 0 – Financial System Messages
Category 1 – Customer payments & Cheques
Category 2 – Financial Institution Transfers
Category 3 – Treasury
Category 4 – Collection & Cash Letters
Category 5 – Securities
Category 6 – Treasury Markets
Category 7 – Documentary Credits & Guarantees
Category 8 – Travellers Cheque
Category 9 – Cash Management & Customer Status

LC is issued using MT category 7, which is specifically known as MT700/701 comprising an assigned sequence ‘fields’.

The first field of MT700/701 is field 27 (sequence of total). This field requires only number or figure to be indicated without alphabet and this field is a mandatory field. In other words, it must present and must be indicated. This field represents number of message and total number of messages.

For example, if 1/1 is indicated, it means that this is the only message in one page. 1/2 indicates that this is the first message of a total of 2 messages. In this case, the receiving bank must ensure that it receives both of the messages marking 1/2 and 2/2 under field 27. This is very important because LC carries monetary value and failure to receive all messages would caused unnecessary problem. In some instances, the message can be more than 3 pages.