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Effectiveness Date of an Amendment
 
Understanding effectiveness date of an amendment.














Related Pages: Partial Acceptance of Amendments

Vincent from Canada is asking a question regarding the effectiveness date of an amendment. 

Here is his question as arrived from my e-mail. 

If the bank issues an amendment directly to the beneficiary decreasing the letter of credit amount without indicating an effective date for the amendment, is the decrease effective the date the amendment is issued or is the decrease effective the date the beneficiary agrees to the amendment. What is your opinion, with of course no responsilibility for providing such an opinion.
 
regards
Vincent 


Dear Vincent ,

In order to find the right answer to your question we need to look at the related part under letter of credit rules. Amendments are explained at article 10 in UCP 600. UCP 600 states that "a credit can neither be amended nor cancelled without the agreement of the issuing bankthe confirming bank, if any, and the beneficiary." 

UCP 600 article 10 continues to clarify effectiveness date of an amendment for the issuing bank and the confirming bank as follows "an issuing bank is irrevocably bound by an amendment as of the time it issues the amendment. 

A confirming bank may extend its confirmation to an amendment and will be irrevocably bound as of the time it advises the amendment." On the next couple of phrases explains the position of a beneficiary against amendments. "The terms and conditions of the original credit (or a credit incorporating previously accepted amendments) will remain in force for the beneficiary until the beneficiary communicates its acceptance of the amendment to the bank that advised such amendment."

As UCP 600 clearly indicates letter of credit will remain in force as is for the beneficiary until the beneficiary communicates its acceptance of the amendment. 

But how beneficiaries can communicate their acceptance to amendments. This would be a good discussion topic for a future page.
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What is effectiveness date of an amendment : 

An issuing bank is irrevocably bound by an amendment as of the time it issues the amendment. A confirming bank may extend its confirmation to an amendment and will be irrevocably bound as of the time it advises the amendment.
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