What a confirmation clause on your letter of credit actually commits the bank to

You read the credit and one line names a second bank, usually your own bank or a bank in your own country, asked to add its confirmation. Or the field just says CONFIRM, with no bank named yet. Either way, the question is the same: what does that word actually change?

A plain letter of credit is one bank's promise: the issuing bank's, in the buyer's country. Confirmation adds a second promise, from a different bank, that stands on its own. UCP 600, the rulebook almost every credit is issued subject to, calls confirmation "a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation." Not a guarantee that the issuing bank will pay. A separate bank's own commitment to pay you, sitting next to the issuing bank's.

What the confirming bank is actually agreeing to#

Article 8 of UCP 600 puts it plainly: provided your documents are presented to the confirming bank and they comply with the credit, the confirming bank must honour or negotiate them. That is the same duty the issuing bank already owes you. Confirmation does not create a new, lighter standard. It adds a second bank bound to the same one.

The timing is the detail worth reading twice. The issuing bank is bound from the moment it issues the credit. The confirming bank is bound from a different moment: "as of the time it adds its confirmation to the credit." A credit that names a confirming bank is not automatically confirmed. If that bank has not actually added its confirmation yet, you are still relying on the issuing bank alone, whatever the field says.

CONFIRM, MAY ADD, and what each one leaves open#

On the SWIFT message a bank actually reads, this sits in one field with three possible values, and they are not interchangeable.

CONFIRM is a request from the issuing bank to the named bank: add your confirmation. It is not an instruction the bank must obey. The named bank can still say no. MAY ADD is weaker again: the issuing bank is only authorising the other bank to confirm if it chooses to, with no request behind it. WITHOUT means the bank is not being asked to confirm at all.

If the bank asked to confirm is not willing to, UCP 600 tells it what to do: "it must inform the issuing bank without delay and may advise the credit without confirmation." The credit carries on exactly as it was, advised rather than confirmed, and nothing forces the matter further. From where you sit as the exporter, a CONFIRM instruction and a MAY ADD instruction land the same way once a bank actually agrees: you get a confirming bank's promise. The difference between the two is mostly about which bank ends up paying the confirmation fee, not about what protection you get once someone has said yes.

The one thing the field can never tell you is whether the confirmation has actually landed. That you get from the bank itself, in writing, not from reading the clause.

What it does not undo#

Confirmation is not a waiver of the document rules. A confirming bank examines your presentation exactly as the issuing bank would, and it can refuse on a genuine discrepancy just as the issuing bank can. Naming a confirming bank does not soften what your paperwork has to match, or buy you any slack on the shipment and presentation deadlines that already govern the credit. The rules a bank applies to your documents apply in full, whichever bank is examining them.

What confirmation changes is who you are relying on, and for what. Once the confirming bank has honoured a complying presentation, its promise to you does not depend on it first collecting from the issuing bank. That is a separate arrangement between the two banks, not a condition on what it owes you. That is the whole point of asking for it: a bank whose creditworthiness and location you already trust stands in front of the issuing bank, on a document-compliant claim, rather than behind it.

What it costs, and who decides#

A confirming bank is taking on a real, priced risk, and it charges for it. What that costs is not part of the credit and is not fixed by UCP 600. It is a fee your bank quotes, set by the credit amount, the tenor, and its own view of the issuing bank and country risk. Ask for that number before you decide whether a confirmation is worth having, not after the credit already reads CONFIRM. Whether the buyer or you carry that cost is usually settled in the underlying contract, not the credit itself, so it is worth agreeing before the credit is opened rather than discovering it in the charges.

Before you rely on a confirmation clause#

Check four things, in this order. Has the named bank actually confirmed, in writing, not just been asked to. Which bank is it, and is that a bank whose promise you would actually want to rely on: a confirming bank in the same country as the issuing bank does not remove country risk, even if it removes issuing-bank risk. What the confirmation fee is, and who is paying it. And whether your own documents will still comply on time. The payment term you agreed to is only as good as the paperwork that has to match it, confirmed or not.

A confirmed credit is a stronger promise than an unconfirmed one. It is still a promise that pays on documents, examined the same way, by a bank that can still say no.