Prior to the development and use of electronic communication platforms, such as SWIFT, to deliver issuances of documentary credits, it was common practice to include a requirement in a documentary credit that a negotiating bank should endorse the amount of any drawings on the reverse of the credit itself and that such endorsement should be confirmed on the schedule to the issuing bank enclosing the presentation.
This made sense in a ‘paper' world and was entirely practical in order to prevent beneficiaries acting fraudulently by presenting a set of documents covering the same transaction to more than one bank.
The problem in the current environment is that issuing banks send the vast majority of credits in an electronic format, generally by SWIFT. As a result, beneficiaries only receive a copy of the SWIFT message which, if they were so inclined, could be replicated multiple times with no way of identifying which was the original. Accordingly there is no longer any advantage to be gained by endorsement of the reverse of a copy of the credit.
In ICC Opinion TA806rev, it was recommended that banks refrain from including ‘endorsement' requirements in their credits. Although it was recognised that in order to fulfil any such requirement, it would be feasible to endorse the covering advice from the advising bank, this was not considered to be particularly practical, as, in many cases, such an advice no longer exists where documentary credits are sent to a beneficiary via an advising banks proprietary system.
For the benefit of other nominated banks that may become involved in a documentary credit, an endorsement of an advising bank's advice of the documentary credit is advisable when the documentary credit is available with any bank by honour or negotiation.
The key conclusion from the above Opinion was that an issuing bank must honour or reimburse in accordance with UCP 600 and that there is no need for any endorsement to be notified by the negotiating bank.