Category 7: Documentary Credits and Guarantees

This category is used for trade finance, including letters of credit and guarantees.

• MT 700: Issue of a Documentary Credit – Issues a letter of credit with full details.
• MT 701: Issue of a Documentary Credit (Continuation) – Continues details of an MT 700 when additional space is needed.
• MT 705: Pre-Advice of a Documentary Credit – Provides a brief pre-advice of a letter of credit before full issuance.
• MT 707: Amendment to a Documentary Credit – Amends the terms of a letter of credit.
• MT 708: Amendment to a Documentary Credit (Continuation) – Continues details of an MT 707.
• MT 710: Advice of a Third Party Documentary Credit – Advises a letter of credit issued by a third party.
• MT 711: Advice of a Third Party Documentary Credit (Continuation) – Continues details of an MT 710.
• MT 720: Transfer of a Documentary Credit – Transfers a letter of credit to another beneficiary.
• MT 721: Transfer of a Documentary Credit (Continuation) – Continues details of an MT 720.
• MT 730: Acknowledgement – Acknowledges receipt of a Category 7 message.
• MT 732: Advice of Discharge – Advises discharge of a documentary credit.
• MT 734: Advice of Refusal – Advises refusal of documents under a documentary credit.
• MT 736: Advice of Discrepancy – Advises discrepancies in documents presented.
• MT 740: Authorization to Reimburse – Authorizes a bank to reimburse under a letter of credit.
• MT 742: Reimbursement Claim – Claims reimbursement under a letter of credit.
• MT 744: Advice of Reimbursement Claim – Advises a reimbursement claim.
• MT 747: Amendment to an Authorization to Reimburse – Amends a reimbursement authorization.
• MT 750: Advice of Discrepancy – Advises discrepancies in documents for a letter of credit.
• MT 752: Authorization to Pay, Accept, or Negotiate – Authorizes payment, acceptance, or negotiation under a letter of credit.
• MT 754: Advice of Payment/Acceptance/Negotiation – Advises payment, acceptance, or negotiation under a letter of credit.
• MT 756: Advice of Reimbursement or Payment – Advises reimbursement or payment under a letter of credit.
• MT 760: Guarantee/Standby Letter of Credit – Issues a guarantee or standby letter of credit.
• MT 767: Amendment to Guarantee/Standby Letter of Credit – Amends a guarantee or standby letter of credit.
• MT 768: Acknowledgement of a Guarantee/Standby Message – Acknowledges receipt of a guarantee message.
• MT 769: Advice of Reduction or Release – Advises reduction or release of a guarantee or standby letter of credit.
• MT 790: Advice of Charges – Notifies charges for Category 7 transactions.
• MT 791: Request for Payment of Charges – Requests payment of charges for Category 7 transactions.
• MT 792: Request for Cancellation – Requests cancellation of a Category 7 message.
• MT 795: Queries – Queries details of a Category 7 transaction.
• MT 796: Answers – Provides responses to Category 7 queries.
• MT 798: Trade Finance Message (Envelope) – Encapsulates other trade finance messages (e.g., MT 7xx series) for corporate-to-bank or bank-to-bank trade communication.
• MT 799: Free Format Message – Used for free-format communication related to trade finance, often to confirm proof of funds or deposits before issuing a guarantee or letter of credit.

Below are definitions for the SWIFT message types MT 199, MT 798, MT 705, and MT 799, based on their usage in the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system. These messages are used for secure communication between financial institutions and are part of specific SWIFT message categories.

• MT 199 (Free Format Message):
  An MT 199 is a free-format SWIFT message used for interbank communication, often described as a “chat” message. It is typically employed to transmit information related to a transaction, such as confirming the status of funds, sorting out transaction details, or engaging two banks’ readiness to proceed with a private transaction (e.g., involving a Safe Keeping Receipt or SKR). Unlike authenticated messages, it does not require a BKE (Bank Key Exchange) authenticator and is approved by one bank officer. It is not a payment instruction or a guarantee but serves as a notification or clarification tool.

• MT 798 (Trade Finance Message):
  An MT 798 is a SWIFT message used in trade finance to facilitate communication related to corporate-to-bank and bank-to-bank interactions. It is often referred to as an “envelope” message because it encapsulates other messages (e.g., MT 7xx series messages like MT 700 or MT 760) to provide structured trade finance information. It supports various trade finance instruments, such as letters of credit, guarantees, or documentary collections, and is used to streamline corporate trade processes. Unlike free-format messages, it follows a more structured format and is part of SWIFT’s Category 7 (Treasury Markets & Syndication) or corporate-to-bank messaging.

• MT 705 (Pre-Advice of a Documentary Credit):
  An MT 705 is a SWIFT message used to provide a brief pre-advice of a documentary credit (letter of credit) before the full details are issued via an MT 700 or MT 710. It informs the advising bank of the key terms and conditions of a forthcoming letter of credit, such as the amount, expiry date, and basic requirements, allowing the beneficiary’s bank to prepare for the transaction. This message is part of SWIFT’s Category 7 (Documentary Credits and Guarantees) and is not a payment or a guarantee but a preliminary notification.

• MT 799 (Free Format Message):
  An MT 799 is a free-format SWIFT message used for bank-to-bank communication, primarily to confirm proof of funds or proof of deposits for a potential trade. It is authenticated with a BKE authenticator, requiring approval by two bank officers, making it more secure than an MT 999. It is not a payment instruction or a promise to pay but serves as a verification tool, often issued before a contract is signed or before a letter of credit or bank guarantee (e.g., MT 760) is issued. Common uses include confirming funds for bank guarantees, letters of credit, or Ready Willing and Able (RWA) letters. Banks typically require collateral to issue an MT 799.

Note: These definitions focus on the primary uses of each message type in the SWIFT system. MT 199 and MT 799 are free-format messages, with MT 799 being authenticated and more formal, while MT 798 and MT 705 have specific trade finance purposes. Always verify with the involved financial institutions for precise requirements, as misuse of these messages (e.g., in fraudulent schemes) has been reported.

In the context of Letters of Credit (LC), the acceptance process involves specific SWIFT Message Types (MTs) from Category 7 (Documentary Credits and Guarantees) to communicate the acceptance of an LC, amendments, or related actions between banks and beneficiaries. Below is a concise list of the MT messages commonly used for LC acceptance or directly related to the acceptance process:

MT Messages Used for LC Acceptance

1. MT 700: Issue of a Documentary Credit
   • Purpose: This message is used when the initial issuing of a documentary credit (LC), including terms for acceptance (e.g., whether it requires acceptance of a time draft). It sets the foundation for the acceptance process by specifying conditions the beneficiary must meet.
   • Role in Acceptance: Defines whether the LC involves a time draft (bill of exchange) that requires acceptance by the drawee bank (often the issuing or nominated bank).
2. MT 710: Advice of a Third Party Documentary Credit
   • Purpose: This message is used to advise a documentary credit issued by a third party (e.g., another bank) to the beneficiary’s bank, including acceptance terms if applicable.
   • Role in Acceptance: Transmits acceptance conditions to the beneficiary’s bank when the LC originates from a third party.
3. MT 730: Acknowledgement
   • Purpose: Acknowledges receipt of an LC-related message, such as the MT 700 or MT 710, by the advising or nominated bank.
   • Role in Acceptance: Confirms that the bank has received the LC and its terms, including any acceptance requirements, before proceeding.
4. MT 732: Advice of Discharge
   • Purpose: Advises that the documents presented under the LC have been accepted or discharged by the issuing or nominated bank.
   • Role in Acceptance: Indicates that the bank has accepted the documents (and potentially a time draft) under the LC terms.
5. MT 752: Authorization to Pay, Accept, or Negotiate
   • Purpose: Authorizes a nominated bank to pay, accept, or negotiate documents under the LC.
   • Role in Acceptance: Explicitly instructs the nominated bank to accept a time draft (if the LC involves a usance/acceptance LC), confirming the bank’s commitment to honor the draft at maturity.
6. MT 754: Advice of Payment/Acceptance/Negotiation
   • Purpose: Advises the issuing bank or another party that payment, acceptance, or negotiation has occurred under the LC.
   • Role in Acceptance: Confirms that a nominated bank has accepted a time draft or documents, notifying relevant parties of the acceptance action.
7. MT 799: Free Format Message
   • Purpose: Used for free-format communication between banks related to the LC process, often for clarifications or confirmations.
   • Role in Acceptance: May be used to confirm or clarify acceptance details, such as proof of funds or readiness to accept a draft, though it’s not a primary acceptance message.

Key Points

• Acceptance Context: LC acceptance typically applies to usance LCs, where a time draft (bill of exchange) is presented and must be accepted by the drawee bank (usually the issuing or nominated bank) to create a binding payment obligation at a future date.
• Primary Messages for Acceptance: MT 752 (authorization to accept) and MT 754 (advice of acceptance) are the most directly tied to the acceptance of a time draft.
• Supporting Messages: MT 700, MT 710, and MT 730 set up the LC terms, while MT 732 confirms document acceptance.
• MT 799: Used for ancillary communication, not as a formal acceptance instruction.
• Process Flow:
  1. LC issued (MT 700/710).
  2. Advising bank acknowledges (MT 730).
  3. Beneficiary presents documents, including a time draft if applicable.
  4. Nominated bank is authorized to accept (MT 752).
  5. Acceptance is confirmed (MT 754).
  6. Documents discharged (MT 732).
• Fraud Caution: Ensure all messages are authenticated via SWIFT and verified by involved banks, as messages like MT 799 can be misused in fraudulent schemes.