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An exam question

Posted: Thu Apr 12, 2018 3:13 pm
by gondem
The issuing bank of a sight documentary credit issues an indemnity to a shipping company
authorising the release of goods to the importer prior to presentation of documents. Documents
subsequently received are discrepant. What action MUST the issuing bank take?

1. Seek agreement from the shipping company to cancel the indemnity.
2. Send a rejection notice to the presenting bank.
3. Approach the applicant for a waiver of the discrepancies.
4. Pay the presenting bank.

A 2 only.
B 4 only.
C 1 and 4 only.
D 2 and 3 only.

The answer is B. Could you pls explain me why the answer is B ? I'd mark the answer D..

Re: An exam question

Posted: Thu Apr 12, 2018 4:26 pm
by JAX1066

As part of the process of issuing an indemnity it is expected that the applicant accepts all discrepancies (if any) upon presentation and waives the right to reject the documents. As they have already received the goods, they must pay for the documents upon presentation.


Posted: Thu Apr 12, 2018 5:43 pm
by picant
Hi Pal,

the issuing bank authorizing a carrier the delivery of the cargo to a applicant , will be li wait for able for presenting the original bill of lading to the carrier in exchange of the indemnity. The applicant, requesting this action
will have signed aprevious acceptance of documents as presented.
So on receipt of documents the issuing bank will retain the original bill of lading, pay the presenting bank and deliver the remaing documents to applicant.
Other comments appreciated