Draft Say "To: LC Applicant" & Drawn Under Issuing Bank's LC

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Draft Say "To: LC Applicant" & Drawn Under Issuing Bank's LC

Postby Finance - Israel on Mon May 20, 2013 1:53 pm

Letter of credit issued available by negotiation
drafts to be drawn in the lc issuing bank
drafts at sight.

draft that was submitted is on beneficiary letterhead and stamped with the beneficiary's stamp.
draft states drawn under issuing banks lc XXXXXXX

then it says "to: LC applicant"

nowhere does it state that the issuing bank is the drawee.

As per my reading of this the draft is drawn on the applicant, and therefore discrepancy.

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incorrect Drawee

Postby abrar - on Mon May 20, 2013 4:16 pm

I would agree that the drawee has been incorrectly stated. However, since the draft would not ordinarily form part of the documents subject to examination for compliance, this would not be classified as a discrepancy to justify refusal. Instead, the beneficiary should be requested to represent a correct draft.

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Drafts

Postby Finance - Israel on Mon May 20, 2013 4:53 pm

Abrar - thank you for your answer.

You raise a point that i have seen on these forums before, and that I don't agree with. Namely, that the drafts submitted under a letter of credit is not a required document.

IMHO when a letter of credit is issued and states that drafts should be submitted - i.e. 42c is included in the letter of credit - then the drafts are required documents.

On what do you base your statement that "the draft would not ordinarily form part of the documents subject to examination for compliance"?

Regards,
Alex

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Drafts

Postby abrar - on Mon May 20, 2013 9:23 pm

It's a moot point, but one would consider documents appearing under field 46A being the documents subject to examination for compliance

My view is that if the requirement for a draft appears in field 46A then it would be subject to examination under the provisions of Art 14. If however, it appears in field 42A, and happens to be incorrectly drawn up, it is debatable as to whether it is right that the examining bank should exercise its right of refusal, and recourse under aticles 14 and 16, instead of perhaps, simply requesting as matter of good order, for a correctly drawn up draft to be represented?

Under ICC Official Opinion (470/TA.703rev) which concerned a requirement for all "documents" to be drawn up in English, whereas the draft was issued in a different language, the opinion given was that "For the purposes of a clause such as “all documents must be issued in English”, a draft is not to be considered as one of those required documents unless the credit requires the presentation of a draft drawn on the applicant under “documents required”. Conversely, it is also true that there aare numerous paragraphs in the ISBP devoted to how drafts should be drawn up.

Nevertheless, the main point here is that there appears to be a concession that unless the draft is called for under field 46A, it would not be deemed to be a "document" within the scope of the UCP provisions, requiring final submission to the issuing bank/applicant.

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Draft Say "To: LC Applicant" & Drawn Under Issuing Bank's LC

Postby Goody - Bahrain on Wed May 22, 2013 1:43 pm

This is a valid descrepancy as drafts cannot be drawn on the applicant as per UCP 600. If draft is a required document; then it will have to be examined.Under LC draft should be drawn on the issuing bank.

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Draft Say "To: LC Applicant" & Drawn Under Issuing Bank's LC

Postby IJTUDU - INDIA on Wed May 22, 2013 2:37 pm

Agreed with Goody.

Regards,

Isaac

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