Should I Exclude Art 32 To Avoid Risk Of Lost in Transit

[jim]

Hi,

if i, as issuing bank, want to avoid the risk of lost in transit, should i exclude article 35?

regards

Jim

[shahriar]

that may create many other complicacy. better make the credit available at the counter of the issuing bank.


regd

shahriar

[nesarul]

Dear,
There are three possible options:
1.Credit available with the isuing bank only= probably beneficiary may not agree in all the time.
2. exclusion of it: Prabably nominated bank may not willing to act on its nomination and thereby beneficiary may decline or seek amendment.
3. Asked document in two lot with an specific courier service like DHL: May mitigate the issue . [ my assumption]

is there any other alternatives......pls
regards
nesar

[Currer]

Dear Jim,


an applicant excluding article 35 2nd paragraph should also consider the issue of the expiry date of the documentary credit.

Such an exclusion would normally only appear in documentary credits presumably* available with another bank.

In excluding article 35 2nd paragraph a presentation at the counters of the nominated bank on or before expiry date would still constitute timely presentation. When documents are not lost in transit but merely delayed, the issuing bank is still liable to honour even though the delay in transit may be substantial.

An example:
expiry date of documentary credit: 4. August 2008
documents presented to nominated bank on 1. August 2008, sent to issuing bank on 6. August 2008 and are delayed in transit.
In that case when documents finally reach the counters of the issuing bank on 3. November 2008 the issuing bank has to honour / reimburse.

An applicant which agreed with the beneficiary that the risk of documents lost in transit should be on the side of the beneficiary should ask for a documentary credit available with the issuing bank only.


To exclude the entire article 35 would cause additional confusion as it also refers to the general disclaimer on transmission. Frankly, I do not believe that banks want to take the responsibility for actions of any courier service.







Kind regards

Currer


*why presumably?
I agree with Nesar, the nominated bank is no longer protected when it acts as a nominated bank.

[cristiand969]

Dear all,
I will refrain this time to add further comments. Better to quote
Garry Collyer opinion on that exclusion:
Quote
Article 35
There are banks and applicants who still insist on excluding UCP600 Art 35

These exclusions, I would presume, are being driven solely by the inclusion of the new text in this article. Banks and applicants that are including such exclusions should bear in mind that the same position would prevail under UCP 500 and all previous revisions of UCP.

This is made clear in ICC Opinion R. 548 which reads in the conclusion "Notwithstanding the fact that the reimbursement instruction in the credit reads "Upon receipt of full set of documents in conformity with the L/C terms, we will effect payment as per your instruction," by virtue of Article 16 the issuing bank would be obliged to honour a compliant presentation that had been negotiated by a nominated bank but lost in transit.

The reimbursement obligation under a credit, as outlined above, is not subject to the receiving of documents by the issuing bank, but only to a compliant presentation being made to the nominated bank. The reimbursement clause in the credit does not make the reimbursement subject to the receiving of documents."

By excluding article 35, I cannot perceive that any nominated bank will agree to honour or negotiate. The issuing bank has issued their credit and nominated a bank to act thereunder. By that nomination, the issuing bank has a duty to protect the interests of a nominated bank that has acted according to the terms of that nomination and towards a beneficiary who has performed under the credit and provided documents that, in the view of the nominated bank, are in compliance with the terms and conditions of the credit. This is whether or not the beneficiary has sought honour or negotiation from the nominated bank.

************************************************

General note:
It should be noted by banks that if they are considering the exclusion of a rule, it is often not as simple as merely making a statement in the credit that article X or sub-article X is deleted or is not to apply. Very often there needs to be something put into the credit to cover the void that the exclusion leaves. Similarly, where a modification is made, the issuing bank must ensure that the revised wording in the credit is sufficiently descriptive so that there may be no ambiguity as to how it may be interpreted or applied.
unquote
best regards
Cristian