Issuing Bank Raised Late Presentation Discrepancy

[ofei]

Recently a case in china is under discussion.
An L/C was issued available with any bank by negotiation. The date and place of expity is 20081021 at negotiating bank's counter. The beneficiary presents complying documents to a bank on 21 October, 2008 but the bank didn't negotiating the documents. Later the bank forwards documents to the issuing bank on 24 October and the cover note showed that the presenting date is 21 October. Still the issuing bank raised a discrepany on account of late presentation of documents.
Is the issuing bank correct ?

My viewpoint: Whether the nominated bank honour or not, it is still a nominated bank. So the beneficiary presented docuemnts within date of expiry of L/C. The issuing bank cannot raise such discrepancy.
Some think that the bank didn't negotiate , it is just a forwarding bank. So the place and date of expiry should extend to issuing bank's counter. Thus the issuing bank is correct.

Pls comment.

[nesarul]

Dear,
This is indeed a very interesting issue.
two issue should be clarified.
presentation = within the control of beneficiary
Negotiation = outside the control of beneficiary.
.
moreover credit issued IN FAVOR OF[emphasis added] beneficiary not nominated bank.
.
making complying presentation to the nominated bank's counter is an indication of completion of function of beneficiary. if one look into sub article 7(a) of UCP 600, :
"provided that stipulated document are presented to the ISSUING BANK OR NOMINATED BANK......."
.
THE ISSUING BANK MAY SEEK CLARIFICATION FROM THE NOMINATED BANK WHETHER SUB ARTICLE 29(A) & (B) APPLICABLE OR NOT.
BUT IT MUST BE WITHIN THE MAXIMUM OF FIVE BANKING DAYS. OTHERWISE PRECLUSION RULE WILL BE APPLICABLE 16(F).
.
IN ANY EVENT. INNOCENT BENEFICIARY CANNOT BE LIABLE.
REGARDS
NESAR

[shahriar]

UCP 600 article 2,

Presentation means either the delivery of documents under a credit to the issuing bank or nominated bank or the documents so delivered.

the condition is to present the document to nominated bank; not "to negotiate"

a nominated bank remains a nominated whether it acts on its nomination or not. so the document is compliant.

however i was wondering about another possibility. was the document presented within 21 days from the date of shipment?

if expiry is the main issue, then a better refusal advice would be "LC expired"

regd

shahriar

[ofei]

Thank you for your comments to it.
The case shows that the issuing bank refused the documents on account of the documents had out of the date of expiry. But the documents are complying and did present to the nominated bank within validity of the L/C. Just suppose the documents are presented within 21 days after the date of shipment, (in fact they are ,otherwise the documents won't be regarded as complying). The nominated bank forwarded the documents 3 days later (within the 5 working days). What makes me puzzled is that this bank didn't negotiate the docs.
1. Whether this bank is still nominated bank? It's a credit available with any bank by negotiation but the bank didn't act as requested)
2. Whether the credit is expired on issuing bank's counter instead of negotiating bank's counter since the bank didn't act as nominated)
I am still puzzled.
Looking forward to your detailed comments. :oops:

[shahriar]

dear ofei,

even if the nominated bank does not negotiate, its still a nominated bank. and the credit expires at the counter of the nominated bank.

regd

shahriar

[nesarul]

Dear,
I think you follow my answer. however:
quote:
1. Whether this bank is still nominated bank? It's a credit available with any bank by negotiation but the bank didn't act as requested):
.
my thinking:
when an issuing issues a credit available with a bank by negotiation, then this nominated bank posses two option.
1.one is nominated bank to act and another
2. nominated bank acting on its nomination.
.
whether the bank acted according to nomination or not. this bank always keeps its nomination up. probably that is the reason which is why sub article 7(a) started as follows:
provided that stipulated document are presented to the issuing bank or nominated bank [here UCP didn't mentioned that nominated bank acting on its nomination].
.
moreover if one contemplate sub atticle 7(b):
an issuing bank is irrevocably bound at the time of issuance of credit.
. when an issuing issues a letter of credit available witha nominated bank by negotiation, it invite the nominated bank to act but cannot impose any obligation on it [sub article 12(a)]
.
hence,in order to keep issuing bank's obligated under a credit AT THE TIME OF ISSUANCE OF CREDIT, THE ISSUING BANK MUST abide by the presentation of document at nominated bank's counter.
.
SO FROM MY VIEW POINT THE DISCREPANCY RAISED BY THE ISSUING BANK IS NOT JUSTIFIED.

if the above explanation is satisfactory, then the second question may not arise.
awaiting for comments.
regards
nesar

[cristiand969]

Art. 6di of UCP600: Am expiry date stated for honour or negotiation my quote (i.e. utilization of credit) unquote will be deemed to be an expiry date for presentation.
Art. 6d ii of UCP 600: .. The place for presentation under the credit available with any bank is that of any bank.
.
There is no further condition whether or not 'any bank' has honored or negotiated a complying presentation.
.
Therefore issuing bank seeks reasons for non-payment which don't stand at all. Or maybe there are very unexperienced persons dealing with such transaction.
.
In such cases disagreement of presenting bank should quote a/m article if it wants to avoid further disputes on various interpretations
.
best regards
Cristian