i whish ask about
what the effect which arise when exclude article 37c from ucp 600 in lc
What Is The Effect Of Excluding Article 37(C) Of UCP600
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amermurshed
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nraajesh
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Article 37 (c)
Hello Dude,
The main purpose of this article is to remind the responsibility of the bank which instructs another bank to perform any service.
All services (advising, confirmation, negotiation etc.) that are performed by the banks bear a service commission. Therefore if any bank is insrtucting another bank to perform such kind of service, the bank who is performing such service would obviously demand a service commission for the same and this has to be borne by the instructing bank.
Let's take a simple example. Bank A requests Bank B to advise their LC to XYZ beneficiary. Here the instructing bank is Bank A. If in case the LC expires unutilized, or if the beneficiary refuses to pay the advising commission, then the Bank B has to rely on Bank A only for their service charge. Moreover, it is the responsibility of Bank A to pay Bank B.
If the article is excluded, then Bank B cannot go back to Bank A for the commission and has to incur a loss for the service that it has performed.
That's the reason ICC has recommended that certain articles in UCP should not be excluded or modified as it affects the ethical value of the bank.
Hope this clarifies.
Cheers!!
Rajesh
The main purpose of this article is to remind the responsibility of the bank which instructs another bank to perform any service.
All services (advising, confirmation, negotiation etc.) that are performed by the banks bear a service commission. Therefore if any bank is insrtucting another bank to perform such kind of service, the bank who is performing such service would obviously demand a service commission for the same and this has to be borne by the instructing bank.
Let's take a simple example. Bank A requests Bank B to advise their LC to XYZ beneficiary. Here the instructing bank is Bank A. If in case the LC expires unutilized, or if the beneficiary refuses to pay the advising commission, then the Bank B has to rely on Bank A only for their service charge. Moreover, it is the responsibility of Bank A to pay Bank B.
If the article is excluded, then Bank B cannot go back to Bank A for the commission and has to incur a loss for the service that it has performed.
That's the reason ICC has recommended that certain articles in UCP should not be excluded or modified as it affects the ethical value of the bank.
Hope this clarifies.
Cheers!!
Rajesh
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Freediak
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Hello Nraajesh
I really like the example you used as I have the same kind of problem and i'd really appreciate your feedback.
In my situation,the LC expired unutilized and Bank B(which is our correspondent bank) debited our account after the beneficiary refused to pay for the LC's charges, but then the beneficiary and the applicant finally agreed on a deal and they amend the LC to extend its validity.Now,Bank B said that if we do not want our client to support the charges, we could at the moment of payment, deduct the charges from the LC's amount since all the charges outside the applicant's country are on the beneficiary's account.Can we do that since the beneficiary officially notified us after the amendment that they won't bear any charges incured because of the fact that the LC expired in first place?
Thank you
I really like the example you used as I have the same kind of problem and i'd really appreciate your feedback.
In my situation,the LC expired unutilized and Bank B(which is our correspondent bank) debited our account after the beneficiary refused to pay for the LC's charges, but then the beneficiary and the applicant finally agreed on a deal and they amend the LC to extend its validity.Now,Bank B said that if we do not want our client to support the charges, we could at the moment of payment, deduct the charges from the LC's amount since all the charges outside the applicant's country are on the beneficiary's account.Can we do that since the beneficiary officially notified us after the amendment that they won't bear any charges incured because of the fact that the LC expired in first place?
Thank you
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Navi
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Issuing bank not right...
Hi,
As per article 37 c, attention to wording "...If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds...",
Here, in my opinion, wording "...cannot be collected or deducted..." gives a message. Beneficiary's bank will probably have the chance to deduct its charges but beneficiary already refused to pay any possible charges under the credit.
If I were beneficiary's bank, I would inform the issuing bank for the matter without delay and request an amendment for the charges.
other comments appreciated
regards
As per article 37 c, attention to wording "...If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds...",
Here, in my opinion, wording "...cannot be collected or deducted..." gives a message. Beneficiary's bank will probably have the chance to deduct its charges but beneficiary already refused to pay any possible charges under the credit.
If I were beneficiary's bank, I would inform the issuing bank for the matter without delay and request an amendment for the charges.
other comments appreciated
regards