Payment Refused As No Communication Was Sent By Nominated Ba

[dinesh2476]

Dear Experts,

Please provide your suggestion on the below.

Though LC states ''41A LC available with xxxx by negotiation, The negotiating bank under no obligation to negotiate the documents.

We(bank) here do not negotiate the documents means...Neither we do effect payment to the presenter upfront nor we purchase the draft... as mentioned in article 2(negotiation means the purchase by the nominated bank.........nominated bank).

However if we receive any compliant documents we will put the following comments as practice in our Remittance letter to issuing bank--Say Documents as credit complaints and presented within time frame allowed in this LC

There was an instruction in the LC (Clause 47A)states the negotiation bank must send a communication to the issuing on the day the negotiation bank negotiated the documents(I am very concerned about the purpose of the issuing bank asking such an information). since we had not negotiated the document, we simply sent the documents with remittance letter with instructions as mentioned above.

Now the issuing bank refusing to effect payment under this LC stating they have not received the swift message highlighted in clause 47A.

Please share your opinion -we have certified the documents credit complaints in our remittance letter. Does this mean we have negotiated the documents?

[Anurag]

Dear Dinesh

in this case artile 12(a) : unleass nominated bank is not a confirming bank, nominated bank is under no obligation to negotiate or honour, until nominated bank expecially agreed with beneficiary.

In your case artilce 7 c will be applicable : An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank. Reimbursement for the amount of a complying presentation under a credit available by acceptance or deferred payment is due at maturity, whether or not the nominated bank prepaid or purchased before maturity. An issuing bank's undertaking to reimburse a nominated bank is independent of the issuing bank’s undertaking to the beneficiary.

Whatever ur bank determine presentation is comply. Issuing bank is simply telling, bank is not comply LC terms & conditions.

Other comments are appreciated.

[dinesh2476]

Anurag,

Hope the below gives a clear idea of what i am trying to learn from experts on the subject.

1. Have we negotiated the document from Issuing bank of view?
2. As i told earlier, we did not negotiate the document(pre-purchase), simply we certifed that terms and conditions complied with and mentioned in the RLT that we would debit their account on value date......... Hence we did not comply with clause 47A(47A-PB should mentioned in the RLT that document negotiated). Now IB is raising it has big issue. No idea of what would be the reason being.

Thanks&Regards
Dinesh

[dinesh2476]

Dear Experts,

All opinions are welcome.

Thanks & Regards
Dinesh

[Navi]

Dear Friend,

Really interesting case.
.
As mentioned above, unless you are a nominated bank, you have no undertaking to negotiate documents and accordingly no obligation to send a swift message to issuing bank. Your writing "documents comply with LC terms..." or similar does not mean that you negotiated documents. However, your wording "we will debit your account..." on covering letter may confuse issuing bank. (refer to definiton of negotiation "... by advancing or agreeing to advance funds to the beneficiary on or before ....due...) But anyway, IB cannot avoid payment due to fault of presenting bank, in my opinion, if documents comply. Maybe, IB can claim discrepancy fee.

We also faced similar problems with issuing bank, who raised discrepancy for the same reason. To avoid such problems, when sending documents without negotiating, we add a remark on the covering letter that we have not negotiated documents (just to avoid conflict with IB and save time).

Other comments appreciated.

[picant]

Hi Pals,

IMHO documents are compliant. So no discrepancies to l/c beneficiary. The provision of field 47 must refer to beneficiary action and not to negotiating or remitting bank. In this case there is a responsability of the beneficiary's bank vs issuing bank that in future will avoid to use the services of this bank. Documentary credit terms should divided in Beneficiary actions, presenting/negotiating bank action and mere information, p.e. "Insurance buyers care" .
Other comments appreciated
Ciao