Documents To Be Presented In 1 Lot & Advance Payment

[gegeeee]

Guys Hy,

Again need your valuable opinion.

I had such a case where LC showed such condition: Confirming Bank is authorized to pay advance pmt to beneficiary against presentation of simple receipt, stating that Beneficiary need advance for packaging its goods.

Actually bene. presented such doc. to confirming bank and and the later made payment and forwarded this doc to issuing bank. 1 week later Confirming Bank presented all other documents to issuing bank.

The interesting thing was that in field 78. there was mentioned that documents should be presented in 1 Lot.

Can such presentation of documents considered as presentation in 2 Lots? and is that discrepancy?

[mohitjai]

Hi

I will rather view this as a green clause LC allowing the bene to draw prior to shipment and before presenting any complaint docs. It should be ok if the confirming bank sent this receipt prior to submission of other complying docs. Submission in one lot should be with ref. to general complying docs.

The reason for my view is also that if the bene fails to fulfil his obligations (and hence no docs are submitted) but the issuing bank is still liable to reimburse the confirming bank against the advanced amt.

Other views appreciated.

[picant]

Hi Pal,

IMHO, you are utilizing a Red Clause l/c!
However sending in one lot or two lot refers to a single presentation, where documents must split in two sendings, first immediately and the second after few days, to avoid losses in transit.
Other comments appreciated
Ciao

[gegeeee]

Picant,

What do you suggest?

Under such LC (Red clause) should we require presentation in one Lot or better would be in 2 Lot's?

Thanks.

[picant]

Hi Pal,

usually advance under Red Clause Letter of credit are made against presentation of beneficiary letter of undertaking to use the money in buying the goods and to present documents in due time. If is the issuing bank to provide such advance, the advising, nominated or not, bank will send this letter of undertaking to issuing bank to obtain this payment. It could be made in paper or under Swift messages, authenticated, stating details.
Sending in one or two lots depends on the document, a promissory note or better a bill of lading, if issued in more originals must be send normally in two lots, it is possible to have an original undertaking even is one has been lost without problem, except delay in receiving money, but if you lose full set of bill of lading, you will face a lot of problems.
Other comments appreciated.
Ciao

[mano]

dear,

in your case the logic behind 1 lot or 2 lot is not existed.

you should notice the payment terms of the credit

1-if the credit allows the nominated bank to advance the funds and claim for the fund immediately from the issuing bank, then the simple receipt will consider 1 lot separate presentation and to be paid separately (this is not the usual sequence under red clause credit) this may be your case.

2-if the credit allows to advance the funds under sipmle receipt and ask confirming bank to deduct this fund from the proceeds under the credit then the confirming bank sould retain simple receipt and send it with the documents under one lot. you should read the route of documents well.

in your case and nature of simple receipt, issuing bank under general logic and practice will not issue advise of refusal under the base that simple receipt is 1 lot and other documents will be 2nd lot. by other means no dely will be occured, effect timely presentation or time allowed for examination.
.
regards

[hardy2175]

It is not a presentation in 2 lots because
If a credit provides for advance under red clause , the advance is in the nature of a preshipment advance and therefore at the time of availing the advance the beneficiary cannot submit all the docs.
The submission of the docs under the credit takes place after the shipment .
The advance can be disbursed against a simple demand letter.