Forwarding Date After Expiry & "All Conditions Are Complied"

[shahriar]

hello all,

generally our lcs expires at the counters of nominated banks. now say the lc expires on 15th may. doc presented to nominated bank on 15th. 5 days examination time. suppose i receive the document on 20th june. forwarding schedule showing date of 15th june and "all terms and conditions are complied". what im suppose to do?

shahriar

[nesarul]

Dear All,
IT IS A VERY INTERESTING QUESTION.
LETS TRY TO DELVE IT:
first issue:
I REFER TO YOU SUB ARTICLE 7(a):
"provided that the stipulated documents are presented to the Nominated bank "OR" to the issuing bank......"
the word "OR" is indicative one which means that if a credit is available with nominated bank(whether restricted to a particular bank or any bank) presentation of document at the counter nominated bank is sufficient enogh from the beneficiary's compliance point of view.,
.
Moreover as per sub article 6(d)(i) any expiry date mentioned in the credit will be deemed to an expiry date for presentation. the reason for incorporation of this sub article 6(d)(i) is that
during the lifetime of UCP 500, some letter of credit mentioned that last date of negotiation is .......... where as presentation and negotiation is not the same thing:
presentation = is a function which is within the control of the beneficiary
Negotiation = is a function which is outside control of the beneficiary.

second issue:
whether issuing bank can reaise a descrepancy "LATE PRESENTATION" based on the fact that nominated bank forwarding schedule is later than last date of presentation:

i refer R-372,373 OF ICC OFFICIAL OPINION 1998/99 AND R-416 OF ICC OFFICIAL OPINION 2000/01,
if nominated bank make an statement "documents contitute complying presentation"
issuing bank can not raise this sort of discrepancy.
in addition to that i would like to mention here that if nominated bank doesn;t provide the above statement also, it is better for issuing bank to communicate with the nominated bank regarding the discrepancy such as "LATE PRESENTATION"
I THINK THIS WILL HELP YOU
THNAKS
NESAR

[shahriar]

dear nesar,

this was just the short of answer i was expecting. ofcourse u r right. but i have some arguments to make -

almost all the forwarding schedule make the statement "all terms and conditions are complied" while many of them have discrepancy in them. surely those discrepancies invalidate that statement. that means the statement itself may be wrong and therefore not reliable.

if the so called compliance statement was so reliable, then there would have been reason to recheck the documents. but icc says you have to check the docs irrespective of that statement. this allows me to me sit back and relax on 20th june without issuing any discrepancy notice. i will just consider it a expire lc.

the opinion u quote was issued in 500 era. at that time there was no 29a. following the spirit of 29a, i think the nominated bank must give a statement that they have received the presentation before the expiry of the credit. i believe that its not just me who is thinking up so coz im receiving some docs which actually make such statement.

shahriar

[nesarul]

Dear Sir,
Where there is argument, there is innovation.
two thing that you have to consider ;
1. forwarding schedule is not a stipulated document that credit asked for.
2. nominated bank is not a beneficiary's bank.
let assume the same situation:
The beneficiary presented the document at the counter of nominated bank as per instruction of the credit. nominated bank's forwarding schedule is one month later than the last date of presentation of the credit.
The Beneficiary is the innocent one. An issuing Bank can not make liable the beneficiary for wrongful action of its agent i.e. nominated bank(not beneficiary's Bank).
.
if a forwarding schdule make a statement as you mentioned followed by presentation constitute discrepant, your agent did the wrong one not the beneficiary.
.
one have to check the beneficiary's presentation to determine whether the beneficiarys preserntation is complying or not.one can not raise a discrepancy based on the forwading schedule.

If the message of UCP 500 and 600 of a particular article is same, the opinion of UCP 500 are still valid for that of UCP600.

[shahriar]

hummm, nesar, u r right. that means i have no use of the icc opinion (discrepancy notice after expiry) unless the nominated bank declares the lc was expired. isnt it?

one more thing, do u actually believe that the nominated bank is our agent?

shahriar

[Md.zakir Hossen]

Thanks everybody.Thanks for raising such type of question.
I will not answer this question today.Later I will share with this topic.
zakir

[nesarul]

Dear Sir,
i don't understant your statement "i have no use of the icc opinion (discrepancy notice after expiry) unless the nominated bank declares the lc was expired." do you know any ICC OFFICIAL OPINION REGARDING ABOVE, IF YES PLS MENTION......
REGARDING SECOND QUERY:
I know several court cases whether the beneficiary's bank which is not a nominated bank finance to the beneficairy didn't get protection........
the confusion that most of the banker's of our country is that nominated bank is the beneficiary's bank. i think the reason behind it that most of our credt has been issued in "freely available" in this case the beneficiary make a presentation to his/her bank. they left to forget that this bank involve in this particular transaction upon receipt issuing bank's authorization first.
i used the word "agent" for better understanting. commercially you can term "nominated bank" as an agent of issuing bank but legally you can not. better we should say 'a nominated bank acting on its nomination"
i think this will help you
awaiting for your reply.
nesar

[Armagedo]

Hi!

Either I've understtod question not so clear or you are discussing thing different from question sense

Expiry date: 15 May 2008
Docs presented: 15 May 2008
Place of presentation: nominated bank
Result of nominated bank checking: compliant
Docs have been sent from nominated bank: 15 June 2008
Docs have been received by issuing bank: 20 June 2008

What issuing bank should suppose to do on 20th of June, i.e. in about a month after expiry date?
The only one - to fulfill its obligations under its irrevocable undertaking (LC).

Expiry Date has nothing with whether issuing bank undertaking is expired too or not.
Expiry Date as one may see from UCP Article 6(d)&(e) is considered as Expiry Date for Presentation

Issuings bank undertaking may come to its only one logical end:
1/ if documents received by the issuing bank are compliant then to honour
2/ if documents received by the issuing bank are discrepant then to refuse or ask for applicant's waiver

I suppose that presentation period was upto expiry date (otherwise it would constitute transparent discrepancy on which request is silent).
So presentation is duly done by bene, checked by nominated bank and found to be compliant.
Unfortunately, neither UCP nor ISBP are providing time-frame for the docs to be sent out by the nominated/confirming bank further to issuing bank.
This is upto bank-to-bank, bank-to-client relations etc which are out of UCP.
(But, of course, it's strange that compliant docs were "sitting" somewhere for such a long time )

At last, docs have reached issuing bank.

It is clearly stated in UCP 600 Article 14 Standard for Examination Of Documents

a. A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation.

b. A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank shall EACH have a maximum of five banking days following the day of presentation to determine if a presentation is complying. This period is not curtailed or otherwise affected by the occurrence on or after the date of presentation of any expiry date or last day for presentation.

So from 20th of June 2008 You'll have 5 working business days to determine BY YORSELF whether presentation is compliant or not.
And then to proceed with Article 15 (Complying Presentation) or Article 16 (Discrepant documents, ...) of UCP 600 accordingly.

Good luck.

[shahriar]

dear armegado,

thats a splendid answer and i have no contradiction with you and answer. but some awkward thoughts are beating me.. little layman type. question to u and nesar... then when a issuing bank can say "since the lc has expired, i need not to put a discrepancy notice." is it only when the presenting bank has explicitly pointed out that the presentation was made after the latest day for presentation?

shahriar

[Armagedo]

Hi!

Dear Shahriar.

IMHO, for the issuing bank LC never expires due to any expyry dates or conclusions of any other banks involved.

Issuing bank MUST to check documents by itself and only basing on its examination results to take decision of whether or not presentation is compliant.

Issuing bank is obliged (or even better to say it is obliged for his own safety) to give ITS OWN notice of refusal as per Article 16(c) irrespectively what was stated in forwarding schedule of nominated or confirming bank.

LC is initially obligations of the issuing bank. Obligations of all other banks are additional to its obligations.

And even "when presenting bank has explicitly pointed out that the presentation was made after the latest day for presentation", issuing bank MUST to check presentation and 'the late presentation' should be pointed out as just as additional discrepancy. Refusal notice to be issued in this regard for ALL discrepancies.

If issuing bank will fail with refusal notice at die time, then Article 16(f) is applicable and issuing bank will be obliged to honour (even non-compliant) presentation.

Good luck

P.S. I'm not sure what should be reaction of the issuing bank, if presenting bank presents documents on basis of approval.
But suppose the same.