Letter of credit over drawn

[jim]

dear sir,

if a document is presented under a letter of credit for a value higher than the credit value and issuing bank doesnt send any refusal advice, how much should the issuing bank pay after 5 banking days?

[KennethP]

A discrepancy issue
UCP Art 16(f) ... it shall be precluded from claiming that the documents do not constiture a complying presentation.
If so, issuing bank is bound to pay the presenter full drawing amount at last.

[pebble]

if all documents are in comply with credit except the "invoice issued for an amount in excess of the amount permitted by the credit", then the issuing bank can accept it, do not raise discrepancy for it. It means they just undertake to honour the credit amount. (Art18b)
hope this useful for yr question

[KennethP]

Any difference in the case if (1) commercial invoice, draft and presenting bank's covering letter all indicate the amount claimed exceeding the LC value, and (2) only the commercial invoice with value exceeding the LC amount whereas other documents including draft and covering letter showing lesser amount that does not exceeding the LC value ?

[wongvv]

Hi !

Very good comment, Pebble !

Furthermore,
In case there are another discrepancies. What do you think if the issuing bank intentionally don't advise the discrepancies to presenting bank and only seek for the applicant's wavier? Then the applicant accepts the discrepancies. Can the applicant obtain the documents costed USD120.00 by only paying USD100.00(in case L/C amount USD100.00) ? :mrgreen:

May I have your opinion?

V.V.

[pebble]

That's my thoughtless answer when just mention one side of the issue.
Back to the two-case given by KennethP, yes, I think there is difference between them.
+ With (2), only the invoice show a value exceeding the LC amount whereas other documents showing lesser amount that does not exceeding the LC value, it will be similar to my first answer, the issuing bank may accept that invoice and just pay for the LC amount.
+ With (1), if all the documents represent for the amount claimed exceeding the LC value, and imply for an overshipment be happening, so the docs have been overdrawn. That's an official discrepancy of the docs.
(hereafter is relating to the question of V.V) "In case there are another discrepancies" so that will be official discrepancies of docs, and issuing bank have the right, within their permitted time, to seek for the applicant's waiver first. And in case the applicant accept the a/m about "overdrawn", they have to accept for full value of docs, it means, payment for the exceeding value will happen.
Only base on my own ideas, any comments are respected !

[wongvv]

Hi !

My plan is that, according to art 18 b, the issuing bank accepts the commercial invoice with excess L/C amount and decides to honor the L/C amount. So the invoice showing excess amount would not be treated as a discrepancy. The "other discrepancy" would be noticed to applicant for seeking wavier without advising presenting bank. Then, upon the acceptance of applicant, the presenting bank would be paid only the L/C amount, instead of the excess invoice amount. So the applicant could receive the "excess" value documents.

Would the plan be work?

V.V.

[pebble]

I think it's ok though issuing bank has not advised the matter of invoice to applicant, in their rights it's not a discrepancy. In some cases, the excess value of invoice is an arrangement betwwen appl and bene, a change on price etc
If there are any doubts, pls correct me and discuss more !