L/C Lost in transit between advising bank and benefeciary

[nesarul]

Dear All,
an issuing Bank issued a credit and sent it to advising bank, & advising bank decided to advise and subsequently courrier the credit to the beneficiary, But during this transit the credit reported lost.
query:
whether the credit is treated as advised or not.
Thanks
nesar

[shahriar]

dear nesar,

i have a similar problem few days back. anyway advising a credit has two part; verifying the authenticity and and transmitting it accurately. if the document is lost in transit, i believe that the 2nd function is unfulfilled. therefore there is no reason to consider the lc as advised one. however the lc will be still operative one and the issuing bank cannot deny its undertaking.

regd

shahriar

[nesarul]

Dear Sir,
thnak you for your reply. So far I know in order to advise a credit, an advising bank has to perform two function 1. to satisfy aparant authenticity and 2. accuratly reflect the terms & condition of the credit. I am not sure whether transmitting accurately is a another function that an advising bank has to perform. would you pls make some reference on it or clarify me a bit more to make me more clear.

Yes I agree with you that the credit is operative one and issuing bank can not deny its undertaking on credit.

awaiting for you reply.
nesar

[Md.zakir Hossen]

Sorry ,at this moment I can not make any refer.
But I could not found any problem.
If it is local credit,then use the Second copy i,e, the Advising Banks copy.
If it is SWIFT copy, then Your SWIFT room also has the record.If it is problem to collect the SWIFT copy,then I believe you have the photocopy.

Am I wrong? Advise me.

[shahriar]

dear nesar,

abt ur point 2.accuratly reflect the terms & condition of the credit.
sofar i understand that there is only one way by which the advising bank can accurately refect the terms of the credit before beneficiary is to give a exact copy of it. i think you can substitute giving with transmitting here.

shahriar

[nesarul]

DEAR SIR,
MY QUERY IS WHETHER THE COURIER ADVISED CREDIT WHICH IS REPORTED LOST IN TRASIT BETWEEN THE ADVISING BANK AND THE BENEFCIARY WILL BE TREATED AS ADVISED OR NOT.
.
I EMPHASIS ON THIS PARTICULAR ISSUE TO UNDERSTAND THE ADVISING BANK'S BANK FUNCTION MORE CLEARLY.
.
FOR SHAHARIER:
THE WORD "ACCURACTLY REFELECT IS NEWLY INCORPORATED IN THE UCP 600, BUT IT IS NOT AT ALL NEW IN INTERNATIONAL TRADE. UCP INHERITED THE WORD FROM ISP 98.
.
HERE I QUOTE THE MEANING OF "ACCURACTLY REFLECT OF TERMS AND CONDITIONS OF CREDIT FROM "FREQUENT ASKED QUESTION" WRITTEN BY GARY COLLYER:
"THE WORD ACCURACTLY REFEFLECT MEANS "THE RULE REQUIRE THE BANK TO ENSURE THAT ALL THE DETAILS OF THE CREDIT OR AMENDMENT THAT ARE RELEVENT TO THE BENEFICIARY ARE SENT TO THE BENEFICIARY"
.
ITS ALL ABOUT REFLECTION OF THE TERMS AND CONDITIONS OF THE CREDIT NOT ACCURACTLY TRANSMISSION OF CREDIT.
THNAKS
NESAR

[shahriar]

dear nesar,
let me explain my position. i agree with you about accurately.... now the question is for whom the advising bank is required to reflect the terms and conditions. ofcourse the beneficiary. now if the lc is lost in transit, that means nothing is reflected to the beneficiary about the terms of the credit. if nothing is reflected, how can be the credit considered as advised?

shahriar

[nesarul]

dear Shaharier,
what ill thought is sorrounded in my mind is that:
Sub article:7(b)
an issuing bank is irrevocably bound to honour as of the time it issues the credit.
.
that means if the issuing bank issued a credit but later on garbled, lost in transit, still it will be remain obligated on its credit'
.
i know the function oif advising bank and the issuing bank is quite different.
.
if you think in the following way:
if banks perform a function as per UCP i.e. issuance, advise, confirm, negotiate, it (bank) will be liable for its(function]

consequently, if the advising bank perform two function:
.1. satisfied itself apprant authencity of the credit.
2. accuractly reflect the terms and conditions of the credit.
although the courier advised copy is reported lost, the advising bank has already been completed its two function as per sub article 9(b), the credit will be treated as advised.
.
pls be remember that its all about my ILL THOUGHT. need not to be taken seriously.
thanks
nesar

[shahriar]

dear dear nesar,

u always ask me to think critically and i really think that i should do so.
and now im going to change my whole opinion....

Article 35

Disclaimer on Transmission and Translation

A bank assumes no liability or responsibility for the consequences arising out of delay, loss in transit, mutilation or other errors arising in the transmission of any messages or delivery of letters or documents, when such messages, letters or documents when such messages, letter or documents are transmitted or sent according to the requirements stated in the credit, or when the bank may have taken the initiative in the choice of the delivery place in the absence of such instruction in the credit.

that means in our case the lc should be considered as advised.

you know whats the best thing being not an expert? u can change ur opinion anytime!!

[nesarul]

Dear Sir,
thanks for your posting.now you and me are in similar line. but i am not sure whether both of us are in right path or not.i possed the same question to some international reputed experts, let us have their opine and discus it on this forum more vividly.
.
thanks
nesar
.

[shahriar]

dear nesar

i will be wating

shahriar

[ldt5205]

Dear Sir,
thanks for your posting.now you and me are in similar line. but i am not sure whether both of us are in right path or not.i possed the same question to some international reputed experts, let us have their opine and discus it on this forum more vividly.
.
thanks
nesar
.

Have you receive any more opinions from experts?
pls let us share them.

[ajoy]

Nesar wrote:

Dear All,
an issuing Bank issued a credit and sent it to advising bank, & advising bank decided to advise and subsequently courrier the credit to the beneficiary, But during this transit the credit reported lost.
query:
whether the credit is treated as advised or not.
Thanks
nesar

A hard question to answer. One can argue that the Advising Bank has fulfilled its functions as per ICC ...but can the LC indeed be treated as advised from a practical point of view if the LC never reached the bene. The advising bank advises the LC to the bene and bene only...( no 2nd advising bank here). If bene has not recieved it who has the LC been advised to....?

Another side to it is somebody finds the LC and submits docs under it to a bank other than the Advising bank. Even if this party was commiting a fraud /impersonating the bene can the negotiating bank argue that they have paid under an original LC which on the face of it was advised duly by the advising bank....?

So do let us know the experts opinion on this ? Should be interesting ?

Dear Hossen ,

You state as below:

Sorry ,at this moment I can not make any refer.
But I could not found any problem.
If it is local credit,then use the Second copy i,e, the Advising Banks copy.
If it is SWIFT copy, then Your SWIFT room also has the record.If it is problem to collect the SWIFT copy,then I believe you have the photocopy.

I agree that the copies are readily avaiable but advising bank needs to take some precautions before they issue a duplicate. Otherwise they might land in pretty thick soup.

These precautions / steps may vary from country to country so request you all to post any country specific practices you know off.

Cheers

[ajoy]

I said

A hard question to answer. One can argue that the Advising Bank has fulfilled its functions as per ICC ...but can the LC indeed be treated as advised from a practical point of view if the LC never reached the bene. The advising bank advises the LC to the bene and bene only...( no 2nd advising bank here). If bene has not recieved it who has the LC been advised to....?

Another side to it is somebody finds the LC and submits docs under it to a bank other than the Advising bank. Even if this party was commiting a fraud /impersonating the bene can the negotiating bank argue that they have paid under an original LC which on the face of it was advised duly by the advising bank....?

I wanted to say :

An hard question to answer:

One can argue that the Advising Bank has fulfilled its functions as per ICC ...but can the LC indeed be treated as advised from a practical point of view if the LC never reached the bene. The advising bank advises the LC to the bene and bene only...( no 2nd advising bank here). If bene has not recieved it who has the LC been advised to....?

Another side to it is somebody finds the LC and submits docs under it to a bank other than the Advising bank. Even though this party would be commiting a fraud /impersonating the bene can the negotiating bank argue that they have paid under an original LC which on the face of it was advised duly by the advising bank....? maybe yes but they are still responsible for checking the bona fides of the bene so they donot have any claim on the Advising bank.

Therefore I am not sure if it really matters whether the LC may be treated as advised or not.

To me the real issue here is a lost document (negotiable) which can be misused by fraudsters. An Advising bank is obliged to inform the Issuing bank of the lost LC because the IB is commited to pay under its LC.

In case Advising Bank advises a duplicate to bene now , they must do the following first:

1) Inform the Issuing bank of the lost LC and issue a duplicate under thier instructions/concurrence
2) restrict the LC to themselves (again with instruction from Issuing Bank.)

Also , Issuing bank must make sure that they reimburse after double checking with advising and now nominated bank.

Did I miss something ?

Can the lost LC be misused in other ways i.e not necessarily for submitting fraudulent docs?

Do you think such precautions are necessary? would you add more?

Cheers