Amendment effective only after realization of charges

berry · Post by **berry** » Wed Sep 01, 2010 12:16 pm

friends,

we have faced an amendment which says its effective only after USD 120 amendment charges are remitted to the issuing bank by the beneficiary. what do you think about this clause? is the amendment ineffective or should we disregard such clause as indicated in article 10; i.e amendment effective unless rejected by the beneficiary.

haribargava · Post by **haribargava** » Thu Oct 28, 2010 8:18 pm

Hi Berry,

I too of the same opinion that we can disregard the clause unless similar condition is incorporated at the time of issuance.

Do let me know what action you took!

Rgds
Hari

Bhagirath · Post by **Bhagirath** » Thu Oct 28, 2010 9:38 pm

Hi friends,

May be the a/m article can be considered in this case as it says :

A credit or amendment should not stipulate that the advising to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges.

Other comments on this appreciated

Rgds,

loankim · Post by **loankim** » Fri Oct 29, 2010 1:17 pm

Hi all,

i think that the consent of the beneficiary is a determining factor for amendments to be effective. By stating like that in the amendment ( or in the credit) shows me that the issuing bank try to take defensive action for collecting their charges.
While i admit that the issuing can indicate any requirements in the credit according to their internal procedure guides ( the advisng bank should inform to beneficiary this before advising ), i still argue that the above statement is wrong practice.
i used to face, in some cases, the advisisng bank ask the issuing bank to delete some clauses releated to either collecting charges from the beneficiary or must inform to them when the advising bank cant collect within the validity of the credit, if the issuing bank still want them to advise.
.
Your comments appreciated !

regards,

iLC · Post by **iLC** » Sat Oct 30, 2010 8:18 pm

in my opinion, the amendment is effectove irrespective of the realization of charges. LC or amendment becomes effective even when they are not advised to the beneficiary. more comments appreciated.

abrar · Post by **abrar** » Sun Oct 31, 2010 1:54 am

This is a bit like the concept of the sound of a tree falling in the forest without the presence of anyone to hear the sound. Does the fact that no one is there to hear it, make the sound any less real?

An issuing bank is bound by the terms of an amendment as soon as it has been "issued", and this may be defined from the point "it leaves the issuer's control" (as in Art 4 of URDG758). Therefore, it could also happen that the beneficiary may decide to perform under the terms of the amendment of which it may have prior knowledge, notwithstanding absence of the physical receipt of the amendment. However, it is also clear that the wording of the amendment stipulates that it becomes effective only on realisation of the charges.

Although the practice is to be discouraged (Art. 37 c), it is debatable whether by constructing the amendment in this manner, the issuing bank is actually "expressly" modifying or "excluding" any of the UCP articles (see Art. 1). My view is that in the above case, no such express modification is being made, but the amendment is however expressly stating that it does not become effective without the realisation of the charges, and so it falls back to application of Art. 37 c.

Through the use of the word "should", Art 37 c appears to discourage, rather than outrightly prohibiting the practice. Therefore, although admittedly bad practice, my view is that the pre-payment of charges under the amendment cannot be ignored.

mia vervacke · Post by **mia vervacke** » Wed Nov 03, 2010 6:16 am

In my opinion the amendment is effective as from the moment it leaves the issuing bank. However this clause does not prohibit the advising bank to advise the amendment to the beneficiary without paying the charges. Advising the amendment to the beneficiary is merely an action of passing through the information received.

Only if beneficiary expressly accepts the amendment (f.e. by presentation of documents conform to the amendment), beneficiary is reliable for payment of issuing bank charges. An amendment can not be accepted partially as such If you accept the amendment, you also agree to pay the issuing bank charges.

If no documents are presented (l/c expires unutilised) or beneficiary expressly rejects the amendment, beneficiary is not reliable for payment of issuing bank charges.