Accepting Discrepant Document Does Bind To Accept Future Dis

[Md.zakir Hossen]

Solicited Your decision:

Docs. that Nego. Bank presented to the to the Issuing Bank were rejected due to the fact that Insurance Certificate was presented instead of Insurance Policy. Issuing Bank does not raise the discrepancy and accept the docs for the first 02 Shipments.

However Nego.Bank presented a third set of docs containing same discrpancy. But in this case Issuing Bank raise the discrepancy and notified to the Nego. Bank discrepancy with in 05 days.

Is the negotiating Bank is right in his decision?

Zakir.

[Shabnam]

No. Its a separte transaction.

[shahriar]

Agreed with shobnam.

ICC Opinion R473 say
"The fact that two previous drawings may have been paid without identification of a valid discrepancy does not prohibit a bank from making that assertion in a subsequent drawing under that same credit. Each drawing under a credit is considered to be independent of any other."

shahriar

[Md.zakir Hossen]

Please disregard the posting as it is related with shipping gurantee
For Shabnam and Shariar
I appreciate your opinion:
Let's look at an example:
Company A had a credit line of USD100,000 for the issuance of letter of credit with Bank I against 100% cash deposit.
Company A wished to import "one lot of electronic devices" for an amount of USD250,000 but it was not able to place an additional amount of USD150,000 with the bank.
Bank I, without any knowledge of the of the same between Company A and Company X, issued a letter of credit for USD100,000 covering shipment of "one lot of electronic devices" in favour of Company X.
When the shipment arrived, Company A applied for a shipping guarantee in favour of the shipping company. Bank I approved the shipping guarantee as the value was declared as USD100,000 only.
But when documents were presented, Bank I was shocked to see that the amount claimed under its credit was USD250,000.
What did Bank I do?
Firstly, Bank I checked the documents. The documents did not comply so it issued a notice of refusal to the beneficiary citing the discrepancies.
When the beneficiary received the notice of refusal it asked for the documents to be returned. On receiving the documents, it then instructed the shipping company to return all cargo or pay for the cargo.
As the goods had already been released, the shipping company claimed under the shipping guarantee on Bank I.
Applicant already used the goods.

Now what will the Issuing Bank do?


For nesarul: I reproduce some Part of ICC Banking Commission Collected Opinions 1995-2001 (98 Article no-14,R-413)
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The issuance of a guarantee to the shipping company is outside the scope of UCP and the credit. In circumstances where the goods have been released against a bank guarantee, at the request of the beneficiary, the issuing Bank is still obliged to check the documents against the terms and conditions of the to ascertain compliance. Where a bank guarantee is required and the beneficiary consents instigates the issuance, the agreement between the parties should reflect the stance to be taken by the issuing bank upon receipt of the documents.

...........What happens if we have a discrepancy when we present documents? The issuing Bank is obliged to check the docs in accordance with UCP...and provide a a rejection notice in the event of discrepancies being observed.
Question such as “Is it possible for an opening Bank to refuse payment because of a discrepancy when the B/L has been endorsed to the buyer and if so, can the goods be returned?” are outside the scope of the Letter of Credit.

[Sergio]

Solicited Your decision:

Docs. that Nego. Bank presented to the to the Issuing Bank were rejected due to the fact that Insurance Certificate was presented instead of Insurance Policy. Issuing Bank does not raise the discrepancy and accept the docs for the first 02 Shipments.

However Nego.Bank presented a third set of docs containing same discrpancy. But in this case Issuing Bank raise the discrepancy and notified to the Nego. Bank discrepancy with in 05 days.

Is the negotiating Bank is right in his decision?

Zakir.

as the issuing bank must give a single notice to that effect to the presenter which is not peroformed by the issuing bank in the first two documents which will leads us to the idea that the applicant can go with said docs as happened in the previos two times,
according to a real case ( i'll try to give more details about it ), i think that issuing bank is precluded from claiming that the documents do not constitute a complying presentation

[Md.zakir Hossen]

Thanks Shariar.
I will appreciate if Sergio provides his information.
zakir

[shahriar]

dear Sergio

what you are saying seems correct in our daily life. but rule is something different i guess. as i have said earlier you can reject the third presentation. refer to icc opinion. you can even do so even if all the three sets of document are presented under one forwarding schedule.

shahriar