Best Trade Solution

Dear Experts,

What is use of draft in imports side. We received draft from the presenting bank along with other shipping
documents in which we found discrepancy in drawee and lc number.

Please confirm shall we proceed with transaction as clean as this is only discrepancy in the document.

How it is affect the BAU?

Thanks&Regards
Dinesh

Dear,
Whether draft is a document or not is a long debated issue in the LC world.
There are lots of argument.
Someone say that if your ask for a draft as a condition under field 46A or 47A, then this draft is subject to examine and so on.
My point of view is that if the drawee [including endorement] on the draft is conflicting interms of "drawee" parameter.. you can raise this as discrepancy.
.
Next ISBP will provide us specific guideline on the issue.
regards
Nesar

in my opinion, presenting bank must be indicating right drawee as mentioned in the lc of the issuing bank.
If it is wrong drawee so that the issuing bank cannot get the right to pay for the documents.
the drawer give the presenting bank the right to send their documents to issuing bank to claim the reimbursement by signed on draft and draft to order of presenting bank.
Presenting bank must be drawn on issuing bank or reimbursing bank to give them the right to pay for presenting bank.
Give me advice if i am wrong

I have read a case about a beneficiary who failed to submit the draft required under a credit. The court held that the issuing bank who paid irrespective of non-submission of the draft acted contrary to the terms of the credit. Based on the decision, I would said the mistakes in drawee's name and Lc number are discrepancies.

Dear,
in a letter of credit transaction draft always uses as a formal claim tools... the importance of draft under a letter of credit transactions is always other documents.. draft is not at all require [other than credit available by acceptance]. Hence mixing up letter of credit with negotiable instrument act might not help us to take proper decision...
.
in addition to above, ICC also opined to keep draft by confirming bank where draft drawn on confirming bank...and further said that there are also other documents based on which issuing bank can defined bill amount.
.
there are also one docdex decision, where draft is dated [sight draft credit available by payment] probably DOCDEX decision 260... which was not discrepancy despite ISBP paragraph 13.
.
but according to analytical commentary of UCP 600 written by James e Byrne.... the issuing bank has the right to check basic eliment of draft such as:drawee name, amount etc. and may raise discrepancy if not in order.....
.
regarding missing of LC number:
.
ICC issued more than 3 official opinion on the issue... its not discrepancy.
regards
nesar

The following extract from 'Benjamin's Sale of Goods' 7th edition may be a good reference for us to consider this question.

'In Kydon Compania Naviera SA v National Westminster Bank Ltd (The "Lena") Parker J. held that, even although a sight draft might have no legal effect and served no useful commercial object, it had to be tendered if called for in the letter of credit. Moreover, it had to be drawn on the designated drawee and not on some other party. American decisions go in the same direction. It is true that, as the drawing of the draft is essentially a method of, or procedure employed for, obtaining payment, it was, at one stage, held that the tender of a draft could be excused even where it was specifically required in the documentary credit. But in view of the general principles of strict compliance, the opposite view, expressed in recent cases, is to be preferred.'

ICC Official Opinion TA703rev states that a draft is not to be considered as documents required under a credit so mistakes in the draft should not be raised as discrepancies. The opinion is obviously contrary to the court decision.

Now there is a dilemma, especially for those situated in the country of the court decision, of following the court or the ICC. We all know that law overrides the UCP but court will refer to ICC practices when making decision. Until another similar case goes to court, there are still uncertainties whether the court will support the ICC practices.

More comments appreciated.

Dear Kevin

well quoted case. very interesting.

IMHO, discrepancy in a draft and not presenting a draft is not the same thing. R528, as mentioned by nesarul, is a case where the beneficiary has presented the draft and retained by the confirming bank. besides it only applies to sight draft. and so is docdex 260. my understanding is that we do not check draft in detail, because there is no clear guideline in UCP and in LCs in most cases. if the LC says that draft has to bear xyz, then it has to bear XYZ and failing to do that would be a discrepancy. So I see no conflict between the opinions and the court case. failing to provide a draft would be a Discrepancy.

to answer the original question, the draft is discrepant because it got the drawee wrong.