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Hi Friends.
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I'm in trouble and need your comments as well as experience...
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2 months ago we received and advised a deferred payment LC to beneficiary adding our confirmation. We were presented documents and we sent them to issuing bank claiming them to be complying. However, issuing bank refused docs due to following discrepancy:
* Certificate of fumigation not signed.

We didnot object to this refusal hoping to be accepted but applicant's behave was not ethical. After 4 shipments they decided not to buy the remaining goods and saw this as a chance. After 3 weeks from the date of MT734 of issuing bank, we today received a message stating that documents will be returned to us.

Here, I have a few questions:
1) Is the discrepancy valid since there were no detail of the fumigation certificate requested in the LC? or ISBP parag.37 is applied?
2) Is there a time limit for objection to issuing bank's refusal? Can I do it now?

Hey pal,

about your first question, without having a look at the document, its bit difficult to answer. but as per ISBP, a certificate by its nature needs a sign. however one must remember that sign can be made in variety of way.

about refusing a discrepancy, there is no such time limit. but i think the theory of reasonable time apply here. your silence proves that you have accepted the discrepancy. besides if the issuing bank have had provided sufficient notice to you, then i think there is not much extra to do

dear navi,

sorry to learn your case. but i believe that ISBP 37 perfectly applies here though a look at the document would have been better. since you have confirmed the document and found it complying, i guess you have incurred deferred payment undertaking. so its between you and the issuing bank now. yes you can object. but while the issuing bank has a valid discrepancy in hand, i really dont think the objection will offer a lot. by the way, what the expiry of the credit? is there time to represent? i learned one thing here. never depends on the applicant for waiver if there is a way to replace the document.

Dear friends,
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Unfortunately document is discrepant and we are seeking now cooperation with applicant. I think they will demand a reduction in price, because the document has no effect to goods in either quality or quantity and no effect to customs formalities. They saw this a chance. Any way there will be a loss for beneficiary and our bank may be requested to disburse it. And bank may revert to us... Now we have the corrected document at hand but LC already expired. We nevertheles sent it today to issuing bank.
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We will wait...
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Regards

Dear Navi,
I'm really sorry for this matter particularly because you confirmed the credit.
However, given the fact that I suppose pretty long time elapsed , what about the goods status. Are they picked up, or laying in a port and counting for demurage? Just asking myself.... If you find out that goods were taken over by applicant you might have a strong negiotiating position in respect of reimbursement.
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Brgds
Cristian

dear cristain,

good point. but as far as saving navi is concern, i dont think that would offer much. even if we know that the cargo has been released by the applicant, we still can not bind the issuing bank on this ground under UCP. it becomes a legal issue which the beneficiary is suppose to fight. if i assume that the bill of lading was issued to the order of the confirming bank, then there may be a good legal ground to sue the issuing bank provided that the issuing bank has released the bill of lading to the applicant. but if it is to the order of the issuing bank then.... besides since the issuing bank is returning the document, i think the cargo is ok as per shipping document. in any case, it will be the bank, not navi, who will fight the case.

i feel very sorry. a banker is in problem and our knowledge is of no use.

Firstly, we all agree that the Fumigation Certificate must be signed, as per ISBP 37
- If a Fumigation Certificate was required by the credit, even if the credit didn't mention it to be "Signed" then, ISBP37 applies, and document is discrepant and no way to run.
While, In case the Fumigation Certificate is not required by the Credit; I would like to present another interpretation of ISBP Art.37 as well as UCP Art.14 a. & g. on which I hope to receive your comments upon.
ISBP 37

Even if not stated in the credit... in accordance with the provisions of UCP 600

UCP600 14 a.

on the basis of the documents alone

UCP600 14 g.

A document presented but not required by the credit will be disregarded and may be retured to the presenter

We can notice that ISBP 37 do mean the general dealing with certificate and drafts, but within the provisions of the UCP which states that any document not required should be disregarded.

Any ideas!?

While the certificate of fumigation does not specificaly call for details to be stated therein, it was indeed required among other documents as I understand from Navi's original posting.