documentary credit without presentation

[jim]

dear sir,

i have a strange request. my client wants me to issue a LC under which all the document will be sent directly to the consignee; which is not the client and is in another country. no document will be sent to us or any other bank. on a predefined date we are suppose to transfer the fund to a bank nominated by the beneficiary. i am very much confused. please advice

[iLC]

its very much possible to issue a letter of credit apart from our conventional ones. to be a documentary credit, the issuing bank must request at least one document. a simple claim from the beneficiary should do the job. since you are requested to issue a LC where you will reimburse on a predefined date, i guess there is no nominated bank and there will be no presentation of documents. hence your proposed transaction is anything but a documentary credit

[Judith]

A letter of credit that does not require presentation of commercial documents is referred to as a ‘Clean Letter of Credit’. (Much like clean collections under URC 522.) However, the letter of credit must call for at least presentation of a demand or a draft from the beneficiary. In this case, request the beneficiary to present a sight draft drawn on yourselves or a written demand made on you following which payment can be made.

[Ozoda]

Hi,

It is recommended to issue a "Clean documentary credit" only for high standing clients, due to the fact that the preparation of the single document (draft or demand) is very simple, and there is a great risk of fraud.

[cristiand969]

The basic definition of a documentary credit is that a payment is triggered when a presentation of a set of complying documents is made. The form of transaction chosen (LC) in this particular case is totally wrong and unaceptable.