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Dear experts,
I would like to ask general banking practice on handling discrepancy of export transaction.
I heard that the practice of handling discrepant documents for a negotiation bank in Japan is following.
1. Cable Nego. ( including cable nego after nego in case negotiation bank is not confirming bank. That is, negotiation bank pays exporter with recourse and then send out cable nego message.)
2. Dispatching documents on approval basis ( negotiation bank pays exporter with recourse).
3. Dispatching documents on collection basis.
4. Asking exporter to rectify discrepant documents.

I have question about first three methods.
What I heard about Japan`s practice regarding ``on approval basis`` is that they still discount the bill to exporter and mention nothing about discrepancy on covering letter. The certifying clause like``We certify that documents are presented in accordance with LC terms and conditions`` is not indicating on covering letter.
Is that also general practice in other countries?
If no, then what does exactly ``on approval basis`` look like?
Is that Pretend Nego? If no, what does exactly Pretend Nego look like?
As for collection basis,
does that mean sending documents on collection without paying export beforehand?
does collection basis still applying UCP or applying URC? ( I heard some people say collection basis means excluding UCP rules and treat transaction as if it is DP/DA )
Do other countries have cable nego after nego handling ?

Your detailed opinions would be highly appreciated

Regards, Luke

Hi Pal,

in my knowledge it depends on the Country, the standing of beneficiary and documents.

I will revert after checking some last experiences.

Ciao

Hi Picant,
Thanks for the comment. Look forward to your further comment.

Regards, Luke

I didn't understand your whole question but from my point of view, it would be your answer Under the UCP 600 issuing all the banks are bound to make payments under letters of credit when submitting documents (bill of freight, packing list, invoice, certificates, etc.) are shown.

Thanks for the comment, Aubreekim.
Questions are all related to banking practice of treating discrepant documents from Nego bank point of view.
I just want to know how other banks in various countries handle it.

Regards,

Hi,

As picant said, the answer to your question depends on the country, bank procedures and customer-bank relations. In case of non compying presentation, some of the the general practises :
1. The exporter's bank sends MT750 to issuing bank, stating all the discrepancies before sending documents and request authorisation to pay to beneficiary. If issuing bank (and applicant) waives discrepancies and sends MT752, exporter's bank despatches documents to issuing bank and may honour/negotiate presentation.
2. Exporter's bank may send document to issuing bank on approval basis. On the covering schedule the bank may or may not list the discrepancies. When received authorisation from issuing bank, exporter's bank may honour/negotiate presentation.
3. Collection basis not generally preferred method. Exporter's bank simply send documents on collection basis and awaits applicant to accept documents and issuing bank to remit the value of documents.

In above cases nr.1 and 2, exporter's bank generally not pay to beneficiary before receipt of authorisation and/or funds from issuing bank.

Thanks for the comment, Navi.
In case of Collection basis, is it still subject to UCP rules or is it possible to apply URC rules?
How about Pretend Nego. What does it look like ?

Regards, Luke

Hi Pals,

I check last transactions and verify that we send dociments to the issuing bank, under beneficiary's agreement, check the receipt by the issuing bank of the same(DHL Tracking p.e.) control the calendar
in the Swift Book, count the banking days and wait.
In case of reimbursement authorization, we claim reimbursement but we credit the proceeds after 2
weeks approx. We avoid to indicate discrepancies on covering letter, except evident data as credit expired or late shipment.
I observed a remittance to the issuing bank, quoting l/c number, indicating the applicant as drawee, not stating that presentation was under UCP 600. The problem was that the issuing bank has l/c dept in one town and coll dept in another town, 700 kg far!!
Ciao

picant wrote: ↑

Fri Jan 11, 2019 1:22 am

Hi Pal,

in my knowledge it depends on the Country, the standing of beneficiary and documents.

I will revert after checking some last experiences.

Ciao

Hi Mr Picant,
I really appreciate for your advice. I think that you must have passed CDCS exam. Would you mind sharing your materials about this exam with me via email: ngoaithuong91@gmail.com
Thank you so much.