CLARIFICATION ON DRAFTS

vinodkoli · Post by **vinodkoli** » Wed May 27, 2009 12:06 am

Need your assistance again..

When Docs are presented, whai if in a scenario where the Drawee is issuing bank, but bene has presented a Draft
drawn on NEGOTIATING Bank ?
Are the docs discrepant ?
can we forward the Draft to issuing bank ?
Suppose in a case, where the DRAWEE is some third party bank (Reimb bank) & bene has presented a draft which is Drawn on Issung bank, then, do we need to fwd the draft to issuing bank when docs are going in trust ?

Regards,
Vinod.

cristiand969 · Post by **cristiand969** » Wed May 27, 2009 7:15 pm

There is one answer for both scenarios: drafts are discrepant and must be replaced accordingly.
i would like to draw your attention on art 52 of ISBP : The draft must be drawn on the party stated in the credit

shahriar · Post by **shahriar** » Wed May 27, 2009 9:37 pm

i agree with cristian. if the credit calls for a draft to be drawn on issuing bank, it must be drawn on the issuing bank in any circumstances and credit must be available by negotiation then (unless the rule is expressly modified in the credit). for a swift LC, the swift rule also applies which defines 42a as "This field identifies the drawee of the drafts to be drawn under the documentary credit."

vinodkoli · Post by **vinodkoli** » Wed May 27, 2009 10:28 pm

Dear All,
Thanks for your comments.
But I still am not getting there...
When the LC calls for a Draft to be Drawn on Issuing Bank, But bene presents a Draft which is Drawn on Negotiating bank and that the Nego bank makes him aware of this situation / Discrepancy, But still the Bene wishes / asks the nego bank to forward the docs on Approval basis , Then what stand should the Nego bank take ?
Should it fwd the Draft to IB ?
Or just keep it with self ?
OR should it return the same to bene ?

Regards,
Vinod.

shahriar · Post by **shahriar** » Wed May 27, 2009 11:24 pm

i think its very unusual for a beneficiary to ask to forward a document while it contains a curable discrepancy especially when the discrepancy relates to a document produced by the beneficiary.
to answer your question, unless you are a confirming bank, you have a variety of option open before you -
1. forward the document without negotiating it
2. refuse to take it up
3. seek issuing bank approval for negotiation with this discrepancy before forwarding them
4. negotiate and forward the document with this discrepancy which is a very bad idea

o one more thing, since the draft is drawn on your bank, you can not negotiate

Judith · Post by **Judith** » Thu May 28, 2009 8:59 am

Why does the beneficiary insist on drawing the draft on the negotiating bank?

Also, as per article 2,

Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank)…