Hi all....Here is an example
LC is issued by bank ABC in USA .It is available with BANK XYZ in China.....Now the client of BANK XYZ submits the documents to BANK XYZ.
The LC is SIGHT L/c..
B/L is consigned to issuing bank ABC........
The issuing bank BANK ABC recieves the documents and the documents are DISCREPANT and sends it to the APPLICANT for ACCEPTANCE AND WAIVER.....
The applicant accepts and makes the payment.......The payment is released by the issuin bank......Meanwhile....the APPLICANT recieves the goods and finds the goods are defective and not up to the mark........My questions are
1)Can the APPLICANT ask for refund and get back the payment..Is he entitled?Is there any provision......rules etc....
2)In the above example what if the documents are presented to any bank by the BENEFICIARY other than BANK XYZ?
Anyone ...
zapcoolsail
Answers
Hi !
Ans 1.
The payment effected by issuing bank is on without recourse basis. It means that proceeds can't be recovered from presenter once the issuing bank paid out.
However, if the applicant find the there is a valid discrepancy on the documents which is not pointed out by issuing bank, the applicant may claim the money back from issuing bank for their fault.
Ans 2.
The results are no difference, since the L/C available with the nominated bank also available with issuing bank.
Hope it may help!
V.V.
read the small sentence
Hi Friend,
documentary credits are based on words, documents too. When the applicant accepts document, discrepant or not, always signs a bank form that documents have been fully accepted, also if some discrepancies could be found later.
L=C is a mean of payment and cannot follow the behaviour of buyer and goods. Art 34 is clear ! However applicant could sue buyer if the goods dont respect the contrattual quality.
Ciao
reasons for applicant's rejection
Hi Pan !
I agree that many bank always add the exemption clauses on their acceptance of documents/discrepancy. However, if there is the breach of fiduciary duty of banker, the exemption clause may not be workable. It depends on the local law. In many case, the banks would not like to affect their reputation, and they compromise with their customers.
On the other hand, although UCP or ISBP do not mention the rule for rejection of applicant, the position of ICC can also be seen in other publishing, eg. ISP98 rule no.
5.09 Applicant Notice of Objection
a. An applicant must timely object to an issuer's honour of a non-complying presentation by giving timely notice by prompt means.b. An applicant acts timely if it objects to discrepancies by sending a notice to the issuer stating the discrepancies on which the objection is based within a time after the applicant's receipt of the documents which is not unreasonable.
c. Failure to give a timely notice of objection by prompt means precludes assertion by the applicant against the face of the documents received by the applicant, but does not preclude assertion of that objection to any different presentation under the same or a different standby.
Therefore, it implies that applicant's rejection is possible in ICC's view, but it isn't inside the UCP & ISBP's scope. V.V.
UCP 600 REFUND
Dear V.V Thanx for the clarifications.....
But UCP is not clear on the refund aspect.....Also the applicant has accepted the earlier discrepancies......how come....??
2)pls note that the documents are presented to a bank other than the nominated bank.....what can happen in that case....
Regards
zap
Additional notes
Hi !
You are right! UCP doesn't mention the aspect of refund to applicant. Because it treats L/C applicant not a party of L/C. Referring to Ans 1, if the applicant can find the valid discrepancy not stated in the acceptance, they have a chance to claim the money back from opening bank.
As I mentioned in Ans 2, L/C available with nominated bank also available with issuing bank. Therefore, even the documents were presented to a bank other than nominated bank, that other bank can also act as the banker of beneficiary to present the documents to issuing bank for payment. And issuing bank is responsible for payment against the compling presentation without excuse that the documents were not presented by nominated bank.
Hope they are clear now !
V.V.