Dear experts,
L/C field 41A: “Available with ABC Bank, China.”
L/C field 78: Intr to Payg/Accptg/Negotg Bank:
“ABC Bank, China holds special reimbursement instructions. All documents drawn under this credit must be presented to us through them.”
ABC Bank received documents form beneficiary’s banker XYZ Bank.
After checking documents with discrepancies, ABC Bank sent MT734 refusal notice to XYZ Bank , and at same time, ABC Bank immediately forwarded documents to issuing bank. (done in same date)
Data in the refusal notice MT 734 :
Field 72: “As per L/C terms we have forwarded the docs to our correspondent in applicant’s country, documents are held until applicant’s acceptance.”
Field 77: listing discrepancies: xxxxx
Field 77B: HOLD.
After receiving refusal notice by XYZ Bank, he declined it, claiming that documents were sent to issuing bank without his prior approval., and complained that ABC Bank would not let the chance for beneficiary to rectify documents and is violating UCP article 16 C thus ABC Bank is precluded from claiming non complying presentation as per art. 16(f)
ABC Bank disagreed with reason that in the L/C terms filed 78 which had clearly stated that they have the right to send out documents to issuing bank..
Which one is correct?
Kindly have your comments.
Violation of Art. 16
Asd long as art. 78 of the credit did not contain a special clause with witch ABS Bank was explicitly authorized to relay discrepant docs to issuing bank and applicants for a waiver without consent of the presenter, this is a severe violation of ARt. 16 of UCP 600. ABC Bank is forced to compensate for any damage caused by their malhandling.
As long as the applicant and the issuing bank take up the docs, they will be fine. But if one of them should refuse to do so, they owe the presenter the full doc value!
-Each long journey starts with a small step-
Best regards
Frammi
IF A + B can be liable, this doesn't mean C can never be liable
Dear Guoking,
In fact, ABC bank never has been authorized by either the UCP 600 nor by the presenter to present non-complying documents to issuing bank, thus rendering a correction impossible.
Due to the contractual obligation which were injured by their action are they obliged to compensate.
That such action is not foreseen by the UCP does not mean that ABC bank is not liable. For example, if they would burn the documents - this is something not mentioned in the UCPs. Would you also think they were not liable?
-Each long journey starts with a small step-
Best regards
Frammi
Thanks Frammi..now I agree with you.
DEar Frammi,
You not even possessed good knowledge of DC operations but also in Law.
Thanks for your reply.
Dear Frammi, not fully agree with you...
Dear Frammi,
As you said the nominated bank ABC Bank is forced to compensate for any damage caused by their malhandling.
But Art. 16 (f) states " if an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation" This art. states only ISSUING BANK and CONFIRMING BANK are liable for mal-handling docs. but excluding NOMINATED BANK. What do you think?
Please have your comments.
No need to comply art 16 for a "disqualified" nominated bank?
Dear all,
As in my case, if the nominated had not expressly agreed himself to act as a nominated bank. (art.12 (a), Would his action of sending of refusal notice constitute him to act as a nominated bank?
If yes ,he must he follow refusal procedures according Art.16, right?
If no,(means he is no longer a qualified nominated bank), must he obtain prior consent from presenter to send out discrepant docs to issuing bank?
Thanks.
ABC Bank is wrong
Hi friends,
first of all you have to inform us, if the l/c was available by payment, acceptance, deferred payment or negotiation.
I understand that was by payment with the nominated bank ABC Bank: The latter having received documents and not found them correct, had to sent a notice of refusal to presenting bank asking for further action, so she did but having quoted HOLD, ABC Bank had to keep documents awaiting further instructions by the presenting bank and after few days send back all documents.
IMHO ABC Bank made a mistake and is responsible towards presenting bank and L/C beneficiary.
Regards and Ciao
Hi Pan.
Hi Pan,
L/C is available by payment.
If in above case, if there is no wording of HOLD in MT 734, can nominated bank based on the wording stated under L/C 78 field forwarding dox to issuing bank without prior agreement by presenting bank?
Which bank ?
Hi Guoking,
IMHO, ABC Bank could follow these insctructions only if the presentation is correct, or, I dare say, if a not adjustable discrepancy is found, i.e L/C expired.
Nice writing to you:
Ciao
I used to work for that bank
I used to work for ABC bank, or a bank that has the similar language.
ABC Bank is wrong as per article 16. They had no right to forward the documents to the issuing bank without the instruction of the presenter if they are discrepant. Even if there is a discrepancy that is not adjustable.
A recent court case in the US prompted the wording in Art 16 because of the following.
The issuing bank notified the presenting bank of discrepancies and then proceeded to contact the applicant for a waiver and accepted the waiver without instructions from the presenting bank. They only notified the presenting bank of discrepancies. The court found the following. Since the issuing bank did not take up the documents as a complying presentation and did not have instructions to contact the applicant and release discrepant documents, they did not have a right to release the documents that were discrepant since the beneficiary still "owned" the documents.
Article 16 gives the right of contacting the applicant for a waiver solely to the issuing bank. So any other bank must either hold the docments, return the documents or follow previous instructions from the beneficiary. ABC bank clearly did not do this.
As to their defense for the clause giving them the right to forward the documents, the clause states that they have special reimbursement instructions. This would mean that there will be reimbursement, so the documents do comply and the presenter will get paid. This is definitely not the case.
Now what recourse do you have? There is no recourse against the issuing bank as per Art 37. Your only recourse is against ABC bank.
Good luck, and I hope you receive payment soon.
Best regards,
LC Sam
Confusing example Sam!
In the court decision matter you stated that it was the issuing bank releasing the docs after the apllicant waived the discrepancies. Assumed that the issuing bank rejected the docs under Art. 16 c) iii) b) that was completely correct.
Please check again. Either it was not issuing bank or the judge was drunken!
-Each long journey starts with a small step-
Best regards
Frammi
I am sorry for the confusion
Hi Frammi,
I failed to mentioned that the example was under the UCP 500. While the regulations have changed to protect the bank under standard practice (Art. 16 c) iii) b)) the concept of the ownership of documents applies.
So here is how I see it.
1. Since only the issuing bank can apply Art. 16 c) iii) b), all other banks must act under either Art. 16 c) iii) a), Art. 16 c) iii) a, c) or Art. 16 c) iii) d).
2. The bank in question is not the issuing bank.
3. The bank in question can not approach the applicant for a waiver.
Therefore the beneficiary still own's the documents and any title associated with the documents. Any action taken outside of Art. 16 c) iii) a), Art. 16 c) iii) a, c) or Art. 16 c) iii) d) is beyond the scope of the bank and they are liable for the result of such actions.
Even if the applicant accepts and pays for this set pf documents, the beneficiary can sue for lost funds if they found a different buyer willing to pay more for the merchandise that is associated with this set of documents.
I hope this makes it a little clearer.
Best regards,
LC Sam