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D/P AT XXX DAYS AFTER BL DATE

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QUESTION

Dear Mr. Old Man,

As far as I know there are only two types of collection: D/P (Documents Against Payment) and D/A (Documents Against Acceptance). However, I’ve just heard about a strange collection: D/P at xxx days after BL date.

Please let me know if there is such a strange collection. If there is, what is the difference between D/P at sight and D/P at xxx days after BL date?

Looking forward to hearing from you soon.

Thanks and best regards,
TB
——

ANSWER

Hi,

According to Article 2 URC 522, collection means the handling by banks of documents in accordance with instructions received in order to (i) obtain payment and/or acceptance; or (ii) deliver documents against payment (D/P) and/or deliver documents against acceptance (D/A); or (iii) DELIVER DOCUMENTS ON OTHER TERMS AND CONDTIONS , i.e.,

– delivery of documents against partial payment;
– delivery of documents against promissory notes;
– delivery of documents against letters of underatking to pay;
– delivery of documents against a trust receipt;
– delivery of documents against bank undertaking (bank’s avalization)…
– (and of course) delivery of documents against payment of a draft at xxx days sight or after BL date.

It is agreed that of the above types of collection, D/P and D/A are the most popular terms. D/P at xxx days sight or xxx days after BL date is not too strange. I sometimes come across such type of collection instruction.

Under a D/P collection, the collecting bank can only deliver the documents against the drawee’s payment at sight and must remit the payment to the remitting bank immediately.

Under a D/P at xxx days after BL date, the collecting bank should obtain the acceptance of the tenor draft and should retain the draft and commercial documents, including transport documents, until the drawee pays the draft at maturity. The collecting bank has no authority to surrender the documents except upon payment.

Please bear in mind the key word “documents against payment” which means that in any case the collecting bank can only release the documents to the drawee when the drawee pays the accepted draft.

Kind regards,
Mr. Old Man

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32 Comments

  1. kamleshlimbachiya

    January 26, 2014 at 12:01 am

    In case if drawee wants immediate release of docs and gives undertaking to make payment on maturity (drawee is very big client of collecting bank and bill ammount is very less)can collecting on their risk Release the docs.in event after receiving MT412 if remitting bank wants recall documents before maturity. Is collecting bank obligated to return the docs ?

    Reply

  2. mroldmanvcb

    January 26, 2014 at 9:01 pm

    1) In theory, collecting bank can release the documents only after receipt of the payment from the drawee. However, in practice if the drawee is one of the big customers of the collecting bank, the collecting bank may consider releasing the documents against the drawee’s acceptance and undertaking to pay at maturity. The collecting bank bears the risk of releasing the documents without obtaining payment.2) No.

    Reply

  3. anonymous

    January 26, 2014 at 11:01 pm

    Anonymous writes:D/P at XXX days after BL date, the collecting bank can choose two the following options:1. Release docs at maturity after receiving payment from drawee.2. Release docs against payment from drawee and remit the payment to the remitting bank immediately, the same as D/P.Right?

    Reply

  4. mroldmanvcb

    January 27, 2014 at 8:01 am

    Hi,The term “D/P at xxx days sight or at xxx days after BL” may be applied as a result of exchange control requirements in some exporting countries. The disadvantage of this term, in theory, is that the collecting bank will obtain the drawee’s acceptance and only release the documents to the drawee when the drawee pays the draft at maturity. So what if the underlying cargo arrives at the destination before maturity? It is clear that the drawee (buyer) is unable to take delivery of the cargo if the collecting bank refuses to release the documents.So, in order to avoid disadvantage for the buyer, the remitting bank , if choosing the term “D/P at xxx days…” should clarify its instruction as to whether to allow the collecting bank to release the documents against payment in the event the underlying cargo arrives before maturity. If there is no such further instruction, the collecting bank should seek the remitting bank’s clarification/authorization.It’s just theory. In practice, I see that collecting banks would release the documents against the drawee’s payment and remit the payment to the remitting bank when due.Hope the above helps answer your two questions.Regards,Mr. Old Man

    Reply

  5. anonymous

    January 28, 2014 at 6:01 pm

    Anonymous writes:Thanks for your valuable opinion, Mr Old Man. Lunar New Year is coming. Wish you and your family all the best. Happy New Year !

    Reply

  6. mayakanons

    February 11, 2014 at 11:56 pm

    Can any one clear me the specific rules for draft for different type of LC?
    1. If LC available by payment then Draft is must/must not / maybe?
    2. If LC available by Deffered payment then Draft is must/must not / maybe?
    3. If LC available by Negotiation then Draft is must/must not / maybe?
    4. If LC available by Acceptance then Draft is must/must not / maybe?

    Reply

    • mroldman

      February 12, 2014 at 10:21 am

      Hi,
      No specific rules, just practice that has been followed by banks.
      1) No sight draft is required
      2) No tenor draft is required
      3) Sight draft is required
      4) Tenor draft is required
      LC available by negotiation would refer to an action of negotiation by a nominated bank of sight draft drawn on the issuing bank or another nominated bank.
      LC available by acceptance would refer to an action of acceptance by the issuing bank or by a nominated bank of tenor draft drawn on the issuing bank or another nominated bank.
      LC available by payment would refer to an action of sight payment by the issuing bank or by a nominated bank against complying documents not including drafts.
      LC available by deferred payment would refer to an action of hounour (incur a deferred payment undertaking and pay at maturity) by the issuing bank or by a nominated bank against complying documents not including drafts.
      Regarding the types of LC, I answered a similar question raised by Neville Dcosta on http://www.letterofcreditforum.com in 2007. I quote here for your further reference:
      QUOTE
      Dear Neville Dcosta,
      As you may know, an LC may be stipulated available by payment, available by negotiation, available by acceptance or available by deferred payment.
      LC available by (sight) payment does not require sight drafts to be presented and normally the payment is to be effected at the counter of the issuing bank or at its nominated bank upon receipt of the complied documents. The beneficiary under LC available by payment normally may not obtain the payment in advance by negotiating (selling at a discount) the documents at his bank.
      Different from LC available by payment, LC available by negotiation allows the beneficiary to receive the payment by negotiating the sight drafts and documents at a nominated negotiating bank which is normally located in his country. The negotiation may be effected on a with or without recourse basis. However, under a confirmed LC, the confirming bank must negotiate the documents on without recourse basis.
      Acceptance LCs and deferred payment LCs are usance LCs. The difference is that the acceptance LC requires a time draft, whereas the deferred paymet LC does not.
      Under acceptance LC, the beneficiary may receive the payment before the draft is due by discounting the accepted draft at its bank or discounting it on forfaiting markets (as the accepted draft is a financial instrument which can be transferable).
      Under deferred payment LC, after his presentation of complied documents, the beneficiary receives a deferred payment undertaking incurred by the issuing bank or its nominated bank. Deferred payment undertaking is not largely accepted as a financial instrument, therefore, normally the beneficiary may not discount the deferred payment undertaking. However, in some cases, the beneficiary can use the deferred payment undertaking incurred by the issuing bank or nominated bank as a security for the advance given by his banks.
      UCP 500 was silent on negotiating/discounting deferred payment uindertakings. The dispute between Banco Santander and Banque Paribas in connection with the discounting of a deferred payment undertaking led to the change in UCP. Under UCP 600 Art. 12 (b), the nominated bank is allowed to purchase (buying at a discount) its own deferred payment undertaking.
      UNQUOTE
      Best regards,
      Nguyen Huu Duc

      Reply

  7. mayakanons

    February 12, 2014 at 3:56 pm

    Thanks for valuable reply . Please help me the rules for RA(Reimbursement Authorization) for different type of LC?
    1. If LC available by payment then RA is must/must not / maybe?
    2. If LC available by Deffered payment then RA is must/must not / maybe?
    3. If LC available by Negotiation then RA is must/must not / maybe?
    4. If LC available by Acceptance then RA is must/must not / maybe?

    Reply

    • mroldman

      February 12, 2014 at 5:11 pm

      Hi,
      Reimbursement authorisation means an instruction and/or authorisation, independent of the LC, issued by an issuing bank to a reimbursing bank to reimburse a claiming bank, or, if so requested by the issuing bank, to accept and pay a time draft(s) drawn on the reimbursing bank.
      LC of any type (available by negotiation, by acceptance, by payment or by deferred payment) may or may not include a reimbursing bank which is authorized by the issuing bank to provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank. So, if the LC (irrespective of any type) indicates a reimbursing bank, the issuing bank will issue a reimbursement authorization to the reimbursing bank. No reimbursing bank is indicated in the LC, there is no reimbursement authorization.
      You are encouraged to read URR 525.
      Regards,
      Mr. Old Man

      Reply

  8. Patrick

    January 23, 2015 at 3:43 pm

    Hi Mr. Old Man,

    We receive an L/C from Malaysia which does not mention anything about the drawee.
    The L/C is available at any bank by negotiation and on sight basic.
    Could you please give us your advise regarding this situation?
    We do have the problem with preparing the Bill of Exchange, for your information.

    Best regards

    Reply

    • mroldman

      January 23, 2015 at 3:55 pm

      Hi,
      If the LC requires presentation of draft, then it should be drawn on the issuing bank despite that the LC does not specify drawee.
      If the LC does not require presentation of draft, then there’s no need to prepare draft.
      kind regards.
      Me. Old Man

      Reply

    • mroldman

      January 24, 2015 at 7:16 pm

      If the LC requires presentation of draft, then the draft can be drawn on the issuing bank despite that the LC does not state drawee.
      .
      If the LC does not require presentation of draft, then there’s no need for a draft to be presented.

      Reply

  9. Patrick

    April 17, 2015 at 4:40 pm

    Hi Mr. Old Man,

    I have a question about the amount L/C tolerance. Could you please give me your advise on the following case:

    L/C at sight with full amount 252,259 USD. L/C does not show tolerance and and partial shipment is prohibited.

    If we issue the invoice with the amount less than 252,259 USD, then is it a discrepancy or not?

    Your quick response is highly appreciated.

    Regards

    Reply

    • mroldman

      April 18, 2015 at 1:41 pm

      Hi,

      The information provided in your question is not enough to give a definite answer.
      Please check if your case falls into the cases referred to in UCP 600 sub-article 30 (b) or sub-article 30 (c) as quoted below for your reference:

      Sub-article 30 (b):
      A tolerance not to exceed 5% more or 5% less than the quantity of the goods is allowed, provided the credit does not state the quantity in terms of a stipulated number of packing units or individual items and the total amount of the drawings does not exceed the amount of the credit.

      Sub-article 30 (c):
      Even when partial shipments are not allowed, a tolerance NOT TO EXCEED 5% LESS THAN THE AMOUNT OF THE CREDIT IS ALLOWED, provided that the quantity of the goods, if stated in the credit, is shipped in full and a unit price, if stated in the credit, is not reduced or that sub-article 30 (b) is not applicable. This tolerance does not apply when the credit stipulates a specific tolerance or uses the expressions referred to in sub-article 30 (a).

      According to R689 / TA618, any drawing under the LC would be subject to the allowances made in UCP 600 sub-article 30 (b) or sub-article 30 (c), depending on the terms of the LC and the underlying drawing. A drawing of up to 5% less in the LC amount would be allowed under the LC.

      Kind regards,
      Mr. Old Man

      Reply

  10. Eduardo Maal

    April 1, 2016 at 5:33 am

    How do I make an LC related question to Mr. Old Man?

    Reply

  11. SUBHASH

    April 4, 2016 at 8:15 pm

    Mr. Old Man,

    First thanks for services of providing such an excellent service.

    I have a question about wrongful rejection of documents by bank.

    We have an LC wherein we submitted all relevant documents with required disclosures. However, the bank has raised discrepancies in TCN –

    1. Shipping marks as per clause 47A-E not complied with
    2. TCN does not state date of despatch

    clause 47A – E: states – SHIPPING MARKS: TRUCK CONSIGNMENT NOTE
    TRANSPORT DOCUMENTS SHOULD CERTIFY TO THIS EFFECT.

    In TCN, we stated Goods received date: 29/03/2016
    Goods Despatched: (left blank)

    Above is for second set of documents.

    For first set of document, discrepancy was noted as –

    1. Shipping marks as per clause 47A-E not complied with.

    Due to urgency, documents were sent on approval basis.

    However, once we received discrepancy intimation and refusal of documents,
    We got this checked from our banker, HSBC. HSBC confirmed that such discrepancies are invalid.

    My question –

    1. Whether the discrepancies noted are really invalid as confirmed by HSBC. This means the applicant bank acted with wrong intention to not to pay under LC.

    2. If confirmed that the applicant bank acted with malicious intention to not to honour LC and just like that created such discrepancy, what is the immediate course of action available against such unfaithful banks though it is “A” rated.

    Shall highly appreciate your comment.

    Thanks and regards,
    SC

    Reply

    • mroldman

      April 5, 2016 at 5:31 pm

      Hi,

      1. Shipping mark is not required to be indicated in the transport document. However, when it is indicated it must not conflict with that in other documents.
      I see that the wording “SHIPPING MARKS: TRUCK CONSIGNMENT NOTE TRANSPORT DOCUMENTS SHOULD CERTIFY TO THIS EFFECT” stated in F47A is ambiguous. I don’t know the wording of the shipping mark stated in the TCN,but I think the discrepancy appears to be invalid.

      2. According to sub-article 24 (a)(ii), a road transport document, however named, must appear to indicate the date of shipment or the date the goods have been received for shipment, dispatch or carriage at the place stated in the credit.
      The fact that the TCN indicates the date of receipt of the goods for shipment is acceptable. No need to indicate the date of dispatch.

      3. Not sure that I undertstand your question correctly, but when the documents are presented to the issuing bank on approval basis stating the discrepancies, the issuing bank may refuse to honour based on such discrepancies.
      Some presenting banks find the documents discrepant but they would not the documents to the issuing bank on approval basis nor stating any discrepancy. The issuing bank would examine the documents to determine the compliance of the documents and may refuse if the documents do not comply.

      Kind regards,
      Mr. Old Man

      Reply

  12. c2t_112208

    May 10, 2016 at 10:07 pm

    Dear Mr Oldman

    Relating to the invoice for the balance amount.
    L/C required in 45A as following:
    A.First payment:
    1. Invoice for 90% value of shipped goods

    B.Second payment
    1. Invoice for the balance amount based on survey draft

    -The document of the first payment are stricly conform with terms and conditions of L/C.
    -After receipt of consignment,the invoice of the second payment is presented just show the name of goods, the balance amount based on survey draft.

    -The issuing bank rise a disc for the invoice of second payment as below:
    The invoice not showing full descrip tion of goods as per f.45A of LC.

    I wonder that whether this disc is valid?

    Reply

    • mroldman

      May 11, 2016 at 8:52 am

      I cannot give a firm answer without seeing the LC and the invoice. Here’s my view based on my assumption.
      It is normal that the invoice for the balance payment would also include full goods description as that for the first payment. However, the LC in question requires an invoice for the balance amount based on survey draft, therefore, the presented invoice not showing full goods description is acceptable provided that it shows data of the survey draft or refers to the attached survey draft.

      Reply

  13. Sam

    March 9, 2017 at 2:51 pm

    Hi Mr old man
    If insurance documents we mentioned short form of consignee I:e ABC Germany but other documents there is full address is it insurance documents discrepancy

    Reply

    • mroldman

      March 14, 2017 at 9:55 am

      I think there is no discrepancy

      Reply

  14. Tuong van

    April 25, 2017 at 9:25 pm

    abc

    Reply

  15. Sam

    June 20, 2017 at 6:53 am

    I have received lc to be shipped on cip terms it has asked to show on invoice fca value freight paid and insurance premium kindly advise if it is possible to show pls explain with example

    Reply

  16. Sam

    June 20, 2017 at 3:04 pm

    I have received lc to be shipped on cip terms it has asked to show on invoice fca value freight paid and insurance premium and the payment term per lc is 80 percent after awb and 20 percent after installation kindly advise if it is possible to show pls explain with example

    Reply

    • mroldman

      June 22, 2017 at 2:31 pm

      Sorry I can’t answer now I am in hospital

      Reply

  17. T V RAJESH

    August 7, 2017 at 11:36 pm

    what is the difference between a “TO ORDER BL” blank endorsed and only a “TO ORDER BL” without any endorsement at back side . does a “TO ORDER BL” needs a blank endorsement

    Reply

    • mroldman

      August 9, 2017 at 9:39 pm

      If LC requires Bill of Lading to be issued to order blank endorsed , the Bill of Lading presented must be issued “to order” or “to order of the shipper”. And it is the shipper that would endorse in blank on the back of the Bill of Lading by signing with authorized signature and stamping with the company’s chop. The Bill of Lading made out to order is deemed to be discrepant if not endorsed by the shipper.

      Reply

  18. Cdcs

    October 30, 2017 at 3:49 pm

    Hi Oldman
    I m very confused I have received third port Lc from our customer in China and final delivery in India our customer in China have asked us to deliver goods to India could you tell me who will b conginee on invoice and awb and can we show notify party as our customers from China on invoice and awb
    How the third port Lc shipment works

    Reply

    • mroldman

      October 30, 2017 at 9:24 pm

      I cannot give answer without seeing the L/C in this case. Can you please send to my email nhduc.dng@gmail.com a copy of the L/C?

      Reply

      • CDCS

        October 31, 2017 at 9:12 pm

        hi i have sent you mail kinldy check

        Reply

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