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EARLY PRESENTATION

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QUESTION

Dear Mr Old Man,

I am Dang from Vietnam Prosperity bank. I know that you usually give valuable oppion for difficult cases from bank in Vietnam. Today, our bank faces with a difficult case and I would like to seek your valuable idea:

L/C required:
Latest date of shipment: 10 Aug 20…
Period for presentation: After 21days from the date of shipment but within the validity of the credit
Presented docs:
Shipment date: 01 Aug 20…
Issuing bank received the docs on 10 Aug 20…

On 18 Aug 20…, after 05 working days from the date issuing bank received the doc but no payment, presenting bank sends msg to the issuing bank tracing payment. One day after, issuing bank informs that as the doc early presented, they hold the doc to the earliest date on which the doc should be presented ( 22 Aug 20…). On 23 Aug 20… they start to examine the docs to determine whether the docs is complied with and they will reverse to presenting bank the result on 29 Aug 20… (05 working days after 22 Aug 20…)

The Question is that:

1. Whether action of issuing bank is reasonable (holding the doc until the earliest date on which the doc should be presented and start to exam the doc after that day)?
2. Is issuing bank required to send swift message to presenting bank within 5 working days after receiving the doc to inform that they are holding docs until 22 Aug 20…
3. In case, presenting bank has negotiated the document, can they claim issuing bank that issuing bank precluded from claiming that the document do not constitute a complying presentation because presenting bank has not received any reply from issuing bank within 05 working day and presenting bank have the right to claim issuing for delay fee count from 17 aug 2014 (05 working days after issuing bank receive the doc, grace days exclude (if any)).

We hope to receive your response in the soonest time.

With many thanks,
Best regards

Khuất Hải Đăng
Checking doc manager
Vietnam Prosperity Commercial JS Bank
—————-

ANSWER

Hi Dang,

Instead of giving a direct answer to your question, I would like to quote hereunder a discussion on the same topic on DCPro Discussion Forum where I made my own comments (signed as N.H.Duc).

Hoping it is helpful.

Kind regards,
Mr. Old Man
———–
EARLY PRESENTATION

QUERY FROM THI THUY MYT (VIETNAM)
There is one set of docs which was presented to our bank early than L/C required (L/C required docs must be presented not early than 10 days after B/L date. However, docs presented with 05 days after B/L date). We advised discrepancy as early presentation. After 10 days from B/L, negotiating bank sent msg to state that the a/m docs presented as L/C required at this time and request us effect payment. Pls let me know their opinion is wrong or right? thanks so much

COMMENT FROM N.H.DUC (VIETNAM)

Hi,

If the negotiating bank’s correction message is sent to the issuing bank within the period for presentation, i.e., not earlier than 10 days after bill of lading date and prior to the expiry date for presentation, the discrepancy of early presentation is regarded as corrected complying with the credit requirement and the issuing bank must honour.

Best regards,
N.H. Duc

COMMENT FROM THI THUY MYT (VIETNAM)

Hi,

Pls let me know which foundation you think so. In my opinion, early presentation is an action happened and it can’t comply at the future time.

COMMENT FROM N.H.DUC (VIETNAM)

Hi,

My comment was based on the common sense approach and my years of practical experience with L/Cs.
Hoping more comments from other experts would help clarify the point.

Best regards,
N.H.Duc

COMMENT FROM GLENN RANSIER (UNITED STATES)

The beneficiary owns the documents until they are honoured or negotiated (without recourse). They have the right to cure any defect in which they are able. If they can cure a discrepancy within the time mandates stated in the LC then the documents must be considered as complying. The ICC has always supported the beneficiary’s rights to cure discrepancies.

COMMENT FROM THI THUY MYT (VIETNAM)

If set of docs is not considered as early presentation from new date in the future. Have we maximum of five banking days following the that date of presentation to determine if a presentation is complying? Tks

COMMENT FROM N.H.DUC (VIETNAM)

Hi,

Though UCP 600 allows each bank (nominated bank, issuing bank and confirming bank, if any) to have a maximum of five banking days following the day of presentation to determine if a presentation is complying, a fair bank should not make full use of such a period to delay the payment once the compliance is determined earlier, especially when L/C is payable at sight.

Best regards,
N.H.Duc

COMMENT FROM GLENN RANSIER (UNITED STATES)
If the documents are determined disrepant, the bank is expected to notify the presenter when that determination is made (see UCP 16 a.). In the case of “early presentation”, the expectation is that a bank would refuse to honour/negotiate and contact the presenter notifying them of the refusal. Using Article 16 c. you could either:
1. agree to hold the documents on their behalf until the presentation is no longer early, or
2. return the documents unpaid. Generally, UCP intends for banks to make the compliance determination within a “maximum” of 6 days (5 days plus day of receipt) and act promptly when the determination is made.

COMMENT FROM JACK CHAN (HONG KONG)

Hi there, if I were the presenter, I would state the following instruction in my covering letter addressed to the issuing bank.

Quote
IN THE EVENT THAT THE ATTACHED DOCUMENTS ARE RECEIVED BY YOU LESS THAN 10 DAYS AFTER BL DATE, PLEASE DO NOT CONSIDER THEM AS PRESENTED UNTIL 10 DAYS AFTER THE BL DATE.
Unquote

Jack Chan, Hong Kong

COMMENT FROM GLENN RANSIER (UNITED STATES)

In response to JLee, The suggested statement may not be adequate. Some banks may decide to return the documents as they would not desire the responsibility to:

1. Take full responsibility for the care of such non presented documents (What happens if the documents are lost, destroyed, etc.); or

2. Determine if the UCP presentation/examination rules can be truly overridden based on the beneficiary’s statement.

COMMENT FROM YAATULOLAIA (INDONESIA)

You as issuing Bank have to decide. As you mentioned that documents were presented earlier and you have advice discrepancy to Negotiating Bank, then you have to approach the applicant whether they accept dthis discrepancy or not and if they accept it then you may consider to pay negoatiating bank.

COMMENT FROM DANIEL (SWITZERLAND)

Could I know why documents must not be presented earlier than 10 days after B/L date?

Regards

Daniel

COMMENT FROM N.H.DUC (VIETNAM)

Dear Daniel,

It may take one month or longer to ship the goods, for example, from Long Beach (USA) to Da Nang Port (Vietnam) or vice versus. Hence, if the documents are presented as usual, i.e., right after shipment date, the applicant may pay at least 10 days earlier (while the goods are still somewhere on the sea). Such a provision in L/C may help the applicant delay the payment for 10 days, which means that he may save some money (interest payable due to early payment). Some importers would make full use of this bad practice, especially when the shipment is of high value.

I think that is the reason why sometimes the documents are required to be presented not earlier than 10 days after B/L date.
Best regards,

N.H.Duc

COMMENT FROM DANIEL (SWITZERLAND)

Dear N.H. Duc,

I thought so but in that case, it would be easier to arrange a deferred payment

Regards
Daniel

COMMENT FROM N.H.DUC (VIETNAM)

Dear Daniel,

It’s true that arranging a deferred payment or an acceptance L/C is more convenient. I have seen U.S importers who import goods from Asian countries having their LC available at 30 or 45 days sight.
Still, it is not always easy for importers in some countries which are enforcing the policy of foreign debt restrictions to open such a type of L/C. Imports to be paid by deferred payment L/Cs are regarded as one of the forms of foreign borrowings. Therefore, importers in the said countries are not allowed to open deferred payment L/Cs or are allowed with hard-to-meet conditions or with complicated formalities.

I take my country as an example. Fifteen years ago or more my country’s government ever imposed the same policy on deferred payment L/Cs. That is to say, the importer who wanted to open deferred payment L/C had to pledge deposit of 70% of L/C amount to secure the payment right at the time applying for opening L/C.
The government did not prohibit importers to open deferred payment L/Cs but it was obvious that wise importers would never open L/Cs with such a condition.
What described above perhaps is strange in your country or at least to you, isn’t it?
The case in the query may have nothing to do with the same situation as described above. The reason may lie in the selling policy of the exporter or in the fact that the exporter, for some reason, feels unsafe with deferred payment L/C. Moreover, you may agree with me that 10 days is much shorter than 30 days sight or after B/L date which is the shortest tenor normally used in deferred payment L/Cs.
Best regards,
N.H.Duc

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