Discrepant Documents, Bills of Lading and Return of Goods

Introduction

A discrepancy in an LC presentation can create some practical questions that go beyond the documents themselves—particularly when the B/L is made out to the order of the issuing bank.

If the applicant refuses to waive the discrepancies, does the issuing bank have to endorse the B/L before returning the documents? And, perhaps more importantly, who is responsible for the goods while the documents are being returned?

This Q&A looks at these two questions from the perspective of UCP 600 and the principle that banks deal with documents, not with the underlying goods.

Question

Hello, Mr. Old Man!

I have been reading your blog for quite some time, and I am very grateful for it. I have learned a lot from your posts.

I have a couple of questions regarding discrepancies and endorsement.

What happens if the applicant refuses to waive the discrepancies and the B/L is made out to the order of the bank? Does the bank endorse the B/L, or does it return the documents as they were received?

And what happens to the merchandise? Is the bank responsible for returning the shipment, or does the beneficiary arrange for the goods to be returned once the documents are made available to them?

Thank you very much for your time and for sharing your knowledge.

Best regards,

Juli

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Answer

Dear Juli,

Thank you for your kind words and for your interest in my blog.

1. Must the issuing bank endorse the B/L when returning the documents to the presenter?

If the presented documents contain discrepancies, the issuing bank may refuse the presentation and return the documents as presented to the presenter, regardless of whether the applicant waives the discrepancies, as provided under UCP 600 sub-article 16(c)(iii).

In other words, the issuing bank is not obligated to endorse the B/L, even if the B/L is made out to the order of the issuing bank.

For further discussion, you may refer to ICC Opinion TA891rev.

2. Is the issuing bank responsible for shipping the goods back?

No.

Under UCP 600 article 5, banks deal with documents and not with the goods, services or other performance to which the documents may relate.

Therefore, if the documents contain discrepancies and the issuing bank refuses the presentation and returns the documents to the presenter, the issuing bank is not responsible for returning the goods.

The beneficiary may arrange with its agent or directly with the shipping company to return the goods or have them shipped to another destination, subject of course to the applicable contractual and transport arrangements.

Best regards,

Mr. Old Man