Uncategorized NEGOTIATION UNDER A CREDIT AVAILABLE BY DEFERRED PAYMENT By Mr Old Man Posted on April 29, 2010 9 min read 21 0 5,393 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUERY FROM WARLORD9609 Hi mr old man, Listen please, I tried to write a new blog in your forum but I dont know how to write a new post. would you please help me in LC, its simple for you I think, but for me its not It would be appreciated if you can reply me asap, ty. LC from Sudan. —- MT : 710 Sender : Bank S, Qatar Receiver : Bank C, UAE Form of Documentary Credit : Irrevocable Transferrable Adding our Confirmation Applicable Rules UCP latest version Date & Place of Expiry 100421 – Qatar Issuing Bank Bank U, SUdan Issue date 15.03.2010 Applicant ABCD, Sudan. Beneficary XYZ, UAE Available with Bank S By def Payment 360 days from B/L date Latest Date of Shipment 100331 Description of goods Cars, LCD. Delivery terms :CFR Portsudan Sea Port as per Incoterms2000 Documents required : 1) Signed Commercial Invoice in 3 originals. 2) Full set Clean shipped of Board shipping co. Additional Conditions : 1) Insurance covered Locally by buyer. 2) Bill of Lading Issued or Signed by N.V.O.C.C and/or Freight forwarder are not acceptable, Article 14 D is not applicable in this credit. 3) All documents must mention the LC Number. 4) Third party documents acceptable. 5) Any documents presented at out counters on approval/collection and/or with discrepancies will be subject to acceptance of ourselves and or applicant, and shall charge usd.100 from proceeds. 6) All documents must be forwarded to us through the negotiating Bank and not directly from the beneficiary. 7) Our confirmation charges of USD.153,000/- are on beneficiary account. 8) Any transfer under this letter of credit is to be approved by the issuing Bank and the confirming Bank and this approval is to be conveyed by ourselves. Field 49 Confirmation Instructions ( Without). Field 78 instr to payg/aceptg/negotg Bank : we Bank S add our confirmation to the captioned Letter of Credit, and undertake to honour negotiating Bank claim (s) in accordance with their instructions on due date provided that all documents presented at our counters are in strict compliance with this LC terms and conditions. Field 72 : This Lc is subject to UCPDC (1993 revision) ICC No.500. Guys, the beneficiary came into our counter requesting us to be available with Bank because the confirming bank does not want to negotiate it, the confirmation bank wants only to add confirmation,from My side I see there is no problem, but I what to know your comments, and my main question is ( would you negotiate LC MT710 even though its confirmed by other Bank that is not you? ——— COMMENT Dear old friend, It turns out to be that you are a member of www.letterofcreditforum.com . Welcome to Mr. Old Man’s blog! Hope you’ll find it interesting and helpful. If you want to lo post your comments to blogs on myopera.com you must be a member of http://myopera.com. You seems to have been a member of myopera.com already. Regarding your question, I wish to answer as follows: The captioned LC is available with the confirming bank (Bank S) by deferred payment 360 days from BL, so in this case, only the confirming bank is authorized to prepay or purchase a draft accepted or a deferred payment undertaking incurred by the confirming bank. Please refer to UCP 600 sub-article 12 (b), which says “ By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank”. Notwithstanding the confirming bank’s reimbursement undertaking in Field 78 that they will undertake to honour negotiating Bank claim (s) in accordance with their instructions on due date provided that all documents presented at our counters are in strict compliance with this LC terms and conditions, it is prudent and wise for your bank to accept to purchase the deferred payment undertaking only after: 1) Bank S has incurred its deferred payment undertaking. 2) Bank S has authorized your bank to purchase its deferred payment undertaking. However, if the beneficiary is a reliable customer in term of financial standing and creditworthiness, your bank may decide to negotiate the documents on a with recourse basis whether or not the confirming bank has incurred its deferred payment undertaking. By the way, it seems that the LC is issued improperly: 1) Field 41A specifies LC is available with Bank S by deferred payment, whereas in Field 78 the confirming bank undertakes to honour negotiating Bank claim (s) in accordance with negotiating bank's instructions on due date provided that all documents presented at their counters are in strict compliance with this LC terms and conditions.2) Field 40E (Applicable Rules) specifies UCP latest version, whereas Field 72 says “This is subject to UCP DP (1993 revision) ICC No. 500”. Please note that with regard to discounting deferred payment undertaking, under UCP 500 the nominated bank is not allowed to prepay or purchase its own deferred payment undertaking, whereas UCP 600 turns green light for the nominated bank to do so. Please refer to Banco Santander case. Best regards,Mr. Old Man (Nguyen Huu Duc) …