RETURNING THE DISCREPANT DOCUMENTS

by Old Man on Friday, November 11, 2011 at 3:15pm
QUESTION
.
Hi Mr. Old Man,
.
I have read a lot of your helpful writings about L/C and am extremely impressed by your deep knowledge on L/C issues. Could you please help me to deal with the following case:
At the request of the applicant, and as the applicant and the beneficiary have had long-term and reliable business relationship, we issued a L/C at sight as follows:
46A: Documents required: 3/3 of original of clean “shipped on board” Ocean Bill of lading consigned to the applicant, 2/3 of B/L sent to issuing bank, 1/3 of B/L sent directly to the applicant.
When the presenting bank presented the docs to our bank, we found that the docs are discrepant under L/C terms and conditions. We sent an MT734 to the presenting bank stating discrepancies and indicate that we hold docs at the presenting bank’s risk and disposal.
As to applicant, after receiving our advice of discrepancies, they refused to make payment and requested to return docs whereas they already picked up the goods.
4 months pass by, but we haven’t received any response from the presenting bank. According to sub-article 16e – UCP600, we can return docs at any time after we sent an advice of refusal citing discrepancies. However, we would like to hear your opinion regarding this matter. What should we do now?
.
Thanks very much for your kind support!
NTH
————————————————–
ANSWER
.
Hi,
.
Thank you for your compliment.
.
If 1/3 bill of lading consigned to the applicant are sent direct to the applicant, the beneficiary bears the risk of losing control over the goods while the issuing bank may refuse to honour if the documents presented do not comply. A wise bank will never agree to negotiate such documents. This could be the reason why the presenting bank has kept silent as to your bank’s refusal due to valid discrepancies. If needed, the beneficiary may take legal action against the applicant before the court to claim payment from the applicant.
.
I wonder why your bank has kept the documents for such a long time. In accordance with sub-article 16 (e), you can return the documents to the presenter at any time if you have give a notice of refusal in accordance with sub-article 16(c) (iii) (a) or (b) no later the close of the fifth banking days following the day of receipt of the documents.
Please note that the documents including the bills of lading should be returned as they were received (e.g., no endorsement back to the shipper/beneficiary even when the bill of lading is made out to the order of the issuing bank).
.
Best regards,
Mr. Old Man