A NEW REGULATION APPLICABLE TO LCs ISSUED BEFORE THE DATE SUCH A REGULATION COMES INTO FORCE?

QUERY
L/C at sight

Dear DC experts,

My customer opened a L/C at sight (applied by UCP 600) aready this L/C covers five units ( including 03 used wheel cranes and 02 used hydraulic excavators). But after this L/C was opend for few days then a new regulation released from Custom Department, this new regulation means used wheel cranes are temporary prohibited to import. So please advise me to solve this problem in case I am exporter and in case I am importer.

Many thanks for your kind help in advance.

Regards,
Thang.
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MR. OLD MAN'S COMMENT

Hi Thang

An L/C is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.(UCP 600 Art. 2). It can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary (UCP 600 Art. 10).
In view of the above provisions, the exporter (beneficiary) may effect the shipment and is entitled to the issuing bank’s payment if the documents presented to the issuing bank are complying with the L/C terms and conditions. The importer (applicant) is obligated to reimburse the issuing bank once the issuing bank has effected the payment to the beneficiary though he might not take delivery of the goods due to Customs Department’s regulation.

I use the modal verb “might” on purpose because it is normal that a new regulation is not applicable to sale contracts or L/Cs signed or issued before the date such a regulation is promulgated or comes into force.
Assuming that the said new regulation is applicable to L/Cs issued before the date the new regulation is promulgated or comes into force, what is the solution for the problem?

(1) The applicant may negotiate with related parties, mainly the beneficiary, to have the L/C cancelled. This depends much on the trade relationship between the importer and exporter; or
(2) The applicant may negotiate with related parties to have the L/C amended, e.g, brand-new wheel cranes and excavators instead of second hand ones.

I don’t think the amendment can be effected easily as: (i) brand new wheel cranes and excavators are expensive and not in the applicant’s business plan; (ii) the issuing bank (normally also financing bank) may not agree to finance the increased amount; (iii) the end user may not afford the new wheel cranes and excavators ; (iv) the new wheel cranes and excavators may not be available in the exporter’s stock. (v)…
If the L/C can not be cancelled or amended as above suggested, the last thing the applicant can do is just waiting for the issuing bank’s advice that the documents presented are discrepant.

Best regards,
Nguyen Huu Duc …