Can a Confirming Bank Refuse When Documents Arrive After Expiry?

Intro

In practice, documents are often presented to a nominated bank close to the LC expiry date and then forwarded onward to a confirming bank.

This raises a recurring question: does the confirming bank have the right to refuse simply because the documents reach its counter after expiry?

 The following scenario illustrates why forwarding time must not be confused with presentation time, and why UCP 600 Article 8(a)(i)(e) is the key provision governing the confirming bank’s obligation.

Question

Dear Mr. Old Man,

I have a question regarding the role of a confirming bank and would appreciate your expert advice.

Scenario:

• The LC is available with any bank by negotiation.
• The LC expires in the beneficiary’s country.
• The beneficiary presents documents to a presenting (nominated) bank (Bank A) in the beneficiary’s country within the LC expiry date.
• Bank A forwards the documents to the confirming bank (Bank B).
• The documents reach Bank B’s counter after the LC expiry date.
• Bank B treats this as a discrepancy and refuses to honour or negotiate.

Questions:

1. Is the confirming bank correct in refusing to honour?
2. Should the confirming bank require the confirmed LC to expire at its own counter to avoid this situation?

Thank you in advance.

Best regards,

TKL

——

Answer 

Dear TKL,

Thank you for your question.

Based on the facts provided, the following is clear:

• The LC is available with any bank by negotiation.
• The LC expires in the beneficiary’s country.
• The beneficiary made a complying presentation to a nominated bank within the stipulated period of presentation and before the LC expiry date.

Pursuant to UCP 600 Article 8(a)(i)(e), provided that the stipulated documents are presented to the confirming bank or to any other nominated bank and that they constitute a complying presentation, the confirming bank must honour if the credit is available by negotiation with another nominated bank and that nominated bank does not negotiate.

Accordingly, once a complying presentation has been made in due time to the nominated bank, the confirming bank’s obligation to honour is established. The date on which the documents are forwarded to and received by the confirming bank is irrelevant for determining compliance.

In view of the above, Bank B, as confirming bank, is not correct in refusing to honour on the ground that the documents reached its counter after the LC expiry date.

Best regards,

Mr. Old Man