Home Uncategorized CAN A COURT INJUNCTION PREVENT A BANK FROM EFFECTING ITS PAYMENT OBLIGATION UNDER LC?
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CAN A COURT INJUNCTION PREVENT A BANK FROM EFFECTING ITS PAYMENT OBLIGATION UNDER LC?

By Mr Old Man
Posted on March 5, 2010
3 min read
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QUERY

Ngân hàng được chỉ định thực hiện chiết khấu và gửi chứng từ đến ngân hàng phát hành để được hoàn trả. Tuy nhiên, ngân hàng phát hành viện cớ có lệnh phong tỏa từ Tòa án nên không thanh toán (hoặc chỉ thanh toán một phần trị giá bộ chứng từ).
Hành động của NHPH trong trường hợp này có phù hợp với thông lệ quốc tế về tín dụng chứng từ hay không? Trách nhiệm pháp lý của các bên tham gia giao dịch này như thế nào?

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ANSWER FROM MR. OLD MAN

Việc chứng từ xuất trình phù hợp mà ngân hàng không thanh toán hoặc chỉ thanh toán một phần là không phù hợp với thông lệ quốc tế và quy định của UCP. Tuy nhiên, đây là vấn đề phụ thuộc vào luật địa phương mà có giá trị thi hành cao hơn UCP. Do vậy, khi nhận được lệnh của tòa án yêu cầu ngừng hoặc tạm hoãn thanh toán, ngân hàng phát hành có nghĩa vụ phải tuân theo.
Ngân hàng phát hành, khi được yêu cầu, có trách nhiệm cung cấp cho ngân hàng xuất trình/người thụ hưởng bản sao lệnh ngừng thanh toán của tòa án. …

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16 Comments

16 Comments

  1. anonymous

    December 29, 2010 at 4:12 pm

    Importer writes:Dear Mr. Old Man (The Sifu of all LC and banking matters)We are signing a 12 months contract to purchase goods from Russia and the seller originally asked for a Revolving Letter of Credit but our bank said "NO" because of our financial situation, our bank will only issue LC by LC month by month. The seller said this case should then be treated as a spot deal (prices will be much higher). After weeks of negotiation to keep the price the same, my seller is now asking for a SBLC or a Bank Guarantee for the full value of each shipment and one for the last (12th) shipment, please enlighten me of all the risks associated for issuing these kind of financial instruments from the importer's point of view and what should I be doing about it or around it. Please note that we are yet to verify the seller but they did actually invite us to Russia to witness the loading of the cargo and the final inspection by SGS after the contract is sign and before LC is issued.Your valuable comment is like the words from the Bible to us so we are looking forward to your advise.Sincerely…Importer.

    Reply

  2. mroldmanvcb

    December 29, 2010 at 5:12 pm

    Sorry but you should not compare mine with the words from the Bible. I am not the Sifu of LC matters. Being a banker, I am very busy these days but I promise I will answer asap. Pending my answer, I hope my friend from UK – Mr. Abrar Ahmed will shed some light on the issue if he comes across this comment.

    Reply

  3. anonymous

    December 30, 2010 at 8:12 am

    Importer writes:Dear Mr. Old ManOk, I will wait for your response but do try to help me soon because the seller is waiting for my answer and they are harassing me every day. Some advises from Mr. Abrar Ahmed would be welcome any time.Warmest regards…An Importer

    Reply

  4. mroldmanvcb

    December 30, 2010 at 5:12 pm

    Hi,I must note you that commercial LCs are used for payment in international trade, whereas SBLCs/or bank guarantees serve as a secondary payment mechanism (just in case the applicant fails to meet his contractual obligations and the beneficiary makes a written demand for payment). However, I must also admit that these days SBLCs/bank guarantees have been popularly used as instruments to guarantee the importer’s payment obligation. One of the reasons why sellers insist on SBLCs or bank guarantees is that SBLCs/ bank guarantees offer more advantages to them than commercial LCs: simple use but fast collection of funds. Documents required under an SBLC are not so complicated or numerous as under a commercial LC, hence, easy to comply. Sometimes just a written non-payment declaration can trigger the issuing bank’s payment obligation.Please also note that under SBLC or bank guarantee transactions, banks deal with documents and not with goods, services or performance to which the documents relate and that banks are in no way concerned with or bound by the sale contract signed between the beneficiary (seller) and the applicant (buyer). Consequently, the issuing bank must honour against the beneficiary’s complying presentation notwithstanding that there is a dispute between the beneficiary and the applicant over the goods (bad quality, short shipment, wrong specifications…). KYC – Know Your Customer:For high risk and great value transactions, caution is recommended when dealing with a new customer. KYC is very important. You should make credit inquiries on your customer through your bank to know if he is financially able to supply with such a huge quantity of goods. It is worth spending a little money and time to avoid risks. If the seller’s ability to deliver the goods is in doubt, why don’t you ask him to provide a Performance Bond? Be careful with this transaction! From my experience, it smells of …!!! :confused: Just my own thought and not from the Bible. Go ahead if you feel safe!Sorry for not helping you much! 😥 Good luck! Mr. Old Man 😎

    Reply

  5. abrar2

    December 30, 2010 at 8:12 pm

    Sorry for the delay in replying (year end etc) , but I would concur with the points made by Mr. Old Man.However, I am not clear whether the seller is asking you to put up twelve individual SBLCs in advance, or proposing that you may issue a separate SBLC for each month, as they become due?In any case, as pointed out, an SBLC can be used both as a primary payment instrument, and also as a a default payment instrument (although the latter is more common). Generally, such transactions are enetered into after a period of transactions (perhaps established through commercial LCs) between the seller and the buyer, to establish track record, and trust between the parties. Once the parties are satisfied as to the good faith and integrity between the respective parties, trading may be conducted on open account terms, with the SBLC acting as a contingency back-up. From a buyer's point of view,I would be wary of entering into such transactions on a first-time basis without conducting full due diligence on teh seller.To mitigate the risks, and if the SBLC is the only feasible option, you may wish to consider requiring the SBLC to not only require a simple demand, but also copy documents from the supplier, evidencing performance under the contract (e.g copy of B/Ls [evidencing shipment by a certain date], copy of invoice marked "unpaid", a demand for payment[dated not earlier than say, X days from date of invoice],etc). As also pointed out, you may also to protect the performance risk by calling for a reciprocal performance bond.

    Reply

  6. anonymous

    December 31, 2010 at 10:12 am

    Importer writes:Dear Mr. Old man and Mr. AhmedBy the way, the seller is also offering a 2% performance bond.Importer

    Reply

  7. anonymous

    December 31, 2010 at 10:12 am

    Importer writes:Dear Mr. Old Man and Mr. AhmedThank you so much for being very helpful. After further negotiation with the seller we have come up with an alternative: We (the buyer) would pay for the first shipment by a Irrevocable, Non-transferable LC At Sight and open a SBLC for 1 shipment value with expiry date in 12 months. The seller said the reason for the SBLC is because we are getting the product at 12 contract price and the seller must be sure that we are fulfilling our contract not just pay for 1 shipment and then stop (in this case it should be treated as a spot deal at a much higher price). His reason is solid, however I am still having some doubts on the supplier because we have never deal with this company before. On the other hand they did offer to invite us to their country to witness the loading of the cargo and inspect their manufacturing facility. This fact does help a bit but it does not eliminate my doubt completely, we need to go ahead with this deal because we need the stock desperately but obviously NOT AT ALL COST because securing our fund is still our foremost concern.I have also heard that with a SBLC or BG the seller can actually use these kinds of financial instruments to negotiate and make money on these instruments somehow, is this true ??? If it is then is my company at risk of losing money without ever see the products. Mr. Ahmed advise on some conditions on the BG or SBLC would certainly help but would it eliminate the risk completely from the buyer point of view ???I hope to receive some much needed advises from you soon.Sincerely grateful for your help.Importer

    Reply

  8. anonymous

    December 31, 2010 at 2:12 pm

    Importer writes:Dear Mr Old ManI'm actually a foreigner working for a Vietnamese distributor. If Vietnamese banks only issue BGs, then please tell me the main differences between the two. Thanks a bunch.

    Reply

  9. mroldmanvcb

    December 31, 2010 at 2:12 pm

    According to ISP98 or UCP 600, an SBLC is not transferable unless it so states. If you are afraid that the SBLC may be abused, you may state in the SBLC that “This SBLC is not transferable to any third party”.I don’t know where you are from. You may know that SBLCs are popularly used in the USA and in some countries where banks are not allowed to issue guarantees. Banks in other countries like Vietnam mainly issue BGs instead of SBLCs. Please ask your bank if they agree to issue SBLC or BG.If still in doubt, please do not proceed until it is clear. Tell your bank your problem and ask them for a solution.

    Reply

  10. mroldmanvcb

    December 31, 2010 at 3:12 pm

    By saying that Vietnamese banks mainly issue BGs, I do not mean that they do not issue SBLCs. Both an SBLC and a BG have the same function and serve the same purpose. The main difference between an SBLC and a BG is the governing law/rules: an SBLC may be issued subject to ISP98 or UCP 600, whereas a BG may be suject to URDG 758 (Uniform Rules for Demand Guarantees, ICC Publication No. 758) or to the law of the issuing bank’s country. The beneficiary would prefer a BG subject to URDG to the one subject to the local law which is different from country to country.

    Reply

  11. anonymous

    December 14, 2013 at 4:12 pm

    Giấu tên writes:Hi anhAnh giúp em bài tập này với.Tolerance in LC amount and shipped quantityA confirmed letter of credit subject to UCP 600 states:In Field 39A: + or – 5%In filed 43P: Partial shipments and drawings allowedIn field 45A: 100,000 MT steel round bars BS 1234 per PO No. 5678.1st shipment: Around 50,000 MT2nd shipment: Around 30,000 MT3rd shipment: Around 20,000 MTThe confirming bank refuses to pay based on following discrepancies:a. “Around” is not a word defined in UCP 600. Hence the tolerance limit in quantity should be governed by the tolerance limit in the credit, namely + or – 5%.b. The issuing bank should bear the consequences of unclear or misleading wordings as well as ambiguity in the credit.c. Hence the quantity in the 1st shipment, 55,000 MT exceeds the tolerance limit of + or – 5% in the credit.Question: Is the confirming bank right in its refusalTheo em ngân hàng không thể từ chối, vì theo điều 30 ucp 600 khi giao quá số lượng hàng vẫn thỏa mãn LC nhưng chỉ là không được nhận quá +- 5% số tiền tín dụngAnh giúp em với, thanks anh nhiều ạ

    Reply

  12. mroldmanvcb

    December 16, 2013 at 12:12 pm

    The discrepancy is valid.

    Reply

  13. anonymous

    December 16, 2013 at 9:12 pm

    Anonymous writes:I have read the book CẨM NANG SỬ DỤNG THƯ TÍN DỤNG – L/C – TUÂN THỦ UCP 600 VÀ ISBP 681 2007 ICC, around meaning 10%, I don't know that it true,I'm confused

    Reply

  14. anonymous

    December 16, 2013 at 9:12 pm

    Anonymous writes:I do not understand muchCan you explain further help me?thanks you

    Reply

  15. mroldmanvcb

    December 16, 2013 at 9:12 pm

    As pointed out by the issuing bank, around is not defined in UCP, hence, it is disregarded. As the quantity is stated in MT, the tolerance not to exceed 5% more or less the quantity of the goods is allowed. The 1st shipment of 55,000MT exceeds 5%, therefore, it does not comply with LC requirement and sub-article 30(b).

    Reply

  16. mroldmanvcb

    December 16, 2013 at 10:12 pm

    I don't read that book. Please provide me with any ICC publication that says that the word "around" allows a tolerance not to exceed 10% more or less than the amount, the quantity to which they refer. Thank you.

    Reply

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