TELL ME WHEN PAYMENT WILL BE MADE, TELL ME QUANDO QUANDO QUANDO (*) One of the most frequently misunderstood provisions in UCP 600 is the relationship between a deferred payment maturity date and the five banking days allowed for document examination under Article 14(b). What happens when documents arrive so late that the LC maturity date falls only a day or two after presentation? Must the issuing bank pay on the contractual due … Read More
Prepay vs. Purchase – Same Same but Different? A reader recently asked Mr. Old Man a deceptively simple question: If “prepay” and “purchase” under UCP 600 Article 12(b) essentially produce the same commercial result, why does the definition of negotiation mention only “purchase”? An excellent question. The answer lies not only in the wording of UCP 600 but also in the legal distinction between an accepted draft and … Read More
AVALIZATION UNDER DOCUMENTARY COLLECTIONS A 16-Year-Old Debate That Remains Relevant Today Mr. Old Man recently revisited an interesting discussion that took place more than 16 years ago on the DCI Discussion Forum regarding avalization under documentary collections. The discussion began with a question raised by Svishu from Kuwait and attracted comments from several respected trade finance practitioners, including Daniel D (Switzerland), Jim Barnes (United … Read More
Institute Cargo Clauses (A) or (Air), as Applicable – Does It Meet an LC Requirement for Institute All Risks? Questions relating to insurance documents continue to generate a surprising number of discrepancies under letters of credit. One area that occasionally causes uncertainty is whether an insurance document must expressly state “All Risks” when the credit requires such coverage. In the following case, the LC called for insurance covering “Institute All Risks”, while the presented insurance document referred to “Institute … Read More
Does an Insurance Document Need to State “Effective Date” Exactly? One of the most common issues in the examination of insurance documents under letters of credit arises when the insurance policy or certificate is issued after the shipment date. ISBP 821 requires the insurance document to evidence that coverage was effective no later than the shipment date. But does the document need to use the exact wording “Effective Date”? What … Read More
From Negotiation to Payment: What’s Behind the Confirming Bank’s Request? Not all L/C amendments are about shipment dates, amounts, or documents. Sometimes, a confirming bank requests changes that appear quite technical, such as changing a credit from “available by negotiation” to “available by payment” or moving the place of expiry from one country to another. Are such amendments merely operational preferences, or do they have legal and risk implications for … Read More
Can an Issuing Bank Advise an LC Directly to the Beneficiary? One of the fundamental safeguards in documentary credits is the authentication process performed by an advising bank. But what happens if an issuing bank sends the LC directly to the beneficiary without involving an advising bank? Is this permissible under UCP 600, and what risks should the parties consider? Let’s look at a question from Gerson Mário. Question Dear Mr. … Read More
Does a Longer L/C Expiry Date Mean Greater Risk? And Is the Word “Clean” Really Necessary on a Bill of Lading? In international trade, many disputes arise not because parties misunderstand UCP 600, but because they mix up legal requirements with commercial practices. A reader recently asked Mr. Old Man about two common concerns in timber imports from Africa: whether the L/C expiry date must be linked to the shipping transit time, and whether removing the word “Clean” from “Clean On … Read More
Does Field 39A Cover Quantity Tolerance? A reader recently sent Mr. Old Man an interesting question about quantity tolerance under an L/C. The issue sounds simple at first glance, but in practice it often creates confusion between sales contract terms, the wording of the credit, and the application of UCP 600 Article 30. Here is the question and discussion. Question Dear Mr. Old Man, I would … Read More
CAN A COMMERCIAL INVOICE EXCEED THE LC AMOUNT? One area that occasionally causes confusion under UCP 600 is the relationship between Article 18(b) and Article 30(a). Many practitioners assume that a commercial invoice may exceed the LC amount only where the credit expressly allows a tolerance, or where the words “about” or “approximately” are used in connection with the credit amount under Article 30(a). However, Article 18(b) provides … Read More