Does a Transferred LC Have to Carry the Confirmation of the Original LC? One of the recurring questions in transfer transactions is whether a transferred LC must also be confirmed when the original LC is stated to be confirmed. The answer depends on whether the confirmation was actually added by the bank concerned, not merely authorized or requested by the issuing bank. QUESTION Dear Sir, I have a question that I’d like you … Read More
Lost Documents in Transit: Is the Old Practice of Sending Two Mailings Still Relevant? Introduction The loss of documents in transit is one of the rare but troublesome risks in documentary credit operations. In the past, it was common practice to dispatch documents in two separate mailings—typically one by courier and the other by airmail—to reduce the risk of total loss. Today, however, many issuing banks instead require the bank handling the drawing to … Read More
Should an Advising Bank Go Beyond Its UCP 600 Obligations? The role of an advising bank under UCP 600 is relatively straightforward: verify the apparent authenticity of the credit and accurately advise its terms to the beneficiary. But should an advising bank go further and alert its customer to ambiguous, impractical, or potentially troublesome conditions in the credit? A reader recently raised this interesting question. Question Interesting post. I would … Read More
Quantity Tolerance in Field 39C – Is It Valid? ✅Question Dear Mr. Old Man, Hope this email finds you well. Would like to seek your opinion regarding the below scenario. • LC Field 45A contains three goods and the quantities are specified in pieces (pcs). • LC specifies a 10 pct tolerance in Field 39A. • LC Field 39C states: “Variance in Quantity of Screws shipped”. • LC … Read More
NO BILL OF LADING, NO CONTROL? Managing Documentary Risk Under EXW Letters of Credit One of the fundamental principles of documentary credits is that banks often rely on transport documents—particularly negotiable Bills of Lading—to maintain a degree of control over the goods until payment is secured. But what happens when the sale is concluded on Ex Works (EXW) terms and the beneficiary insists that no Bill … 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
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
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