DOCUMENTS ARE LOST IN TRANSIT (Revisited)

8 Comments

1. 

   mroldman

   August 8, 2014 at 11:09 am

   Good news: This morning the asker called me to say “thank you” for my consultation. She said that her bank conveyed my answer to the issuing bank together with the copies of the documents lost in transit and the issuing bank effected the payments.

   Reply

2. 

   Ngọc Anh

   January 28, 2015 at 4:59 pm

   Hi Mr old man,
   My team is in a bad case and need your valuable advise
   On 21 Jan 2015, The beneficiary presented a set of Documents including 01 original C/O. We checked and found it complying with the L/C.
   We also sent the set of document to the issuing bank by DHL on that day.
   On 27 Jan 2015, we received MT999 from the issuing bank informed that they coudn’t honour or negotiate the docs because The C/O was not presented.
   Before sending the set of documents we checked carefully and made sure that the C/O was sent.We contacted DHL but they could only confirm they received A lot of docs from us, not what kind of papers in that lot . That means we have no evidence that we gave DHL the original C/O.
   What should we do now?
   I’m looking forward to your early answer.
   Thank you very much

   Reply

• 

  mroldman

  January 28, 2015 at 8:02 pm

  Hi,

  1) Missing document is a discrepancy. However, as for your case it’s not easy to determine whether the C/O was mislaid at your bank’s end or at the issuing bank’s end.
  Please refer to ICC Opinion TA720rev attached below to know how to settle the problem:
  Official Opinion TA720rev
  A missing copy of a document would obviously give rise to a discrepancy. It should be noted that either the correct number of copies were included with the other documents or they were not, and only Bank A and/or Bank S will know the answer. It would be expected that Bank A would, if necessary, allow Bank S to provide a further copy to supplement those already received and which otherwise comply with the credit. It is the responsibility of the sending bank to ensure that the correct number of originals and copies and their respective pages are enclosed with the schedule.
  .
  2) It seems that the issuing bank gave a notice of refusal not in accordance with sub-article 16 (c)(iii). If so, you may reject their refusal.

  Good luck!

  Reply

• 

  Ngọc Anh

  January 29, 2015 at 8:59 am

  Thanks so much for your kind reply.
  I’m fallen in love with “danangese”.Thanks again.
  Ngọc Anh

  Reply

• 

  mroldman

  January 29, 2015 at 7:11 pm

  Thanks for your love for Danangese including me!!!

  Reply

3. 

   Naima

   August 13, 2017 at 6:41 pm

   Hi Mr Old Man ,,

   I received one L/C this is saying the following:

   NOTWITHSTANDING ANYTHING TO THE CONTRARY MENTIONED IN UCP 600 ARTICLE 35, IN THE EVENT DOCUMENTS ARE LOST IN TRANSIT AFTER A NOMINATED OR CONFIRMING BANK DETERMINES A PRESENTATION IS COMPLYING AND FORWARDS THE DOCUMENTS TO US, WE SHALL HONOR OR REIMBURSE SUBJECT TO RECEIPT OF AN AUTHINTICATED SWIFT MESSAGE CONFIRMING THAT THE DOCUMENTS ARE CREDIT COMPLIED AND COPIES OF THE DOCUMENTS HAVE BEEN COURIERED TO US. HOWEVER, UPON RECEIPT OF THE COPIES OF DOCUMENTS AND IF FOUND TO BE NOT COMPLYING TO THE CREDIT TERMS AND CONDITIONS, THE NOMINATED OR CONFIRMING BANK IS LIABLE FOR A FULL REFUND OF THE REIMBURSED AMOUNT(S) PLUS OUR RELATED CHARGES AND/OR DUE INTEREST IF ANY.

   Me i have requested the applicant to remove this article as it is not complying with article 35 and i am afraid if the issuing bank will find any discrepancy in the documents copies he will ask for a refund from the confirming bank and so the amount received will be taken back from our account by the confirming bank which is our advising bank.

   Please can you advice .

   Thank you

   Reply

• 

  mroldman

  August 15, 2017 at 8:07 pm

  Please refer to the following icc opinion:

  Official Opinion R651 / TA639rev – 2005-2008
  From UCP600 – UCP 600 article 35; sub-articles 38 (d) and (a)
  QUERY
  1. Some banks in Country H and Country S have issued letters of credit, available with any bank by negotiation, whose terms include a condition stating that: “The issuing bank shall be entitled to require the nominated bank to send copies of all the documents presented under the credit and which the nominated bank has determined to be a complying presentation, were the documents thus determined to be complying lost in transit after being sent by the nominated bank. The issuing bank should be entitled to examine the copies of the documents to determine if they comply with the terms of the credit (except for the question of originality) and to refuse reimbursement to the nominated bank should the issuing bank determine that the documents do not comply with the terms of the credit. Article 35, to the extent it is inconsistent with the foregoing, is expressly excluded.”

  It is our opinion that a more adequate procedure would be to request that required documents be forwarded to the issuing bank by two subsequent courier parcels. Also, we have strong reservations concerning the legitimacy of determining the compliance of documents based on photocopies of documents. It seems too easy to state “except for the question of originality”, as if it were a minor issue. How would they establish if a document is originally signed or stamped? And what about the term of validity or period for presentation? Would the issuing bank abide by the negotiating bank’s statement concerning documents lost in transit? We would strongly appreciate your comments.

  2. A letter of credit which originated in Country H, allowing partial shipments, mentions: “Additional fee for USD 25.00 will also be charged on each additional set of documents (a ‘set’ of documents would include one set of invoice plus relative transport document) under the same drawing.”

  Is it acceptable that the beneficiary should bear charges related to a circumstance of the transport that caused more than one set of transport documents to be issued? We do not think so, and also feel that if the beneficiary chooses to present documents related to more than one shipment in a single drawing under the credit, he should be entitled to do so. Kindly let us have your view on this subject.

  3. An applicant of a credit, at the alleged request of the first beneficiary, asked for a transferable credit to be issued stating that the second beneficiary would be allowed to transfer the credit to a subsequent beneficiary, arguing that the allowance in article 1 ( … unless expressly modified or excluded by the credit) overruled sub-article 38 (d). Since we refused to do it, based on our understanding that double transferability represented an accrued risk both for the applicant and the issuing bank, the matter was otherwise resolved.

  However, the first beneficiary kept insisting that double transferability was a current practice (without referring as to where). We feel we can hardly be blamed for being overzealous in our refusal. Nevertheless, your view on our decision and a comment on the risks that double transferability involves would be most appreciated.

  ANALYSIS/CONCLUSION
  Analysis

  Query 1 is in relation to the wording that appears in article 35 which reads: “If a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank.”

  Query 3 is in relation to the wording that appears in sub-article 38 (d) which reads: “A credit may be transferred in part to more than one second beneficiary provided partial drawings or shipments are allowed. A transferred credit cannot be transferred at the request of a second beneficiary to any subsequent beneficiary. The first beneficiary is not considered to be a subsequent beneficiary.”

  Conclusion

  Query 1

  The concept that has been incorporated into article 35 is not new. Under UCP 500, the ICC Banking Commission issued its Opinion R.548 which, in the conclusion, reads: “Notwithstanding the fact that the reimbursement instruction in the credit reads ‘Upon receipt of full set of documents in conformity with the L/C terms, we will effect payment as per your instruction,’ by virtue of Article 16 the issuing bank would be obliged to honour a compliant presentation that had been negotiated by a nominated bank but lost in transit.

  The reimbursement obligation under a credit, as outlined above, is not subject to the receiving of documents by the issuing bank, but only to a compliant presentation being made to the nominated bank. The reimbursement clause in the credit does not make the reimbursement subject to the receiving of documents.”

  Neither the Opinion nor the rule in article 35 provide the answer to what course of action is required in the event of documents being lost in transit or how to negate such a risk. This is left to the parties concerned. There is, of course and as mentioned in the query, the option of pre-emptive action in requesting that the documents are sent in two lots. This is the choice of the issuing bank and/or the applicant, bearing in mind that mailing in two lots will increase the costs under a credit for an event (loss in transit) that is quite rare.

  Where only one mailing is made – and this was requested in the credit or no indication of the number of mailings was given and documents are lost in transit – the issuing or confirming bank may determine that they require a presentation to be re-created consisting of copies of the documents that were originally presented. The issuing or confirming bank will then review the copies “as if they were the originals and copies as requested by the terms and conditions of the credit” and were presented thereunder. This would include the stance that any signatures appearing on the copies of the original documents would need to be considered as if they were originally made.

  As the presentation of the documents must have been made to the nominated bank within the expiry date and/or last date for presentation, there is no issue regarding validity or presentation periods. If the issuing or confirming bank determines that the documents did comply, when originally presented to the nominated bank, then they must honour or negotiate. It should be noted that whilst a nominated bank is not bound to retain copies of the documents presented to it, it may ease problems later (in the unlikely event that documents are lost in transit) in recreating the presentation in the form of copies if so requested by an issuing or confirming bank.

  The clause, as mentioned in the query is highlighting to the nominated bank, the issuing bank’s requirements in the (unlikely) event that documents are lost in transit. This option being selected over one requesting the sending of documents in two lots.

  Query 2

  It is not for the ICC to pass comment on the charging structure that banks may impose under letters of credit. If the beneficiary is not in agreement with any stated charge, then they should liaise with their applicant to arrange a suitable amendment.

  Query 3

  The rule in sub-article 38 (d) reflects the standard position in relation to transferable credits i.e., that it may be transferred once only. Where there is a need for the transferred credit to also be made transferable, the original credit must include a condition to the effect that the “transferred credit may also be transferred”. This wording would be in line with the content of article 1 which allows for each rule to be modified or excluded by the terms and conditions of the credit.

  Sub-article 38 (a) makes it quite clear that a bank is under no obligation to transfer a credit except to the extent and in the manner expressly consented to by that bank. This would include the right of the bank, subject to this query, to decline any request for transfer, especially where the transferred credit was also designated to be transferable.

  Where an original credit allows for the transferred credit to also be transferred, this increases the number of parties involved (and the inherent risks of not knowing the parties, with possible fraud implications); the number of substitutions of documents that may need to occur and delays in the issuing bank receiving the documents following each presentation, each of which will entail: examination thereof; substitution thereunder; honour or negotiation; and sending of documents to the next bank in the chain. Whilst, in most countries, it is not common for an original credit to allow the transferred credit to be transferred it can often occur under standby letters of credit.

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• 

  Naima

  August 16, 2017 at 5:31 pm

  Thanks , it is quite complicated but i will try to understand

  Reply