DOCUMENTS LOST IN TRANSIT

QUESTION

Dear Mr Old Man,

Please help me to clarify my confusions about the paragraph of article 35 UCP 600, which says

“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”.

Does it mean that when the nominated bank certifies that the documents lost in transit are complying, the issuing bank must honour without checking the documents to determine if they are complying with the L/C terms and conditions?

What if  the L/C contains the reimbursement instruction which says “We (the issuing bank) will effect the payment as per your  instructions upon receipt of the documents complying with the L/C terms and conditions”? Does the clause exclude article 35 UCP 600?

In case the documents are lost in transit from the nominated bank to the issuing bank, can the issuing bank request the nominated bank to send copies of the documents to check if they are complying? Can the issuing bank refuse to honour if it find discrepancy(ies)?

Thank you very much.

Best regards,

QN

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ANSWER

Hi,

The provision with regard to “documents lost in transit”  was not incorporated in UCP 500. However,  ICC ever  issued  under UCP 500 its opinion R548 , 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 (UCP 500) the issuing bank would be obliged to honour a compliant presentation that had been negotiated by a nominated bank but lost in transit.

Now the provision with regard to “documents lost in transit”  has  been incorporated in article 35 UCP 600, which is very clear that iff 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.

In order to determine the compliance of the documents lost in transit,  according to ICC opinion  R651 / TA639rev, the issuing or confirming bank may 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 L/C terms and conditions ” 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…If the issuing or confirming bank determines that the documents comply, when originally presented to the nominated bank, then they must honour or negotiate. I would like to add that if the documents contain discrepancies, it may refuse to honour or negotiate.

The opinion also 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.

Kind regards,

Mr. Old Man