DOCUMENTS PRESENTED AFTER EXPIRY DATE

QUERY FROM THE COUNT

Dear Colleagues,

We are an exporting co, from IN. We processed an order couple of months ago through LC advised to us from our buyer. We sent the Goods, but the documents were submitted in the bank after the expiry of the LC. The Documents were forwarded to the issuing bank who in turn asked the customer whether they would accept the document? the customer accepted the documents against the bill of exchage whose maturity was 60 days after sight and got the goods released. Issuing bank sent our bank a telex telling the documents has been accepted and would pay on maturity.Everything was fine until a day before when our bank recieved a telex from the issuing bank that the draft drawn is not being paid by the customer(intentionally!!) and hence they would close the case if the customer doesn’t pay on the maturity date.

The bank have negotiated the instrument and credited our account (after 50 days) since they had recieved the acceptance from the issuing bank. The issuing bank is treating the documents under URC whereas our bank insists they cited UCP on the covering letter.

Please suggest us how to proceed with this nightmarish situation? Won’t the issuing bank be liable to pay if they had sent us the message saying so earlier?

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MR. OLD MAN’S COMMENT

Hi

In practice documents presented to the negotiating under L/C and found to be discrepant are normally sent to the issuing bank for payment:

(i) on approval basis with reference to L/C, e.g., the documents are sent to you under L/C no…. on approval basis; or

(ii) under L/C without indicating any discrepancies.

In either of the above cases, the issuing bank is obligated to pay at sight for sight L/C or accept the time draft or incur a deferred payment undertaking and pay at maturity for usance L/C once it has delivered the documents to the applicant.

The issuing bank’s payment obligation under the L/C is released if the covering schedule sent by the remitting bank states clearly that the documents are sent under URC, and the B/E (if any) is drawn on the buyer. In this scenario the issuing bank plays the role of a presenting/collecting bank. It delivers the documents to the buyer in accordance with the remitting bank’s instruction, i.e., against payment (D/P) or against acceptnace (D/A). Where the collection instruction has authorised the delivery of documents upon acceptance, the collecting bank delivers the documents to the buyer/drawee once acceptance has been made and advises the remitting bank of such an acceptance and the maturity date. However, please note that under D/A collection the issuing bank is not obligated to pay in the event the B/E, which has been accepted by the buyer, is not paid at maturity.

Best regards,
Nguyen Huu Duc