QUESTION
Dear Mr. Old Man,
We received an UPAS LC as follows:
Issuing bank: KB Korea
L/C amount: USD33,581.35
Date and expiry: 151014 at negotiating bank
L/C available with any bank by negotiation
Drafts at 120 days after nego date
Reimbursing bank: KB Ho Chi Minh City (SWIFT CODE: ………)
47A : Additional Conditions
T/T reimbursement is not allowed
When you claim reimbursement for accepting bank, you should mark nego date on your claim letter or claim message.
78 : Paying/Accepting/Negotiating Bank
The credit must be negotiated at sight basis. If the presented export documents complied with all terms and conditions of the L/C
Negotiating Bank may claim reimbursement from the reimbursing bank.
We are acting as the presenting bank only by forwarding drafts to the reimbursing bank and the documents (except drafts) to the issuing bank.
So how should the tenor of drafts be written as the nego date is not available?
Whether the requirement of marking nego date on claim letter not fulfilled causes the delay in reimbursement or not in case the L/C is not amended.
I am looking forward to your advice.
Thank you
Regards,
Trang
———-
ANSWER
Hi,
Usance draft would be drawn at xx days after bill of lading date or after sight. Usance draft is rarely drawn at xx days after negotiating bank.
Since your bank decide not to act on its nomination, i.e. not to negotiate the documents, it should send the documents to the issuing bank and simultaneously ask for the issuing bank’s authorization to claim reimbursement from the reimbursing bank. If so, the draft may indicate “120 days after sight”. It should claim reimbursement from the reimbursing bank upon receipt of the issuing bank’s authorization or where the issuing bank fails to refuse the documents within five banking days from the day of receipt of the documents.
Last but not least, it is recognized in practice that where an L/C available by negotiation includes an instruction to claim reimbursement from a reimbursing bank, the nominated bank would send the documents to the issuing bank and at the same time claim reimbursement from the reimbursing bank even when it has not negotiated the documents. You are not advisable to follow this bad practice.
For your further reference, please refer to my related Q&A at:
CLAIMING REIMBURSEMENT WITHOUT NEGOTIATION
Kind regards,
Mr. Old Man
dini
March 3, 2016 at 8:40 pm
Dear Mr.Old Man,
Our bank received UPAS L/C as follows :
Issuing bk : abc bank
42c : 60 days after b/l date
42a: (Drawee bank) xyz Bank
47a: t/t claim reimb. Is allowed.
78:+ credit payable at sight basis
+all docs except draft must sent to issuing bank. Bene’s draft please sent to drawee bank.
+if claim by t/t, please state b/l date on your claim.
If our bank send the claim reimbursement by authenticated swift to xyz bank and send bene’s draft together with original docs to issuing bank, whether the issuing bank can refuse to pay because docs is discrepant (bene’s draft present to issuing bank i/o drawee bank).
Thank you.
mroldman
March 4, 2016 at 8:07 am
Hi,
You should send the draft to the drawee bank as instructed.
The issuing bank cannot refuse the documents based on the fact that the documents presented to it includes the draft.
You may ask the issuing bank to cancel such a draft and send the new one to the drawee bank.
Kind regards,
Mr. Old Man