Q&A DRAFTS UNDER D/A COLLECTIONS; NON-DOCUMENTARY CONDITION; ISSUED RETROACTIVE; GUARANTEE VS CONTRACT By Mr Old Man Posted on September 11, 2017 6 min read 8 0 4,160 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Dear Mr. Old Man, Could you give me your opinions about controversy issues that I meet during processing documents? COLLECTION: We have received under a D/A collection a set of documents including drafts at 60 DAYS AFTER SIGHT. Do we calculate the maturity date from the day we receive the above documents for collection or from the day the importer accepts the documents? LETTER OF DOCUMENTARY CREDIT: LC requires: Field 46A (Documents Required): – Signed commercial Invoice – Delivery Order – Packing List Field 47: Additional Condition: Mill Test Certificate must be issued by ABC Company (without showing the phrase ‘Continued from Field 46A”) Is it a non-documentary condition or a kind of documents that must be presented for negotiation? LC required: C/O form E issued by COCKPIT. If B/L date is after C/O date. It must stick in box 13:”Issued retroactively”. C/O presented with the phrase: “Issued retroactively” in other place not stick in the box 13. Is it discrepancy? GUARANTEE: A clause in a guarantee read as follows: “THIS PERFORMANCE GUARANTEE WILL COME INTO EFFECT FROM August 5, 2018 AND SHALL REMAIN IN FORCE UNTIL THE APPLICANT HAS FULFILLED ITS OBLIGATION(S) UNDER THE CONTRACT, WHICH WILL BECOME EVIDENT TO THE GUARANTOR UPON RECEIPT OF AN AUTHENTICATED SWIFT MESSAGE FROM BENEFICIARY’S BANK CONFIRMING, ON BEHALF OF THE BENEFICIARY, RELEASE FROM LIABILITY UNDER THE GUARANTEE. HOWEVER, THIS GUARANTEE EXPIRES IN ANY CASE IN FULL AND AUTOMATICALLY IF BENEFICIARY’S WRITTEN DEMAND FOR PAYMENT AS WELL AS THE CONFIRMATION OF BENEFICIARY’S SIGNATURE(S) ARE NOT RECEIVED BY THE GUARANTOR ON OR BEFORE EXPIRY” Please note the underlined capitalized clause “…UNTIL THE APPLICANT HAS FULFILLED ITS OBLIGATION(S) UNDER THE CONTRACT”. Are we bound by such a clause to check if the the applicant has fulfilled its obligation under the contract? Thanks you so much Kind regards, LHH ————– Hi, A. Maturity date of a tenor draft under a D/A collection transaction Drafts under collection transactions are drawn on the buyer/importer (drawee). For drafts at 60 days sight, the maturity date will be 60 days after the date the documents are presented to the drawee. Assuming that the collecting bank receives the documents on 1 August, 2014 and presents the draft at 60 days after sight to the drawee on 3 August, 2014 for acceptance and the drawee accepts on 5 August, 2014. The maturity date of the draft in this case will be 60 days after 3 August, 2014. B. LC issues 1. It is the intention of the issuing bank that Mill Test is required to be presented for negotiation/payment. However, the issuing bank fails to express its intention in the LC. The condition stated in Field 47 appears to be a non-documentary condition. However, it is advisable for the beneficiary to present Mill Test (if any) to avoid dispute. 2. In my opinions, there is no discrepancy. The fact that the C/O indicates “issued retroactively” satisfies the LC requirement. There’s no need for such wording to be indicated in Box 13. C. Guarantee A guarantee is by its nature independent of the underlying relationship (i.e., the contract, tender conditions or other relationship between the applicant and the beneficiary on which the guarantee is based) and the guarantor is in no way concerned with or bound by such relationship (see URDG 758 Article 5). You are not obliged to check if the applicant has fulfilled its obligation under the contract. According to the described clause, the liability of the guarantor under the guarantee shall be released upon receipt from the beneficiary’s bank of its swift message confirming to this effect. Kind regards, Mr. Old Man
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?