Home Mr Old Man Q&A DRAFTS UNDER D/A COLLECTIONS; NON-DOCUMENTARY CONDITION; ISSUED RETROACTIVE; GUARANTEE VS CONTRACT
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DRAFTS UNDER D/A COLLECTIONS; NON-DOCUMENTARY CONDITION; ISSUED RETROACTIVE; GUARANTEE VS CONTRACT

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Dear Mr. Old Man,

Could you give me your opinions about controversy issues that I meet during processing documents?

  1. 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?

 

  1. LETTER OF DOCUMENTARY CREDIT:

 

  1. 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?

 

  1. 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?

 

  1. 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

 

 

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8 Comments

  1. muzammil hayath

    September 11, 2017 at 8:54 pm

    Dear Mr Old Man,

    Good Day..Need your Opinion on this…

    A credit was issued for the amount of USD5.3M (Not Exceeding).The goods qty was stated to be the 5000MT +/- 10%.Partial shipment were allowed and there was a requirement for a “final shipment” document to be presented by the beneficiary..

    Qty Shipped was 5,498MT with a value of USD3,328,214.30 .Invoice showed a unit price of USD605.35 per MT . A “final shipment” t document was presented..

    The Issuing Bank refused the documents due to an under-drawing .it based its argument on UCP 600 30(C)..The Nominated Bank agrees that the credit is under-drawn,but disagrees with discrepancy due to the structure of the credit and the requirement for a “final shipment” document..

    Please advice who is correct Issuing Bank or Nominate bank…

    Thanking you in advance…

    Reply

    • mroldman

      September 12, 2017 at 7:12 pm

      In my opinion the discrepancy raised by the issuing bank is valid as per sub-article 30 (c). The presenter’s argument is not convincing.

      Reply

      • Hayath

        September 12, 2017 at 10:02 pm

        Thank you Mr Oldman

        Reply

  2. Danushka

    September 14, 2017 at 11:33 pm

    Dear Mr. Old Man,
    (1) We (Presenting Bank) have received a set of collection from the remitting bank and the payment term is “D/A 90 Days”. The Bill of Exchange presented was drawn as follows,

    TO
    ABC Company (Name of the drawee)
    Drawee’s address
    Tel NO.
    Our bank Name
    Ac number of the customer
    Our Branch Name (Branch that customer maintains his account)

    Some of our colleague’s opinion is that draft should not be mentioned the name of our bank since it will bound the bank to pay in the event of default by the beneficiary. When they refer this matter to our legal department they also said that draft has drawn to both parties (Drawee and the Presenting bank) and therefore bank is liable to pay in the event of default by the importer. However, my opinion is that seller has drawn the draft correctly to the drawee by merely mentioning their bank details and therefore there is no obligation to the bank in the event of a dispute.

    (2) Will there be any different if Bill of exchange drawn the draft to the importer as above and mention below Consigned to Bank X (Name of the presenting bank)

    Need your expertise regarding the matter.

    Reply

    • mroldman

      September 17, 2017 at 3:07 pm

      1) Under documentary collections, drafts should be drawn on the importer and not on the collecting bank. In your case, I understand the draft is drawn on ABC Co. and your bank’s name is just additional information.
      If needed the collecting bank may ask for the remitting bank’s clarification.
      2) See Answer No. 1

      Reply

      • Danushka

        September 17, 2017 at 9:52 pm

        Thx Mr. Old Man

        Reply

  3. Allan

    September 16, 2017 at 8:50 pm

    Dear Mr Oldman,

    We have received bl issued to order but not blank endorsed. But we have received letter of authorization to endorse bl on behalf of shipper. please confirm whether its acceptable.From bank point of view…
    will ISBP A25 and E13 is ok to negotiate with bank to defend ourselves..please share ICC Opinion for reference, if any

    Thank you Mr Oldman…

    Reply

    • mroldman

      September 17, 2017 at 3:23 pm

      It is quite acceptable if your bank agrees to endorse the b/l in accordance with the shipper’s authorization. ISBP 745 E13 is sufficient.

      Reply

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