FRAUD EXCEPTIONS

QUERY FROM INDIASTAR

My bank in India has submitted docs to construction bank of china on 12 aug (delivered by dHL).
Their bank sent a message on 21st Aug stating that even though date of BL as per docs is correct as per LC, our client has "investigated" and found that ship has sailed late.

Further the message states that we "tried" to relay this message on 19th but could not.

As per UCP 600:
1)Their bank responded after 5 days
2)The BL date is correct as per LC however bank is acting as advised by Chinese customer.

The reason for refusal is the price of commodity fell sharply furing voyage period of 15 days.

What should we do ? where can we complaint against china construction bank and get our money?

My bank is State Bank of India

——————————-

COMMENT FROM MR. OLD MAN

Fraud

Dear Indiastar,

In accordance with UCP 600 Article 34, your bank assumes no liability or repsonsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document etc. Therefore, if your bank is a bona fide negotiating bank that has negotiated the documents without knowledgement of any falsification of the documents, your bank is entitled to the reimbursement from the issuing bank, i.e., Construction Bank of China.

Construction Bank of China must understand the above rule and should act in accordance with UCP 600 sub-article 14 (a), i.e., examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. It must honour if the documents presented constitutes a complying presentation.

Yet, fraud is still a matter of local law so far. Construction Bank of China can (even must) postspone or retain the payment if it has received an enjoining order (stop payment order) from China Supreme People’s Court.

China Supreme People’s Court promulgated New Rules for Resolving LC Disputes in China (effective from August 1, 2006) Article 8 of which deals with fraud cases including the following: (a) the beneficiary has forged documents or submitted falsely recorded documents; (b) the beneficiary has not delivered the goods with vicious intent or has delivered the goods that have no value; (c) the beneficiary and the applicant or other third party have colluded with each other to submit faked documents and there is no real underlying transactions; (d). other circumstances that L/C is used for fraud.

If the applicant can satisfy certain conditions and procedure for enjoining the payment in accordance with the rules’ stipulations, the court shall make a decision on whether or not to enjoin the payment within forty-eight hours. If the court decides to enjoin the payment, the decision shall be carried out immediately.

However, to protect the interests of bona fide banks involved in L/C disputes, the rules regulates that the court shall not enjoin the payment even if fraud does exist in the following cases: (a) the bona fide nominated bank or authorized bank has made the payment; (b) the bona fide issuing bank, nominated bank or authorized bank has accepted the instruments; (c) the bona fide confirming bank has made the payment; (c) the bona fide negotiating bank has negotiated the instruments. Therefore, as said from the beginning of my comment, if your bank is a bona fide negotiating bank which has negotiated the documents, your bank is entitled to reimbursement from Construction Bank of China whether or not the applicant has applied for enjoining the payment.

Best regards,
Nguyen Huu Duc
P/S: Sorry for not having joined the forum regularly in recent months. …