QUESTION
Dear Sir,
I am Vijay, working in Scope Intl P Ltd (Standard Chartered Bank Group) in Chennai as senior officer in Doc checking team for the past one year. Previously, I worked with bene side handling import and export documentation preparation, logistics etc. On the basis of my knowledge I got offer in SCOPE and also I got CDCS this year.
Sir, I would like to become trade advisory role which is my dream. Please guide me what are the things I have to do to achieve this prestigious position. As part of the stepping stone to achieve this goal, I am going through all the ICC opinions, Docdex cases etc and upgrading my knowledge in this field day by day. Sir, for the past one year I 'hands on' personal examination of at least 5000 sets of documents under letters of credits (export transaction).
I came to know that you are expert and avatar in this field through your blog which I am referring regularly if any questions arise in my mind during the doc checking.
Awaiting your valuable suggestion which indeed require for me to achieve my dream goal.
Regards/Vijay
————————-
ANSWER
Dear Vijay,
Thank you but I dare not admit that I am an expert. I just share my experience and knowledge of trade finance operations with those who eat, sleep and breathe trade finance. To share is to learn. I have learnt a lot from the questions given by colleagues and students.
I see that you have gained necessary qualifications to soon become an expert in trade finance. To speed up your dream, why don’t you try the following:
1) Join letter of credit forums or trade finance forums as an active member.
2) Join trade finance training courses and seminars both as a trainee and trainer; or join colleges as a visiting lecturer/speaker.
3) Read and write books about trade finance operations. Start by publishing short articles in banking reviews or Trade Finance Newsletters…
4) Create a blog/a website to share your knowledge and experience in this field.
…
Love (for trade finance) and time (experience in trade finance) will make you become “an old man” like me.
Best regards,
Mr. Old Man
.
Iqbal Moolla
June 5, 2024 at 5:00 pm
Dear Mr Old Man.
I find your comments most valuable.
We are having a debate and would like your opinion/view.
If a LC calls for a bill of lading and field 48 reads :21/within validity of the LC.
Latest shipment date is 30/05/2024
LC expiry date is 20/06/2024
The bill of lading on board date is 29/04/2024
Documents are presented on 30/05/2024
Is the discrepancy of late presentation valid?
Regards
Iqbal
Mr Old Man
June 5, 2024 at 8:42 pm
Hi,
I must say that the LC stipulation with regard to period for presentation is not clear. LCs would normally stipulates that documents must be presented not later than 21 days after shipment date, BUT within the LC validity. The LC in question uses a virgule (slash mark “/”).
There have been divided opinions on this issue but my opinion is that provided the documents are presented within the validity of the LC, the presented is treated as complying. My reasing is based on:
(i) ISBP paragraph A2 (a) which reads if a virgule is used and no context is apparent, this will allow the use of one or more of the options.
(ii) ISBP paragraph (v) which reads the applicant bears the risk of any ambiguity in its instruction to issue to issue or amend an LC.
Please refer to an attached thread of expert discussions on a question similar to yours, The discussion took place on DCPro Discussion Forum 17 years ago.
Best regards.
Mr. Old Man
QUOTE
Albert – United States Posted 20 Jul 07 |
What is the interpretation of a clause [“documents to be presented within validity of the credit”] inserted under SWIFT MT700 field 48.
We have two different opinions among our local community:
1) It means that documents can be presented any time within the validity of the credit even if it is later than 21 days after the shipment.
2) It has no meaning (ambiguous instruction) to insert such clause. SWIFT Usage Rules and definition stating that “The period for presentation is expressed in number of days. The absence of this field means that the presentation period is 21 days, where applicable.”. Therefore Article 14-c still applies.
It is my opinion that this field never allow bank to insert clause to make interpretations not provided under such rule (as well as UCP). If the intension is to allow presentation over 21 days, the credit should be very clear (under field 47B) indicates that “presentation later than 21 days after the date of shipment are acceptable, but in any even not later than the expiry date if the credit” or even put “Stale documents are acceptable” [not recommended] as defined under para 21-b of the ISBP.
Appreciate your opinion on the above.
Albert
[edited 7/20/2007 7:04:05 PM]
Abdulkader- Saudi Arabia Posted 21 Jul 07 |
I agree with your opinion; the clause does not add to what already exists; documents have to always be presented within the validity period of the credit but for a presentation that contains a transport document, unless expressly stated, documents must also be presented within the 21 days from the shipment date. Thus, when the presentation contains a transport document, there are two limits that need to be complied with: the expiry date and the presentation period.
However, when there are two differing opinions or confusion, the best and the safest thing to do is always to contact the issuing bank and get the required clarifications. This way we avoid wasting time arguing.
Best Regards
Abdulkader
[edited 7/21/2007 8:19:53 AM]
Jim Barnes – United States Posted 26 Jul 07 |
A beneficiary should know what the UCP rule on presentation says but should not know what the SWIFT usage rule says and in any event should not be expected to ignore the effect of these words on the UCP default rule of 21 days. This language is a bit careless but not so bad as to support refusal on late presentation grounds. Regards, Jim
UNQUOTE
Iqbal Moolla
June 19, 2024 at 5:28 pm
Dear Mr. Old Man
I require your opinion on the following.
+ Deferred Payment LC issued by Bank in Tanzania to a bank in South Africa. The LC requests that the LC be confirmed by the bank in SA, expires at their counters and is available with the confirming bank (Field 41).
+ Confirming bank duly confirms the LC and advises the beneficiary either directly or through the bank mentioned in field 57.
+ Confirming bank receives documents a few days prior to maturity and on examination deems the documents to be compliant and sends documents to the issuing bank by courier and also send a MT754 with details of the drawing amount, value date and confirming documents received are compliant with the terms and conditions of the LC.
+ In line with their confirmation and in terms of article 8 of UCP600 the confirming bank pays the beneficiary at maturity and claims reimbursement (MT742) from the nominated LC reimbursing bank.
+ The reimbursing bank reverts with a swift (MT799) advising that they have not received a reimbursement authority and are contacting the issuing bank.
+ On contacting the issuing bank the confirming bank are advised by the issuing bank that in terms of UCP 600 article 14 (Standard for Examination of Documents) they have 5 days to check documents before they can authorise the issuing bank to honour our claim.
+ The confirming bank is out of pocket from the time they paid the beneficiary/claiming bank until they receive payment from the reimbursing bank.
.
I seek guidance on the following:
1. Is the issuing bank within their right to only authorise payment after checking docs? Our contention is that as the LC was available at our counters we do not require the issuing bank to check documents before we pay the beneficiary. If the issuing bank does pick up a valid discrepancy they can always revert to the confirming bank in this regard.
2. What recourse does the confirming bank have in this scenario? Does article 14 supercede article 8?
3. Can the confirming bank claim out of pocket/late payment interest from the issuing bank?
Regards
Iqbal
Mr Old Man
June 19, 2024 at 8:34 pm
Hi,
1/ If the issuing bank intends that it will authorize the reimbursing bank to pay or authorize the confirming bank to claim reimbursement from the reimbursing bank only after checking the documents as per UCP 600 Article 14, it must so state in the LC. However, if it so states in the LC, the confirming bank may refuse to add its confirmation to the LC.
In your specific case, the LC is available with the confirming bank by deferred payment and the confirming bank has accepted and paid the complying documents at maturity it is entitled to the full reimbursement from the issuing bank.
2/ Two articles are independent of each other and do not supersede each other.
3/ The confirming bank can claim late payment interest from the issuing bank.
Best regards,
Mr. Old Man
Iqbal Moolla
June 29, 2024 at 1:24 pm
Dear Mr. Old Man,
I trust you are well.
If there is a Deferred Payment LC for 90 days and the confirming/nominated bank discounts the LC.
The issuing bank, either has a clause in the LC or at maturity requests the confirming bank to refinance the LC for
an additional period.
.
Is this extension still subject to the rules of UCP600 or is it now an unsecured loan to the Issuing Bank?
.
Regards
Iqbal Moolla
Mr Old Man
June 29, 2024 at 4:00 pm
Hi,
I am not sure I understand your question correctly.
According to sub-article 8 (a) UCP600, provided that the stipulated documents are presented to the confirming bank and that they constitute a complying presentation, the confirming bank must honour (i.e., incur its deferred payment undertaking and pay at maturity) if the LC is available with the confirming bank.
According to sub-article 12 (b) UCP600, by nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank.
It is understood from the above provisions that the confirming nominated bank may but is not obliged to prepay or purchase (i.e., to discount) its own deferred payment undertaking at the request of the issuing bank or the beneficiary and that in case the confirming bank does not discount its own deferred payment undertaking, it must pay at maturity.
According to sub-article 7 (c) UCP 600, the issuing bank must reimburse the confirming nominated bank that has honoured a complying presentation under the LC available by deferred payment at maturity, whether or not the confirming nominated bank prepaid or purchased before maturity.
I am not sure I understand your question correctly. I guess when using the phrase “requests the confirming bank to re-finance the LC for an additional period” perhaps you mean a request for the confirming bank to accept an extension of the reimbursement period longer than the deferred payment period which it has incurred.
If so, such request is not governed by UCP 600. The confirming bank may refuse to add its confirmation to the LC that contains such clause.
Best regards,
Mr. Old Man