Mr Old Man Q&A LC WITH SPECIAL PAYMENT CONDITION By Mr Old Man Posted on November 7, 2013 3 min read 10 0 7,393 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Hai cụ già sưởi nắng QUESTION Our company is specialized in importing P-phones. Our policy is that the quality, quantity and condition of the goods must be checked at our end. If the goods are satisfactory we will sign Hand Over Certificate which is the key document to trigger the payment. According to the contract we have to open a letter of credit in favour of the supplier. Please let us know whether we can incorporate such a payment condition into the letter of credit and how? —— ANSWER Hi, Yes you can do that if the beneficiary accepts a letter of credit with such special payment condition. If the beneficiary accepts such a payment condition, then it can be incorporated by the issuing bank into the letter of credit as follows: “Upon receipt of the documents complying with the terms and conditions of the credit, we (issuing bank) will deliver the documents to the applicant (free of payment) for the purpose of inspection against a trust receipt signed by the applicant undertaking to provide us with a notice of approval or rejection of payment. We undertake to honour upon occurrence of either of the following events whichever comes first: (a)Upon receipt of the Notice of Approval/Hand Over Certificate from the applicant; or (b) On the 21st day after the date of receipt by the applicant of the documents for the purpose of inspection by the applicant. If we receive a Notice of Rejection from the applicant within 21 days from the receipt date we will notify the presenter accordingly, and shall have no further responsibility therein …”. I see that American and EU banks would incorporate payment conditions similar to the above into their letters of credit for importing aqua-products from Asian countries. I believe your bank would agree to issue a letter of credit with such special payment condition. The problem left is whether the beneficiary accept the letter of credit with such payment condition. 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?