Uncategorized LOI UNDER OIL LC By Mr Old Man Posted on May 17, 2010 3 min read 0 0 2,818 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUERY FROM ZAC My bank has issued an usance OIL LC for my customer. Hence, the negotiating bank presented a set of import docs to my bank's counters which my bank has sent a swift MT756 back to negotiating bank yesterday to confirm acceptance of the usance bill. The docs negotiated were invoice and LOI. Today, my customer told me that he is able to retrieve the original BL from the beneficiary and present directly to my bank to further endorse to them. Can this procedure be done because by right, the original BL has to route to us via negotiating bank, correct? My problem wld also be how to redeem the LOI, and revert to negotiating bank using this way. For accepted usance bill, is it advisable to release the import BL to my customer for him to present to his buyer(on open account sales)? Appreciate your time and efforts.—— COMMENT Hi Zac, As far as I know, in oil trade the LC will be payable against presentation of either: (i) the shipping documents including the original BL; or (ii) the invoice and LOI. The LOI will become null and void upon presentation of the shipping documents including the original BL. It is true that the original BL should be presented to the issuing bank via the beneficiary’s bank, i.e., negotiating bank. However, in this particular case, I think there is no need to ask the applicant to revert the BL to the beneficiary in order for the beneficiary to represent to your bank via the negotiating bank. Your bank has confirmed the acceptance of the usance bill, therefore, it must pay at maturity anyway. Just send a message to the negotiating bank confirming that your bank has received the original BL and that your bank will pay the usance bill at maturity, hence, the LOI is now treated as null and void. If needed, you may ask the negotiating to confirm the beneficiary’s consent of cancellation under an authenticated swift. Hope it can help you. Best 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?