Lost Documents in Transit: Is the Old Practice of Sending Two Mailings Still Relevant?

Introduction

The loss of documents in transit is one of the rare but troublesome risks in documentary credit operations. In the past, it was common practice to dispatch documents in two separate mailings—typically one by courier and the other by airmail—to reduce the risk of total loss. Today, however, many issuing banks instead require the bank handling the drawing to retain photocopies of all presented documents in case the originals are lost before reaching the issuing bank.

A reader recently asked whether the traditional two-mailing approach remains the better solution.

Question

Dear Mr. Huu Duc Nguyen,

I have seen quite a few issuing banks include in their LCs a requirement that the bank handling the drawing make photocopies of all documents presented and keep them available for inspection should the full set of documents be lost or mislaid in transit to the issuing bank.

Personally, I think it would be better to revert to the old practice of sending documents in two separate mailings—one by courier and the other by airmail.

Or am I simply too old school?

Bill Du Rand

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Answer

Dear Bill,

By suggesting that documents be sent in two separate mailings, I would say you are indeed following the old-school approach.

ICC has specifically stated that it would not recommend such a practice, as it increases costs and represents a cumbersome and excessive response to an event that occurs only very rarely.

ICC has also clarified that if documents are lost in transit, an issuing or confirming bank cannot insist on replacement original documents. However, it may determine whether the presentation was compliant by examining copies of the documents originally presented to the nominated bank.

For this reason, the requirement sometimes found in LCs for the bank handling the drawing to retain photocopies of all presented documents deserves consideration. If the original documents are lost in transit, such copies may enable the issuing bank to assess compliance and facilitate prompt settlement.

That said, neither the nominated bank nor the presenter is obliged under UCP 600 to retain copies of the documents, even if the LC contains such a requirement. UCP 600 does not address this situation, and the parties must find a practical solution should the problem arise.

For the sake of prudence and faster resolution of any dispute, a presenter may nevertheless choose to retain copies of the documents presented, particularly in transactions involving high values or difficult destinations.

For further guidance, you may wish to refer to ICC Opinions R.548 (under UCP 500) and R.651.

Best regards,

Mr. Old Man