NEGOTIATING THE COPIED DOCUMENTS

QUERY FROM Q.

Hi Mr. Old Man

Relating to the copies docs, I have the case:

F47a: full set of docs can be presented in copies with a receipt issued by applicant' representative office in Vietnam that they have received all originals

Question:
1) Can the beneficiary's bank negotiate the docs in copies?
2) Must the beneficiary's bank check the copies of docs and present the copies of docs to the issuing bank for payment as per UCP600? What are the risks in case of non payment?
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ANSWER

Dear Q.,

1) NO and YES.
NO because the copied documents are non-negotiable. And YES if negotiation is made on a with recourse basis and the beneficiary is able to repay the negotiating bank in case of non payment from the issuing bank due to discrepancies (if any).

2) According to sub-article 14(c), a presentation must including one or more transport documents subject to articles 19, 20, 21, 22, 23, 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar days after the date of shipment as described in these rules, but in any event not later than the expiry date of the credit.

So, a bank can not determine if the presentation is made within the stipulated period of presentation and/or within the L/C validity based on the shipment date indicated in the copy of the transport documents unless the L/C so allows.

Assuming that the L/C allows the copied documents to be presented any time provided within the L/C validity, the beneficiary is still exposed to the risks of non-payment if the documents presented are discrepant.

It is admitted that in most cases applicants would waive the discrepancies and take up the documents because they need the documents (including the original bill of lading) to take delivery of the goods. But in this case, the applicant is holding the original bill of lading, and if it is made out to his order he can take delivery of the goods, and does not need to take up the copied documents which have no value.

A wise beneficiary should never accept this L/C.

Back to your second question as to whether the beneficiary must check the copied documents and forward them to the issuing bank for payment, the fact that the beneficiary’s bank refuses to negotiate the documents would imply that it refuses to act on its nomination. It is not obliged to check the documents but it should check and forward the copied documents to the issuing bank for payment. However, it should not negotiate unless it agrees with the beneficiary to negotiate on a recourse basis and on the belief that the beneficiary is capable to reimburse in case of non payment from the issuing bank.

Last but not least, in 1990s L/C transactions of this type used to occur in the garment and textile industry where beneficiaries would export their products through middle men, and we used to negotiate these L/Cs on a with recourse basis. Luckily, we were always reimbursed though it was often delayed.

Best regards,
Mr. Old Man