Uncategorized PLACE OF EXPIRY By Mr Old Man Posted on March 12, 2010 7 min read 7 0 7,411 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUERYFrom: Tran Tuan Anh Subject: Where LC expired Dear Mr Old Man ! I would like to ask you a query regarding the country in which LC expired. My bank usually open LCs in which the place expired in the country of beneficiary. However, some of LCs we received from overseas bank having the place expired in the country of buyer. Why ? Pls comment about this Thanks and best rgds ———————————-COMMENTTo: "Tran Tuan Anh Hi, It is a common practice that LC available by negotiation would expire in the beneficiary’s country whereas LC available by payment/acceptance/deferred payment would expire in the issuing bank’s country which is also the applicant’s country. Payment/acceptance/deferred payment LC may also expire in the beneficiary’s country in the following case: (i) LC is confirmed by the confirming bank which is located in the benficiary’s country.(ii) LC indicates a named nominated bank which is located in the benficiary’s country. However, the fact that Payment/acceptance/deferred payment LC indicates a named nominated bank which is located in the benficiary’s country is not often. Practice has shown that the nominated bank under LC available by payment/acceptance/deferred payment would refuse to act on its nomination, i.e., refuse to honour the LC, unless the nominated bank is the confirming bank or has agreed in advance with the issuing bank. Its refusal is supported by UCP 600 sub-article 12 (a). Please check at your end whether which types of LC your bank often issues and receives. By the way, please refer to my old comment to a similar query in Letter of Credit Forum to find out more reasons why some LCs are stipulated to expire in the beneficiary’s country and some others in the buyer’s country. Best regards,Mr. Old Man QUOTETue, 09/11/2007 – 02:12 — nhduc.dng LC Availability Dear Neville Dcosta, As you may know, an LC may be stipulated available by payment, available by negotiation, available by acceptance or available by deferred payment. LC available by (sight) payment does not require sight drafts to be presented and normally the payment is to be effected at the counter of the issuing bank or at its nominated bank upon receipt of the complied documents. The beneficiary under LC available by payment normally may not obtain the payment in advance by negotiating (selling at a discount) the documents at his bank. Different from LC available by payment, LC available by negotiation allows the beneficiary to receive the payment by negotiating the sight drafts and documents at a nominated negotiating bank which is normally located in his country. The negotiation may be effected on a with or without recourse basis. However, under a confirmed LC, the confirming bank must negotiate the documents on without recourse basis. Acceptance LCs and deferred payment LCs are usance LCs. The difference is that the acceptance LC requires a time draft, whereas the deferred payemt LC does not. Under acceptance LC, the beneficiary may receive the payment before the draft is due by discounting the accepted draft at its bank or discounting it on forfaiting markets (as the accepted draft is a financial instrument which can be transferable). Under deferred payment LC, after his presentation of complied documents, the beneficiary receives a deferred payment undertaking incurred by the issuing bank or its nominated bank. Deferred payment undertaking is not largely accepted as a financial instrument, therefore, normally the beneficiary may not discount the deferred payment undertaking. However, in some cases, the beneficiary can use the deferred payment undertaking incurred by the issuing bank or nominated bank as a security for the advance given by his banks. UCP 500 was silent on negotiating/discounting deferred payment uindertakings. The dispute between Banco Santander and Banque Paribas in connection with the discounting of a deferred payment undertaking led to the change in UCP. Under UCP 600 Art. 12 (b), the nominated bank is allowed to purchase (buying at a discount) its own deferred payment undertaking. Hoping the matter has been clear. Best regards,Nguyen Huu DucUNQUOTE …
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?