QUESTIONS REGARDING LC WITH T/T REIMBURSEMENT ALLOWED

QUESTION

Dear Mr. Nguyen,

Many thanks for taking the time to reply while busy working . I apologize about unclear query on face book. Please allow me to explain more clearly:

In fact we are the applicants our bank amended the L/C to allow T.T. Reimbursement without seeking our approval to authorize such amendment. The amendment was carried by issuing bank after direct instruction from the negotiating bank which is also part of the same bank group based in an other EU country .

Initial opening swift
:40E: UCP latest version
:49:WITHOUT
:78: WE SHALL CREDIT YOU AFTER OUR RECEIVING OF STRICTLY COMPLYING DOCUMENTS WITH LC TERMS.

Beneficiary’s advising bank requested to amend as follow:
Field 41A: Available with confirming/negotiating/bank by payment
Field 49: Confirm
Field 47A: + TYPING ERRORS, MISSING AND INSERTION OF PUNCTUATION WICH IS
NOT CONFORM WITH DOCUMENTARY CREDIT AND DON’T AFFECT THE WEIGHT MENTIONNED ON B/L AND ON COMMERCIAL INVOICE ARE ACCEPTABLE.
Field 78: T.T. Reimbursement allowed I/O existing

We (applicant) only allowed following amendment:
Field 41A: Available with confirming/negotiating/bank by payment
Field 49: Confirm

Issuing bank (our bank) amended as follow:
In FIELD: 40E UCPURR LATEST VERSION I/O EXISTING
IN FIELD 41A: XYZXXXX BANK BY PAYMENT I/O EXISTING
IN FIELD 49: CONFIRM I/O EXISTING
IN FIELD 53A: XYYZXXX (reimbursing bank BIC)
IN FIELD 78: WE AUTORISE YOU TO CLAIM REIMBURSEMENT UNDER VALUE 10 WORKING DAYS AFTER YOUR SWIFT ADVICE TO US WXYZXXX (issuing bank BIC)”

Our bank authorized T.T reimbursement without our approval!
L/C was cashed on basis of a fraudulent BL.
Vessel shown on BL arrested during loading operation in departure port
Cargo was never shipped and Beneficiary went bankrupt!
L/C presentation had some discrepancies
Typographical error in weight on BL (comma missing on net weight)
Port of discharge ” Berjaya Algerian port” (singular) instead of “Algerian ports “(plural)
Discrepancies on goods description on BL and commercial invoices

Both Beneficiary attestations (first confirming set of documents sent by DHL to applicant and 2nd certifying expedition)were missing from bank presentation despite the fact they were both requested in field 46 A (required documents). The beneficiary attestation (shipping advice) confirming details of shipping( received by applicant by email ) stated falsely cargo shipped and vessel sailed from loading port towards port of discharge on date of BL!!!

And multiple minor discrepancies

Issuing Bank was presented with proves that vessel never sailed including:

– Satellite photos of vessel by AIS tracking showing stranded in loading port day post BL date
– 3 Emails from beneficiary confirming vessel was still in split (not giving correct reason for non–expedition, i.e. vessel conservative arrest for unpaid debt)
– These emails were contemporary to issuing bank alert on late expedition and fraudulent BL. Vessel was delayed by 11 days already from due departure date.
Bank was advised 8 days before issuance of MT756 payment order but says had to pay in view of conforming document and obligation towards confirming bank under UCP.

My questions are:

1) Does the issuing bank have the right to allow T.T. reimbursement without applicant authorization?

2) Whether adding confirmation and making payment availably with confirming bank in field 41A implies that one has automatically to amend field 40E???

Whether adding confirmation as follows
Field: 49 : confirm
Field: 41A : Available with confirming bank
Would necessarily binds the issuing bank to amend field 40Efrom UCP latest version to UCPURR latest version as well as nominating a Reimbursing bank in field 53A

3) Who bears the added cost of the reimbursing bank if L/C says all bank charge outside applicant country and confirmation on beneficiary account?

4) Is it possible to confirm and make payment available with confirming bank without the need to change field 40E, 53A and 78 and avoid unnecessary cost for issuing bank and applicant?

5) Does the mention “ T.T. Reimbursement allowed” necessarily suggest UCPURR?

6) Was the issuing bank right in accepting discrepancies?

7) Was the issuing bank right in honoring the L/C despite knowledge of fraud and late shipment?

Our bank behavior with this L/C has caused tremendous damage to our company (2.3 million euros) we cannot recover from insurance as vessel never sailed and risk was still with bankrupt buyer whom pushed us also to bankruptcy!!!!!

Many thank for your comment and expert opinion on aboves points . I would be most grateful if you could kindly answer by adressing each point raised separately for clarity purpose.

Best regards

Your undebted

B.S

——-

ANSWER

Hi,

As said in my previous reply, the confirming bank that agrees to add confirmation to the L/C would require L/C to be available with the confirming bank and allow T/T reimbursement.

Here are my answers to your questions:

1) In my opinion if the issuing bank is not in position to allow T/T reimbursement without the applicant’s consent.

Please check your application for issuing L/C to be sure whether or not T/T reimbursement is allowed. If not allowed, then the issuing bank is liable for amending the clause without the applicant’s consent.

2) Where the L/C indicates reimbursing bank in field 53A (the issuing bank may nominate a reimbursing bank without the applicant’s consent), the L/C should indicate whether it is subject to UCP LATEST VERSION or UCPURR LATEST VERSION.

I don’t think adding confirmation to the L/C and making the L/C available with the confirming bank would automatically amend field 40E from UCP LATEST VERSION to UCPURR LATEST VERSION. However, as it is a bank to bank reimbursement, i.e., agreement between the issuing bank and reimbursing bank on reimbursement, the issuing may choose UCP or URR.

3) A reimbursing bank’s charges are for the a/c of the issuing bank. However, if the charges are for the a/c of the beneficiary, it’s the responsibility of the issuing bank to so indicate in the L/C and in the reimbursement authorization.

4) The confirming bank may claim reimbursement from the issuing bank, so a confirmed L/C may not indicate reimbursing bank in field 53A. If so, there is no need for URR to be indicated in field 40E. For field 78 I see that most the confirming bank would insist on T/T reimbursement be allowed. If not it may refuse to add confirmation (but not always).

5) If the L/C states “T/T reimbursement allowed” and indicates a reimbursing bank, the L/C must also state if the reimbursement is subject to ICC rules for bank-to-bank reimbursement (now URR 725). If the L/C does not state that reimbursement is suuject to URR 725, it is deemed to be subject to UCP 600 sub-article 13 (b).

6) The issuing bank would agree to pay discrepant documents when the applicant agrees to waive the discrepancies. The applicant may refuse to reimburse the issuing bank if the issuing bank pays the discrepant documents without the applicant’s waiver of discrepancies.

7) The issuing bank assumes no liability for falsification of any documents. However, if the issuing bank knows for sure that the documents are forged and late shipment but still pays, it must assume liability for its stupid action.
These are my own opinions.

Kind regards,

Mr. Old Man