Uncategorized WHERE BENEFICIARY REFUSES TO PAY THE NOMINATED BANK'S CHARGES By Mr Old Man Posted on December 4, 2010 8 min read 23 0 4,849 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUERY Anonymous # 2. December 2010, 17:35 Thank you Mr Old Man. I ask for your opinoin on another issue in the case as I descibed earlier in this thead. As I said, L/C stipulates that charges of the nominated bak are payble by the beneficiary.Despite that, the beneficiary presented documents requesting payment and refused to pay those charges or at least simply didnot pay charges. Would such a case makes a discrepancy and non-comlying presentation? I have in mind definition of the complying presentation from article 2 of UCP600 saing "Complying presentation means the presentation that is in accordance with the terms and conditions of the credit…". Further, L/C issuing bank is obliged to pay charges of the nominated bank, but it has the right to refuse payment of L/C documents and to act in accordance with article 12 of UCP600, stating discrepancy "Beneficiary refused or not paid charges of ABCDEFGH bank." That makes good "negotiating position" for the issing bank. The issuing bank is than in a position a) to act as requested by the beneficiary, or b) to deduct charges from proceeds (article 37 of UCP600), or c) to refuse payment and finish by returning documents to the presenters. ————— COMMENTS Mr. Old Man # 3. December 2010, 12:50 Hi, According to sub-article 37 (c), a bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (“charges”) incurred by that bank in connection with its instructions. If LC states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges. For example, if LC states that all charges (including advising charges, reimbursement charges…) outside the issuing bank’s country are for the beneficiary and the beneficiary refuses to pay such charges, the issuing bank remains liable for payment of charges. Back to your particular case, it is true that in accordance with sub-article 12 (a) the nominated bank is not obliged to act on its nomination. Therefore, if the beneficiary refuses to pay the nominated bank for charges as instructed by the LC, the nominated bank would rather refuse to act on its nomination, i.e., refuse to honor the documents, than agree to honour and then claim charges from the issuing bank. I do not think the beneficiary’s refusal to pay charges constitutes a discrepancy. Best regards,Mr. Old Man—————— Abrar Ahmed # 4. December 2010, 01:17 A stipulation on the LC by the issuing bank to the effect that "charges of the nominated bank are payable by the beneficiary" without any further qualifying conditions to provide for the the situation where payment is refused, is in my view, not an express modification to sub-art. 37c, and therefore, the issuing bank would remain ulitimately liable to the nominated bank for its settlement.However, as to whether a nominated bank should act on its nomination, depends on whether such nominated bank is also a confirming bank. In this case, it has an obligation to honour, and it is only on presentation of documents, that the nominated bank's (with the exception of the confirmation fee)charges are incurred. Whilst the confirming bank may be in a position to ensure that its confirmation fees are paid in advance of its adding confirmation, it would not be in a position to deduct "negotiation fee" and the like, until documents are presented. Although unlikely, an outright refusal by the beneficiary to allow a deduction of such fees from the proceeds, would automatically provide for the nominated bank to recover these charges from the issuing bank under provisions of sub-art.37 c. The position of a non-confirming nominated bank is different. It can choose to act, or not act on its nomination. In this case, in consideration of acting on its nomination, it may wish to impose its own conditions for so acting (sub-art 12a),such as an explicit agreement that the beneficiary agrees to deduction of the nominated bank's charges. As to whether a refusal to pay nominated bank's charges would constitute a discrepancy, Article 2 refers to a "presentation" which is defined as the act of delivering documents, or the documents themselves, so delivered. The determination as to a "complying presentation" is restricted to an examination of the documents only, against the LC terms and UCP. Any other conditions in the LC not directly related to the document examination process (conducted in accordance with Article 14) is superfluous, and should not compromise the beneficiary's right to receive payment.——————— Mr. Old Man # 4. December 2010, 06:57 Very very excellent!!!Appreciated, Abrar.
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?