WHERE INVOICED AMOUNT IS IN EXCESS OF CREDIT AMOUNT

QUERY
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From: hoa moclan []Sent: Fri 7/16/2010 10:06 AM
To: Nguyen Huu Duc (DNG)
Subject: article 18b

Dear MR. OLD MAN

Under one unconfirmed LC issued by us under UCP600, we received dos for USD7017.6 whilst LC amount is USD6880 (maximun). It appears that LC is overdrawn by USD137.6. Applicant waived this discrepancy, but agreed to pay only the LC amount.

Sub-article 18(b) of UCP600 states: A nominated bank acying on its nomination, a confirming bank, if any, or the issuing bank may accept a cpmmercial INV issued for an amount in excess of the amount permitted by the credit, and its decision will be binding upon all parties, provided the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit.

Now, as per sub-article 18(b) of UCP 600, can we accept and pay only USD6880, without any consent from the remitting bank/ beneficiary ?

I wish you help me with this question asap.

Thank you so much for your attention.
Best regards,
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COMMENT
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From: Nguyen Huu Duc (DNG)
Sent: Fri 7/16/2010 3:34 PM
To: hoa moclan
Subject: RE: article 18b

Hi,

If the invoice amount is exceeding the credit amount and the amount claimed is the credit amount, the issuing bank may accept such an invoice and pay the claimed amount. This complies with sub-article 18 (b).
Where the claimed amount is the invoice amount, which is exceeding the credit amount, if the issuing bank accepts to pay the documents with such a discrepancy, it must pay the full claimed amount. If it wishes to pay the amount lower than the claimed amount it should ask for the remitting bank’s approval.
Suggested answer of the 18.15 of the Frequently Asked Questions under UCP 600 Volume I, II & III is quoted below:

"Sub-article 18 (b) allows a nominated, confirming or issuing bank to accept an invoice for an amount that is greater than the amount of the credit provided the respective bank does not honour or negotiate for more than the credit value. This requires that the beneficiary (if presentation made direct) or the presenting bank request the settlement of the lower amount in their cover letter / schedule or, where there is a draft, the draft is drawn for the amount of the credit. A bank should NOT pay the lower amount without the agreement or instruction of the beneficiary / presenter."

Best regards,
Mr. Old Man