WHERE THE DOCUMENTS WERE DESTROYED

QUESTION

Dear Mr. Old Man,

I have a question for you.

Let’s assume that the nominated bank received a presentation from the beneficiary and determined that the documents were complying with the terms and conditions of the LC. However, the documents were destroyed by accident while waiting for DHL to pick up.

Can the nominated bank claim reimbursement from the issuing bank under Article 35?

Thank you and best regards,

B.B

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ANSWER

Dear B.B,

According to UCP 600 Article 35,  if the nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honored or negotiated, an issuing bank or confirming bank must honor or negotiate, or reimburse that nominated bank, even when the documents have been LOST IN TRANSIT between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank.

Article 35 regulates the situation where the complying documents have been LOST IN TRANSIT between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank. It does not regulate the case where the documents have been DESTROYED. Therefore, if the documents, whether complying or not complying with the LC terms and conditions, have been destroyed due to the nominated bank’s negligence or fault, the nominated bank is not protected by UCP 600 Article 35, that is to say, it is not entitled to any reimbursement from the issuing bank.

However, if the documents have been destroyed in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank, I think the nominated bank may also enjoy the protection of UCP 600 Article 35 as in the situation where the documents have been lost in transit.

Best regards,

Mr. Old Man