Home Mr Old Man WHETHER DRAFTS ARE PART OF DOCUMENTS REQUIRED UNDER FIELD 45A

WHETHER DRAFTS ARE PART OF DOCUMENTS REQUIRED UNDER FIELD 45A

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QUESTION

Dear Mr. Old Man,

We appreciate your urgent help please!

LC issued by our bank stipulates:

————————————————

41D: Available with

ANY BANK BY NEGOTIATION

42C: Draft at

SIGHT FOR 100 PCT OF INVOICE VALUE

42A:Drawee

(OUR BANK SWIFT CODE)

46A: Documents required

  1. Signed commercial invoice in triplicate.
  2. 3/3 set of Originals of clean ‘Shipped on board’ ocean Bill of Lading marked ‘Freight prepaid’ made out to order of the issuing bank and notify applicant.
  3. Packing list in triplicate.

47A: Additional Conditions

DRAFT(S) MUST BE ISSUED…

——————————————

Documents presented to our bank do not include drafts as required. However, all documents required under Field 46A comply with the LC terms and conditions.

We’ve read somewhere in your blog and understood that drafts are not part of documents required under Field 46A and discrepancies on drafts do not constitute good reasons to refuse the documents. So, we intend to accept the documents without notifying the applicant of the fact that no draft has been presented because we are afraid that if we notify the applicant of such a fact, the applicant may refuse to take up the documents while such a discrepancy may be rejected by the presenter.

So, here are our questions:

1) Can we accept the documents and honour without notifying the applicant of the fact that no draft has been presented?

2) Can the applicant refuse to take up the documents once he knows that no draft has been presented?

Thank you in advance for your help.

Best regards,

BHV

————

ANSWER

Hi,

It is true that I have ever said that drafts are not part of the documents required under Field 46A and therefore, discrepancy, if any, on drafts does not constitute good reason for the issuing bank to reject the documents.

ISBP 745 A19 (a) defines shipping documents as all documents required by the LC, EXCEPT DRAFTS… So, it should be agreed that the rejection of the documents based on discrepancies on drafts is not justified.

So, here are my answers to your questions:

1) Yes, your bank can accept to honour the documents without giving any notification of discrepancy, i.e., drafts not presented, to the applicant.

2) No. Drafts is drawn on the issuing bank and if presented it will be kept by the issuing bank. The applicant would take up the shipping documents, i.e. the documents required under Field 46A.

Kind regards,

Mr. Old Man

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2 Comments

  1. Lily

    September 8, 2020 at 2:17 pm

    In case that the issuing bank can not refuse to honour based on the discrepancy of draft(s) because draft (s) was not required documents in LC or is shipping docs as per article A19 (isbp) , it may deduct certain amount as discrepancy fee on basis of its conditions on field 47A on the LC for example, right? After all, the purpose of LC transaction would be done without drafts presentations or discrepancies (if any) i think so.

    Reply

    • Mr Old Man

      September 9, 2020 at 12:58 pm

      You may deduct discrepancy if you gave notice of refusal stating that drafts are not presented as required in F47A.

      Reply

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