Home Uncategorized WHETHER THE ISSUING BANK CAN REFUSE THE COMPLIED DOCUMENTS…

WHETHER THE ISSUING BANK CAN REFUSE THE COMPLIED DOCUMENTS…

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Da Nang, Vietnam

QUESTION

Hi,

I do need comments from someone who knows about Bangladesh Laws relating to refusal of documents.

We have received MT799 from the issuing bank with the content as follows:

“PLS BE INFORMED THAT WE ARE OBLIGATED TO FOLLOW THE FOREIGN EXCHANGE POLICY IMPOSED BY OUR CENTRAL BANK AS WELL AS THE PREVAILING LAWS OF OUR COUNTRY. THE LAWS STATES THAT BEFORE RELEASING THE FOOD ITEM THE GOODS MUST BE EXAMINED BY THE DEPARTMENT OF AGRICULTURE (PLANT PROTECTION WING).

AFTER EXAMINATION THEY HAVE FOUND THAT THE SHIPPED CONSIGNMENT ARE NOT AS QUALITY AS PER DESCRIPTION OF THE ORIGINAL CREDIT. THE APPLICANT HAS INSTRUCTED US VIA THEIR LETTER DATED 08.06.2014 TO RETURN BACK THE ORIGINAL SHIPPING DOCUMENTS TO YOUR END IMMEDIATELY.”

Can the issuing bank refuse the complied documents because of the above mention?

Best regards,

Lan
————–

ANSWER

Hi,

If the LC does not contain such unfair provision/clause, then according to Article 7 UCP 600, the issuing bank must honour the complying presentation. It cannot return the documents based on the applicant’s instructions or  even on Department of Agriculture’s examination result. If the LC does not contain such provision then only the court’s decision can be binding on the issuing bank.

Regarding LCs with such unfair clause or similar, please click the following to read my article “Unfair Letters of Credit” published in Trade Services Update in 2010:

http://nhducdng.wordpress.com/2010/11/16/unfair-letters-of-credit/

Regards,
N.H.Duc
———–

P/s: The Q&A is quoted from DCPro Discusssion Forum of  June 23, 2014

 

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4 Comments

  1. Anh Nguyễn

    April 8, 2015 at 3:56 pm

    My case: The issuing bank found the documents discrepant and advised the discrepancies as per UCP600. Then the applicant waive the discrepancy and obtain the documents to take up the goods. The goods, according to the local law, must be examined. The results is that the goods’ quality and specification not as the documents and the l/c requires. The applicant seeked the court’s decision to suspend the payment. The issuing bank send message to the presenting bank about the court’s decision. Then the presenting bank replied, they negotiated the documents and ask why the Issuing bank released the documents to the applicant without payment immediately?
    .
    Pls kindly help us in this case. we are the issuing bank. Our customer don’t want to pay because the beneficiary cheats them.

    Your advice is highly appreciated!

    best regards,

    Reply

    • mroldman

      April 9, 2015 at 5:20 am

      Please note that fraud is a matter of local law which always prevails over the UCP rules. If the issuing bank receives a injunction from the court it can’t help complying with such a order.
      If your bank receives a stop payment order from the court you should inform the presenter of the same and if required, may provide the presenter a copy of the court order. If the presenter is the bank that has negotiated the documents without recourse, it may reisist the court based on UCP 600 Article 5 (Documents vs goods, services or performance) and Article 34.

      Reply

  2. Anh Nguyễn

    April 9, 2015 at 11:18 am

    So even when the presenter has negotiated the documents without recourse and if they do not resist the court, the issuing bank that has received a stop payment order from the court is not supposed to make the payment to the presenter?

    Reply

    • mroldman

      April 16, 2015 at 9:53 pm

      The issuing bank cannot help abide by the court’s order. The issuing bank can remimburse the negotiating bank when the court lifts its order.

      Reply

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