Mr Old Man Q&A WHETHER THE ISSUING BANK MUST HONOUR WITHIN FIVE BANKING DAYS By Mr Old Man Posted on August 8, 2015 5 min read 2 0 3,483 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION Dear Mr. Old Man, We have known you through your enthusiastic and expert answer for problem relate to L/C and we really admire your specialist knowledge. Now, I still have had a question and I hope you help me clarify it: “Which is the last day the issuing bank must honour a complying document presented under at sight L/C and not break UCP 600 rules?” I have read your blog “Five banking day rule” on your WordPress Oct, 2014, and my colleagues have opinions like this “An Issuing bank must honour within that 5 banking days.”, too. But I think different. Article 14 (b) UCP 600 said that “….the issuing bank have a maximum of five banking days… to determine if a presentation is complying”. I think it means to the last second of the fifth day, the issuing bank still have right to determine. When determining to honor, the working day is over. So, I think, issuing bank has to honor on the following working day, and this is not break UCP rules. In the quote of the above mentioned blog, Mr. Gary Collyer said about “the processing of work late”, but he also use “might not” when said that “an actual payment might not be effected until the following day”. About work late, I think it can be counted time of working day. And the issuing bank still have right to determine at the end of that time. About “might not”, it is not strong in support the payment must be effected within the 5 banking days. Please clarify this for me. Thank your very much and look forward to receive your respond soon. Best regards, NQN —————- ANSWER Hi, Please note that the five banking day rule refers to the time allowing the nominated bank, the issuing bank or the confirming bank (if any) to determine if the presentation is complying or not. If the presentation is not complying and the bank decides to refuse it must give the notice of refusal not later than the close of the fifth banking day following the day of presentation. The issuing bank is not obliged to honour within five banking days. However, according to sub-article 15 (a), when the issuing bank determines that the presentation is complying, it must honour. So, it is fair that the issuing bank should honour on the next banking day following that day the presentation is determined to be complying with the LC terms and conditions, which may fall on any banking day within the five banking days (assuming that the documents are determined to be complying on the second or the third banking days following the day of receipt of the documents) or on the sixth banking day following the day of receipt of the documents. However, as said, the issuing bank has maximum five banking days to determine the compliance of the documents, hence, some issuing banks would make full use of these five banking days and may honour on the sixth banking day even on the seventh banking day following the day of receipt of the documents. It may be explained that the issuing bank needs one or two days to process the payment. Kind regards, Mr. Old Man
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?