by N. D. George, CDCS Distinction.

I refer to Rupnarayan Bose's article in the October-December 2011 issue of DCInsight, which makes an interesting read. Mr. Bose's article was prompted by an opinion from the autumn Banking Commission meeting reproduced in the January-March 2011 issue.

N.D. George: "equity and fairness demand that the interpretation of the beneficiary should prevail"

The Banking Commission said in that opinion: "The basis for the UCP in article 6 and international standard banking practice is that the expiry place and place for availability are the same." In another words, anything contrary would represents bad practice unless it is explained in the credit itself.

Mr Bose's article lists various permutations and combinations of credits expiring with the issuing bank in one country with the place of availability being with another bank in a different country. He then offers his perspective on each of them.

Mr Bose's analysis of various scenarios leads to the conclusion that if the credit expires with the issuing bank, the documents have to be received by the issuing bank on or before the expiry date regardless of whether the credit was available with a different bank in a different country and the beneficiary presented documents to the nominated bank within the stated expiry period. He also states that it is bad practice to make the credit available with a bank in a different country and at the same time make it expire at an issuing bank located in a different country.

Bad practice: the timing

I have no disagreement with this as far as bad practice goes, but the point to make is that the test of whether the credit is badly drawn or not is often discovered when it is too late for the beneficiary to be able to do anything to have it fixed. More often than not, the problems with the credit are noticed only when the documents are received by the nominated bank for honour (except in the case of sophisticated beneficiaries who put the credit through a detailed scrutiny by trained specialists before it is passed on to the commercial division to act under it by making shipment or providing a service).

The issue then begs the question - which I think is left unanswered either in the ICC opinion or in Mr Bose's article - of the appropriate practice to be followed when the discovery is made on presentation of documents for honour.

I would have liked Mr. Bose to highlight that at this point in time equity and fairness demand that the interpretation of the beneficiary should prevail. For example, if the credit is available with a bank in Shanghai and expires on 01/03/2012 in London with the issuing bank, the beneficiary's expectation is that it has fulfilled its obligation under the credit by making a presentation to the nominated bank within the time frame mentioned in the credit.Mr Bose's conclusion is that this is not enough. He states that the presented documents must be received by the issuing bank in London within the expiry date even if they were received by the nominated bank in Shanghai within that time frame.

Attitude of the court

I am of the opinion that such an interpretation would not withstand critical scrutiny and indeed may fail if the case goes to court. This is because when something can be interpreted differently, what generally prevails is the beneficiary's interpretation. Once the documents are presented to the nominated bank, the beneficiary fulfils its obligation. What follows after the presentation is beyond the control of the beneficiary, who is not accountable for the actions of the nominated bank.

In my view, a court would be tempted to ask: "What is the equivalent of an expiry of '01/03/2012 in London' as far as Shanghai is concerned?" And in much the same way: "What is the equivalent in Chinese yuan of a certain amount expressed in British pounds?"

In my view, as the credit was nominated to be available with a bank in China, the Chinese bank would be in accord with international norms if it translates "01/03/2012 in London" to be the equivalent Chinese time and date. The nominated bank's contention would be that it was nominated to take documents and honour them as per the terms of the credit. And as far as the time limit for presentation of documents is concerned, this was only to ensure that the presentation was made by the beneficiary on the date that is equivalent to 01/03/2012 London.

Other issues

In most cases, this does not create additional sets of issues, but in certain situations where the time difference between countries can exceed (or be less) than a day, the equivalent of 01/03/2012 in London may not necessarily be on the same date. It could either be earlier or later depending on the time difference between London and that of the other country.

Another interesting question: what if 01/03/2012 is a bank holiday in London? What then would be the equivalent expiry date applicable in Shanghai? I think that in this case the beneficiary could benefit from the availability of an extra day to make the presentation.

Conversely, what if 01/03/2012 is a bank holiday in Shanghai? Will the beneficiary have the right to present documents on 02/03/2012? I think not, since for the purpose of calculating the expiry date in Shanghai the relevant equivalent date is based on the fixed date 01/03/2012 or, as extended in London due to a local holiday in London, much the same way the date of shipment does not get extended if the last day for shipment is a holiday in the place of shipment.

As for transit risk (UCP 600 article 35) if documents are lost, the beneficiary will be protected if the documents are lost in transit between the nominated bank and the issuing bank, provided the nominated bank received the documents on time. On the other hand, if the beneficiary forwarded the documents directly to the issuing bank, by-passing the nominated bank, it will not be protected if the documents were lost in transit.


Is the nominated bank - which in most cases is also the advising bank - expected to seek clarification from the issuing bank when it advises a credit that states the availability with the advising bank but the expiry with the issuing bank? If the nominated-advising bank neglects to raise such a question at the time of advising, it should stand up to the issuing bank and support the beneficiary's interpretation to be the applicable one in the case in question

N.D. George, after more than four decades in banking in India, the UAE and Bahrain, retired to his native city Kochi in India about a year ago. He can be contacted at