Dear all;
I would like to have your opinion regarding documentary credits covering the shipment of oil and allowing the presentation of LOI and telex/copy/fax/original commercial invoice in the absence of shipping documents required by the documentary credit.
We confirmed a documentary credit with the above mentioned condition issued by X Bank. LOI wording is quoted within the documentary credit and the basis upon which the LOI will be released is specified as:
"This Letter of Indemnity becomes null and void upon presentation by us to X Bank 3/3 original B/L and other shipping documents issued in strict conformity with the terms and conditions of documentary credit no: ABC issued by X Bank."
The LOI will be issued and signed by the beneficiary only; countersignature of the confirming bank is not required.
After receipt of credit conforming LOI and copy of commercial invoice in lieu of shipping documents we claimed reimbursement as per L/C terms and effected payment to the beneficiary accordingly. When the shipping documents are presented to us, do we (as confirming bank) have to examine them in order to determine whether they constitute a complying presentation since the LOI will be released against presentation of credit complying shipping documents?
LETTER OF INDEMNITY
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BilselTatar
- Posts: 12
- Joined: Fri Apr 05, 2019 5:16 pm
LETTER OF INDEMNITY
Bilsel,
Firstly, the original BLs etc. might not be presented to your bank.
Secondly, if they are, in my opinion they should be handled as a ‘true’ documentary collection as presentation of the LoI etc. constituted a drawing that discharged the confirming bank’s (and issuing bank’s, assuming they reimbursed) obligations under the Credit.
So no, not only do you not have to examine the original BLs etc against the Credit but to do so would be quite pointless, as you will not being making any payment or entering into any commitment if the BLs etc. do comply with the Credit terms. In other words, the LoI is purely a matter between the Credit beneficiary and the party to whom it is addressed (the issuing bank, by the sound of it, in this case). That is unless you wanted actively to assist the beneficiary obtain discharge of the LoI in which case you might well want to make a charge for performing this examination service.
Jeremy
Firstly, the original BLs etc. might not be presented to your bank.
Secondly, if they are, in my opinion they should be handled as a ‘true’ documentary collection as presentation of the LoI etc. constituted a drawing that discharged the confirming bank’s (and issuing bank’s, assuming they reimbursed) obligations under the Credit.
So no, not only do you not have to examine the original BLs etc against the Credit but to do so would be quite pointless, as you will not being making any payment or entering into any commitment if the BLs etc. do comply with the Credit terms. In other words, the LoI is purely a matter between the Credit beneficiary and the party to whom it is addressed (the issuing bank, by the sound of it, in this case). That is unless you wanted actively to assist the beneficiary obtain discharge of the LoI in which case you might well want to make a charge for performing this examination service.
Jeremy