If documents complying to LC terms are presented to the confirming bank on the due date
a) Is the confirming bank liable to pay before claiming proceeds from reimbursing bank
b) If yes, which party will pay the transit interest
c) If LC is available by negotiation with the confirming bank, will the answer to a) differ
d) If the LC is available by deferred payment / acceptance with the confirming bank and complying documents are presented on due date, will the answer to a) differ
Await member's response to this query
Thanks Khalid
Presentation of documents on due date to Confirming Bank
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AsifMahmoodButt
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ThuHoangAnh_
- Posts: 58
- Joined: Fri Apr 05, 2019 5:28 pm
Presentation of documents on due date to Confirming Bank
Hi,
If the L/C is available with the confirming bank and the documents presented are complying, the confirming bank must:
- pay if the L/C is available by sight payment
- negotiate without recourse if the L/C is available by negotiation
- accept the draft and pay at maturity if the L/C is available by acceptance;
- incur its deferred payment undertaking and pay at maturity if the L/C is available by deferred payment.
- …………..
a) The confirming bank would claim reimbursement from the issuing bank before payment. Yet, it must pay on the expected due date whether it has received reimbursement from the issuing bank or not.
b) It is normal that the confirming bank would agree to add confirmation to the L/C on condition that the L/C allows the confirming bank to claim reimbursement by T.T and the issuing bank is requested to reimburse the confirming bank right upon or within a certain time after receipt of a tested telex/authenticated swift message from the confirming bank confirming the document compliance. The confirming bank can make full use of five banking days of examination and one or two days for payment arrangement, hence, it would normally receive the reimbursement from the issuing bank before making payment to the beneficiary.
In case the issuing bank fails to reimburse within the time as specified in the L/C or in the confirming bank’s reimbursement claim, it must be liable to pay interest for any delay time.
I hope this can also answer your sub-question c) and d).
Best regards,
N.H. Duc
[edited 3/25/2009 11:13:43 AM]
If the L/C is available with the confirming bank and the documents presented are complying, the confirming bank must:
- pay if the L/C is available by sight payment
- negotiate without recourse if the L/C is available by negotiation
- accept the draft and pay at maturity if the L/C is available by acceptance;
- incur its deferred payment undertaking and pay at maturity if the L/C is available by deferred payment.
- …………..
a) The confirming bank would claim reimbursement from the issuing bank before payment. Yet, it must pay on the expected due date whether it has received reimbursement from the issuing bank or not.
b) It is normal that the confirming bank would agree to add confirmation to the L/C on condition that the L/C allows the confirming bank to claim reimbursement by T.T and the issuing bank is requested to reimburse the confirming bank right upon or within a certain time after receipt of a tested telex/authenticated swift message from the confirming bank confirming the document compliance. The confirming bank can make full use of five banking days of examination and one or two days for payment arrangement, hence, it would normally receive the reimbursement from the issuing bank before making payment to the beneficiary.
In case the issuing bank fails to reimburse within the time as specified in the L/C or in the confirming bank’s reimbursement claim, it must be liable to pay interest for any delay time.
I hope this can also answer your sub-question c) and d).
Best regards,
N.H. Duc
[edited 3/25/2009 11:13:43 AM]
Presentation of documents on due date to Confirming Bank
Article 8(a) (i) (a) ... the confirming bank must honour, if the credit is available by sight payment ..."
Article 15 (b) "When a confirming bank determines that a presentation is complying, it must honour ..."
Article 2 "Honour" means to pay at sight if the credit is available by sight payment"
A confirmer of a sight credit is obligated to pay at sight of conforming documents - they do not have the right to pretend it took them 5 days to examine the documents and and then add another 2 or 3 days to make a reimbursement claim and thus deprive the beneficiary of the funds for a week or more.
The UCP does NOT give the confirming bank the right to delay payment 5 days while they seek reimbursement. IF a confirmer wishes to delay their payment, they should put language into their confirmation to the effect that "because the issuing bank requires us to make a reimbursement claim, payment of conforming documents presented to us under this sight letter of credit will be made XX days following our determination that the document comply" or some other language to make it clear to the beneficiary that 'sight' actually means 'deferred payment for xx days'.
Article 15 (b) "When a confirming bank determines that a presentation is complying, it must honour ..."
Article 2 "Honour" means to pay at sight if the credit is available by sight payment"
A confirmer of a sight credit is obligated to pay at sight of conforming documents - they do not have the right to pretend it took them 5 days to examine the documents and and then add another 2 or 3 days to make a reimbursement claim and thus deprive the beneficiary of the funds for a week or more.
The UCP does NOT give the confirming bank the right to delay payment 5 days while they seek reimbursement. IF a confirmer wishes to delay their payment, they should put language into their confirmation to the effect that "because the issuing bank requires us to make a reimbursement claim, payment of conforming documents presented to us under this sight letter of credit will be made XX days following our determination that the document comply" or some other language to make it clear to the beneficiary that 'sight' actually means 'deferred payment for xx days'.
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ThuHoangAnh_
- Posts: 58
- Joined: Fri Apr 05, 2019 5:28 pm
Presentation of documents on due date to Confirming Bank
Dear Mr. Don Smith – my respected expert,
Thanks for your comment. I totally agree with what you explained. But actually I did not mean that the confirmer would pretend it took them 5 days to examine the documents and and then add another 2 or 3 days to make a reimbursement claim. And I did not mean that the confirmer has the right to delay payment 5 days while seeking reimbursement.
Anyway, as said in my answer (a), the confirmer must pay on due date, which is expected not later 5 banking days plus 1.
Best regards,
N.H. Duc
[edited 4/10/2009 8:47:59 AM]
Thanks for your comment. I totally agree with what you explained. But actually I did not mean that the confirmer would pretend it took them 5 days to examine the documents and and then add another 2 or 3 days to make a reimbursement claim. And I did not mean that the confirmer has the right to delay payment 5 days while seeking reimbursement.
Anyway, as said in my answer (a), the confirmer must pay on due date, which is expected not later 5 banking days plus 1.
Best regards,
N.H. Duc
[edited 4/10/2009 8:47:59 AM]