art.18b

[MojcaP]

Hi to all,
Nominating bank send discrepant documents for approval to issuing bank due to overdrawn amount.
(Invoice amount exceeded L/C amount)
Issuing bank accepted documents and effect payment for L/C amount only according to art.18b UCP600.
.
Now, I'd like to hear your opinions.
Is this a common practice(nominating bank refused documents, but issuing bank accepted them)?
If so, then beneficiary should be aware of risk to receive partial payment for goods without further notice.
Thanks
Mojca

[NigelHolt]

Mojca,

If the nominated bank sends documents that exceed the credit amount to the issuing bank on the basis that they can only be delivered to the issuing bank if they are honoured under the credit (notwithstanding that they exceed the credit amount) the issuing bank has only two choices:
1. honour the documents for their full amount or:
2. refuse to honour the documents (at all) and therefore not to deliver them to the applicant.

In other words, the issuing bank is not entitled to honour the documents for the credit amount only and deliver them to the applicant.

Therefore, I am left with the impression that the issuing bank has acted incorrectly.

Regards, Jeremy

[HOANGTHIANHTHU_invalid]

I agree with Jeremy. Once accepting the documents the issuing bank must honour for full amount.

Regards,
N.H.Duc

[PhanThanhNhan]

Could you pls make clear your answer? Why must issuing bank pay in full while art 18b states that '....issuing bank may accept a commercial invoice...., provided the bank in question has not honoured or negotiated for an amt in excess of that permitted by the credit'?
.
Thanks for your advice.

[HOANGTHIANHTHU_invalid]

Hi PTN,

The answer is applicable to the scenario where the claimed amount is the invoice amount, which is exceeding the credit amount. If the issuing bank accepts to pay the documents with such a discrepancy, it must pay the full claimed amount.

If the invoice amount is exceeding the credit amount and the amount claimed is the credit amount, the issuing bank may accept such an invoice and pay the claimed amount. This complies with sub-article 18 (b).

Regards,
N.H.Duc

[DanielD]

Not so sure, art.18b does not deal with the amount claimed. If documents are sent on approval basis, the issuing bank is entitled to pay the credit amount only because the nominated did not make a decision which bind any other party. Only IB made the decision.
Daniel

[DanielD]

Back from a 12 hour flight, I am a bit tired. Please read: "...to pay the credit amount only. This because the nominated bank did not make a decision..."
Daniel

[GlennRansier_]

From what I’ve read, the presenting bank cited LC Overdrawn and claimed for the full overdrawn amount. The issuer paid the lesser LC amount based upon Article 18 b. without any acceptance from the beneficiary. I would not have recommended this approach to the issuer. 18 b. discusses: “accept a commercial invoice issued for an amount in excess of the amount permitted by the credit” so to “accept” generally means that one agree to take and in this case I believe that if you agree to take/accept you are expected to take it all.

[AlbertB]

Issuing bank is 100% liable for effecting (partial/short) payment without consent of the presenter in this case. The only choice (as Jeremy stated) is either to honor the discrepant documents (full amount of the draw according to the remitting schedule and the draft, if any) or to reject the presentation. Article 18b provides option to negotiating/issuing bank to accept invoice amount exceeded the amount of draw that presentation was made in according to terms and conditions of the credit, but not to ignore the overdrawn (discrepant) presentation by paying the credit available amount only.

[JohnLim]

Hi Mojca and Daniel

You may want to refer to Frequently asked questions under UCP 600 -volume 1 and 2 by Collyer consulting.

Regards
Yat

[edited 5/14/2010 5:56:17 AM]