Hi all,
L/C requires a document in field 46A “'Notice of shipment acceptance manual signed (as signature specimen) and issued by Mr. XYZ, applicant's representative. The specimen signature of Mr. XYZ will be sent to the negotiating bank separately by express courier and will be considered as an integral part of this L/C”
Does the negotiating bank have any responsibility to check the specimen signature?
Is there any ICC opinion relating to this issue?
Thanks for your kind comments
Phuong Lan
An integral part of the L/C
-
LNGUYEN1234
- Posts: 13
- Joined: Fri Apr 05, 2019 5:21 pm
An integral part of the L/C
To me the only reasonable inference is that the issuing bank intends that the nominated bank check the signature on the presented document against the signature and refuse the document if the signature does not accord with the specimen.
What the issuing bank ought to have done is:
1. actually stated in the credit that the signature must accord with the specimen and that the nominated bank is responsible for verifying this.
2. informed the advising bank if the specimen was to be forwarded to the beneficiary. Logically if it is ‘an integral part of this L/C’ it should be but that is not normally the applicant’s, and therefore the issuing bank’s, intention. If the specimen is not forwarded to the beneficiary in practice it is only the advising bank that can act as nominated bank and also the beneficiary is reliant on the good faith of the applicant and its representative.
Overall, based on the facts you have given my opinion is that the nominated bank is obliged to examine the signature against the specimen. I am not aware of any ICC opinion on the subject.
What the issuing bank ought to have done is:
1. actually stated in the credit that the signature must accord with the specimen and that the nominated bank is responsible for verifying this.
2. informed the advising bank if the specimen was to be forwarded to the beneficiary. Logically if it is ‘an integral part of this L/C’ it should be but that is not normally the applicant’s, and therefore the issuing bank’s, intention. If the specimen is not forwarded to the beneficiary in practice it is only the advising bank that can act as nominated bank and also the beneficiary is reliant on the good faith of the applicant and its representative.
Overall, based on the facts you have given my opinion is that the nominated bank is obliged to examine the signature against the specimen. I am not aware of any ICC opinion on the subject.
-
GlennRansier_olsABN
- Posts: 70
- Joined: Fri Apr 05, 2019 5:18 pm
An integral part of the L/C
As UCP indicates, examination begins with the terms of the LC. A "complying presentation" must comply with the LC terms and where silent the rules provide a default. In this case, the LC is requiring you to verify a signature which is a difficult thing to do especially in light of Article 3 which begins: "a document may be signed...". I would suggest speaking with the issuer to ensure that if you accept the signature as being compliant, they will view it in the same manner, based on your best reasonable review of it.
An integral part of the L/C
In my opinion, to avoid any eventual misunderstanding, the L/C should indicate that the verification of conformity of the signature on the concerned document when presented for negotiation is left to the sole judgment of the nominated bank, and the specimen of signature should not be forwarded to the beneficiary but kept in the safe custody of the nominated bank.
Regards
Antoine
Regards
Antoine
-
LNGUYEN1234
- Posts: 13
- Joined: Fri Apr 05, 2019 5:21 pm
An integral part of the L/C
Many thanks for your all comments.
So in the same circumstance, the nominated bank has to check the contract if the L/C stipulates “Copy of contract will be considered as an integral part of the L/C”.
Phuong Lan
So in the same circumstance, the nominated bank has to check the contract if the L/C stipulates “Copy of contract will be considered as an integral part of the L/C”.
Phuong Lan
An integral part of the L/C
This is completely different to the question originally posed and no correlation can or should be drawn between the two. It is not necessarily unreasonable to expect a bank to compare a signature on a document to a specimen of that signature already in their possession.
Any bank issuing a credit on its customer’s behalf may well be presented with a copy of the contract at the initial issuance stage and may agree to construct that credit based around the contract terms but I would be astonished if an issuing bank were to then make a copy of the contract an integral part of the credit as this would not be best practice and would most likely result in other banks refusing to take up any nominated role.
I assume your question is hypothetical.
Any bank issuing a credit on its customer’s behalf may well be presented with a copy of the contract at the initial issuance stage and may agree to construct that credit based around the contract terms but I would be astonished if an issuing bank were to then make a copy of the contract an integral part of the credit as this would not be best practice and would most likely result in other banks refusing to take up any nominated role.
I assume your question is hypothetical.
An integral part of the L/C
Hi. Let me add some words related to the signatures.
I agree that the issuing bank's intention, although not very carefully described, was to ensure that the signatures be checked against the specimen sent to the nominated bank.
I cannot, however, agree with some of the comments (especially Jeremy's) regarding the status of the specimen. The issuing bank clearly stated that the specimen "forms an integral part of the credit". The advising bank hence need not ask issuing bank about anything and may easily enclose the specimen to the beneficiary.
Furthermore, in my opinion, issuing bank MUST NOT prohibit enclosing specimen in the advice to the beneficiary at any circumstance. If it so does, the independence principle of the credit is in jeopardy. Beneficiary must have ALL terms of the credit at hand in order to be able to obtain complying documents. If he does not see the specimen signature, he cannot check whether the party required to add its signature signed in order. In this way beneficiary may be deprived of its right to receive money.
Moreover, under documentary credits banks may only check documents against the terms of the credit and may not refer to any extranesous source of information. If a specimen is not made an integral part of the credit (and enclosed to the credit as advised to the beneficiary), banks MUST NOT base any examination thereon.
(I understand the reason applicants or issuing banks might have for disclosing the signature specimen - fear of falsification of the signature - but such reason must not be used as an excuse for misconduct. If the parties are in such a lack of trust among each other leading to fear of criminal offence, they should not enter into a contractual relationship like this. Furthermore, UCP do not deal in fraud and crime...)
Following that, I do not understand one of the later statements in the line, which stated that banks may be expected to check documents against specimens they might have in their possession or against copies of contract, etc. Such handling would be in gross breach of UCP and the principle of independence of the documentary credit transactions. Banks may check L/C documents only and only against credit terms. Basically no other sources of information are allowed.
Reference may be made to UCP 600 art's 2 (definition of "Complying presentation" and "Credit"), 9 (b), and 14 (a), and, to some extent, art's 4 and 5.
Anyway, if we received a credit incorporating a signature specimen and prohibiting us from enclosing it in our advice, we would refuse advising it until such prohibition is lifted, subject to reasoning that the instrument is not an independent undertaking and hence does not fulfil the function of a "documentary credit" as defined by UCP 600 (it happened to us once in past 10 years and the prohibition was lifted immediately).
Have a nice day
Radek
I agree that the issuing bank's intention, although not very carefully described, was to ensure that the signatures be checked against the specimen sent to the nominated bank.
I cannot, however, agree with some of the comments (especially Jeremy's) regarding the status of the specimen. The issuing bank clearly stated that the specimen "forms an integral part of the credit". The advising bank hence need not ask issuing bank about anything and may easily enclose the specimen to the beneficiary.
Furthermore, in my opinion, issuing bank MUST NOT prohibit enclosing specimen in the advice to the beneficiary at any circumstance. If it so does, the independence principle of the credit is in jeopardy. Beneficiary must have ALL terms of the credit at hand in order to be able to obtain complying documents. If he does not see the specimen signature, he cannot check whether the party required to add its signature signed in order. In this way beneficiary may be deprived of its right to receive money.
Moreover, under documentary credits banks may only check documents against the terms of the credit and may not refer to any extranesous source of information. If a specimen is not made an integral part of the credit (and enclosed to the credit as advised to the beneficiary), banks MUST NOT base any examination thereon.
(I understand the reason applicants or issuing banks might have for disclosing the signature specimen - fear of falsification of the signature - but such reason must not be used as an excuse for misconduct. If the parties are in such a lack of trust among each other leading to fear of criminal offence, they should not enter into a contractual relationship like this. Furthermore, UCP do not deal in fraud and crime...)
Following that, I do not understand one of the later statements in the line, which stated that banks may be expected to check documents against specimens they might have in their possession or against copies of contract, etc. Such handling would be in gross breach of UCP and the principle of independence of the documentary credit transactions. Banks may check L/C documents only and only against credit terms. Basically no other sources of information are allowed.
Reference may be made to UCP 600 art's 2 (definition of "Complying presentation" and "Credit"), 9 (b), and 14 (a), and, to some extent, art's 4 and 5.
Anyway, if we received a credit incorporating a signature specimen and prohibiting us from enclosing it in our advice, we would refuse advising it until such prohibition is lifted, subject to reasoning that the instrument is not an independent undertaking and hence does not fulfil the function of a "documentary credit" as defined by UCP 600 (it happened to us once in past 10 years and the prohibition was lifted immediately).
Have a nice day
Radek
-
LNGUYEN1234
- Posts: 13
- Joined: Fri Apr 05, 2019 5:21 pm
An integral part of the L/C
Hi,
In our case the issuing bank does not want to disclose the signature specimen because the applicant and the beneficiary are not in trust each other. I agree with some of the above comments that if the advising bank accepts to act as nominated bank, they must check the signature against the specimen because that condition becomes L/C terms.
For the second issue, some years ago I received an export L/C which stipulated “ Invoice must show description of goods (in details) as per contract no. ABC” and “copy of contract will be considered as an integral part of the L/C and must be presented for negotiation”
Both of the above mention issues are not usual practices and affect the principle of independence of the documentary credit transactions. These are all the customer’s intention, banks should make a decision whether to accept transaction or not.
Thanks for your all kind comments.
Regards,
Phuong Lan
In our case the issuing bank does not want to disclose the signature specimen because the applicant and the beneficiary are not in trust each other. I agree with some of the above comments that if the advising bank accepts to act as nominated bank, they must check the signature against the specimen because that condition becomes L/C terms.
For the second issue, some years ago I received an export L/C which stipulated “ Invoice must show description of goods (in details) as per contract no. ABC” and “copy of contract will be considered as an integral part of the L/C and must be presented for negotiation”
Both of the above mention issues are not usual practices and affect the principle of independence of the documentary credit transactions. These are all the customer’s intention, banks should make a decision whether to accept transaction or not.
Thanks for your all kind comments.
Regards,
Phuong Lan
-
TudorTaslaoanu
- Posts: 3
- Joined: Fri Apr 05, 2019 5:28 pm
An integral part of the L/C
There are several reasons of concern when such clauses are included in an L/C:
1. the nominated bank should not formally advise the L/C to the Beneficiary before actually receipt of the signature specimen;
2. the nominated bank cannot be hold resposible for authentication of third party's signatures, unless such signatures are given in front of the bank's officer together with proper ID identification document(s).
3. even a statement that "the signature of XYZ appears to be similar to the specimen" provides no additional confort to the issuing bank in the light of art. 34 of ICC 600.
4. such practice must be disscouraged and as an exception to the rule, the issuing bank should obtain nominated bank's acceptance prior to the issuance of an L/C containing such provisions.
1. the nominated bank should not formally advise the L/C to the Beneficiary before actually receipt of the signature specimen;
2. the nominated bank cannot be hold resposible for authentication of third party's signatures, unless such signatures are given in front of the bank's officer together with proper ID identification document(s).
3. even a statement that "the signature of XYZ appears to be similar to the specimen" provides no additional confort to the issuing bank in the light of art. 34 of ICC 600.
4. such practice must be disscouraged and as an exception to the rule, the issuing bank should obtain nominated bank's acceptance prior to the issuance of an L/C containing such provisions.