Hi all
I would like to seek for your opinion in the following case:
Extract from L/C:
41D: AVAILABLE WITH…BY…
ANY BANK
BY NEGOTIATION
42C: DRAFT AT…
60 DAY AFTER BILL OF LADING
FOR 100PCT OF FULL INVOICE VALUE
42A: DRAWEE
ISSUING BANK (BIDV)
BIDV received the complying document from presenting bank with bill of lading date is 13Dec2015. As LC terms the due date will be 11Feb2016 BUT 11Feb2016 is non-banking day in Vietnam (Tet Holiday).
The questions are
1. How to calculate the due date?
1.1 The due date will be 11Feb2016 (banking day in beneficiary’s country) and the issuing bank must be sure that the Beneficiary will receive funds on the due date (11Feb2016 – banking day in beneficiary’s country)
OR
1.2 The due date will be fall on the first banking day in the issuing bank’s country after the holiday and the payment will be made after 11Feb2016.
2. In case the due date fall on non-banking holiday in reimbursing bank’s country, which one in item 1.1 or 1.2 mentioned above will be applied”
Thanks for your support
Kind regards
Due date falls on a non-banking day
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PhanThanhNhan
- Posts: 102
- Joined: Fri Apr 05, 2019 5:23 pm
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PhanThanhNhan
- Posts: 102
- Joined: Fri Apr 05, 2019 5:23 pm
Due date falls on a non-banking day
Dear all
Please let us have your opinion on this query. Thank you very much!
Please let us have your opinion on this query. Thank you very much!
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Due date falls on a non-banking day
Hi,
It should be understood that if the LC is available with the issuing bank by acceptance of the drafts drawn on the issuing bank and if the due date falls on a non-banking day of the issuing bank, the payment is to be made on the first banking day following the due date. If the LC is available with a nominated bank by acceptance of the drafts drawn on the nominated bank and the nominated bank has acted on its nomination, the issuing bank must ensure that the nominated bank would be reimbursed with value date not later than the due date notwithstanding that the due date falls on a non-banking day of the issuing bank.
It is noted that the place of expiry and the place of availability should be one and the same. However, in practice, we sometimes come across LCs available with the issuing bank while the expiry place being in the beneficiary’s country.
And the LC in your case is a typical one of this type. This practice is uncommon but acceptable. By so stipulating, the issuing bank intends to allow the beneficiary to make presentation to any bank in the beneficiary’s country and the issuing bank would honour if the beneficiary presents complying documents to the bank in his country within the expiry date irrespective of whether or not the documents reach the issuing bank within the expiry date.
The issuing bank (BIDV) will honour, i.e., accept the drafts and pay at maturity. So, if the due date falls on a non-banking day of BIDV, the payment shall be due on the next banking day of BIDV.
Kind regards,
N.H. Duc
[edited 2/24/2016 9:12:35 AM]
It should be understood that if the LC is available with the issuing bank by acceptance of the drafts drawn on the issuing bank and if the due date falls on a non-banking day of the issuing bank, the payment is to be made on the first banking day following the due date. If the LC is available with a nominated bank by acceptance of the drafts drawn on the nominated bank and the nominated bank has acted on its nomination, the issuing bank must ensure that the nominated bank would be reimbursed with value date not later than the due date notwithstanding that the due date falls on a non-banking day of the issuing bank.
It is noted that the place of expiry and the place of availability should be one and the same. However, in practice, we sometimes come across LCs available with the issuing bank while the expiry place being in the beneficiary’s country.
And the LC in your case is a typical one of this type. This practice is uncommon but acceptable. By so stipulating, the issuing bank intends to allow the beneficiary to make presentation to any bank in the beneficiary’s country and the issuing bank would honour if the beneficiary presents complying documents to the bank in his country within the expiry date irrespective of whether or not the documents reach the issuing bank within the expiry date.
The issuing bank (BIDV) will honour, i.e., accept the drafts and pay at maturity. So, if the due date falls on a non-banking day of BIDV, the payment shall be due on the next banking day of BIDV.
Kind regards,
N.H. Duc
[edited 2/24/2016 9:12:35 AM]
Due date falls on a non-banking day
The expiry date is the expiry date "for presentation". The "place" i.e. "for presentation" is the place where the credit is available. The place of expiry and place for presentation (ie. where the LC is available) should be the same. Making a LC available with the issuing bank (LC is restricted to issuing bank for presentation) while the place of expiry is in the beneficiary’s country (or other country) is not a workable LC. In your case the LC is available with any bank by negotiation and drafts are drawn on the issuing bank. Presumably the place of expiry is in the beneficiary's country or at the counters of the nominated bank. This is a correct and common structure.
To answer your questions about calculating the maturity date:
1: Drafts on issuing bank and the nominated bank has NOT acted on its nomination, then the issuing bank determines the maturity date and if it falls on a holiday, it will typically paid on the next banking day if so provided by the local laws in the country of the issuing bank. Thus 1.2 applies.
2. Drafts on issuing bank and the nominated bank DID act on its nomination and documents are compliant, then the nominated bank determines the maturity date and the nominated bank is to receive payment on the due date in its country. Thus 1.1 applies.
3. Drafts on a designated reimbursing bank, and the claiming bank (nominated bank that acted on its nomination), then the nominated/claiming bank's reimbursement claim should indicate the due date, and it is to receive the payment on the due date in its country. In these cases, the nominated/claiming bank will usually send the reimbursement claim in advance of the due date to allow for the reimbursing bank to pay on time. Thus 1.1 applies.
Regards,
To answer your questions about calculating the maturity date:
1: Drafts on issuing bank and the nominated bank has NOT acted on its nomination, then the issuing bank determines the maturity date and if it falls on a holiday, it will typically paid on the next banking day if so provided by the local laws in the country of the issuing bank. Thus 1.2 applies.
2. Drafts on issuing bank and the nominated bank DID act on its nomination and documents are compliant, then the nominated bank determines the maturity date and the nominated bank is to receive payment on the due date in its country. Thus 1.1 applies.
3. Drafts on a designated reimbursing bank, and the claiming bank (nominated bank that acted on its nomination), then the nominated/claiming bank's reimbursement claim should indicate the due date, and it is to receive the payment on the due date in its country. In these cases, the nominated/claiming bank will usually send the reimbursement claim in advance of the due date to allow for the reimbursing bank to pay on time. Thus 1.1 applies.
Regards,
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PhanThanhNhan
- Posts: 102
- Joined: Fri Apr 05, 2019 5:23 pm
Due date falls on a non-banking day
Thank you Mr. Duc and Rita Ricci
I just wonder how can we know that the nominated bank did act on its nomination if it did not mention this action on the schedule? Can we consider that it did not act on its nomination if it did not so indicate?
And how can issuing bank arrange the reimbursement to the negotiating bank if the negotiating bank's claim is sent to issuing bank on a holiday of issuing bank or a day very near the holiday so the issuing bank can not arrange the reimbursement?
I just wonder how can we know that the nominated bank did act on its nomination if it did not mention this action on the schedule? Can we consider that it did not act on its nomination if it did not so indicate?
And how can issuing bank arrange the reimbursement to the negotiating bank if the negotiating bank's claim is sent to issuing bank on a holiday of issuing bank or a day very near the holiday so the issuing bank can not arrange the reimbursement?