BL presented showed it was made out to the order of beneficiary's bank,B. On the reverse of the BL, B has endorsed it to the beneficiary who in turn endorsed it to A. Is this acceptable or should we as the issuing bank treat it as a discrepancy?
Meanwhile thanks to Leocullen & larryBacon for your advice to my earlier queries.
[edited 5/28/01 1:35:31 PM]
Credit requires BL to be made out to the order of the issuin
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yenfongmoo
- Posts: 14
- Joined: Fri Apr 05, 2019 5:22 pm
Credit requires BL to be made out to the order of the issuin
The enquirer should have provided the data for us to answer his query. He does not mention what the LC says. Then how can we give any answer before we know what the LC says?
And who is party A?
I am from www.tolee.com
[edited 5/28/01 8:32:50 PM]
And who is party A?
I am from www.tolee.com
[edited 5/28/01 8:32:50 PM]
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yenfongmoo
- Posts: 14
- Joined: Fri Apr 05, 2019 5:22 pm
Credit requires BL to be made out to the order of the issuin
In reply to Mr TO Lee's earlier enquiry, Party A is the issuing bank (as mentioned in the topic heading). Credit requires BL to be made out to order of the issuing bank but actual BL presented showed it is made out to another bank B. On the reverse of the BL, B has endorsed it to the beneficiary X who in turn endorsed it to A. Is this acceptable & comply with the credit requirements?
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Credit requires BL to be made out to the order of the issuin
If the L/C requires the B/L to be made out ot the order of the issuing bank, that is the only acceptable form of completion of the B/L.
While I would accept that the ultimate effect of multiple endorsements in yenfongmoo's posting would be similar to that of correctly drafting the B/L, the scenario considered here involves the negotiating bank in the performance of the underlying contract, instead of dealing with documents as required by Article 4.
One of the fundamental reasons for involving banks in the administration of letters of credit is their apparent independent impartiality. A negotiating bank, acting in this way, robs the process of this impartiality. It may be human nature, consciously or otherwise for the negotiating bank to favour the beneficiary, especially if that bank is the beneficiary's bank, which is very common. However, this underlines the need for rules which must be applied equally to all parties. If this case went to litigation, the negotiating bank runs the risk of being shown to be in acting in collusion with the beneficiary. It is the beneficiary's responsibility alone to ensure that documents presented are in accordance with the credit and UCP. The negotiating bank's responsibility is to accept or reject such docuents presented.
Laurence A. J. Bacon
While I would accept that the ultimate effect of multiple endorsements in yenfongmoo's posting would be similar to that of correctly drafting the B/L, the scenario considered here involves the negotiating bank in the performance of the underlying contract, instead of dealing with documents as required by Article 4.
One of the fundamental reasons for involving banks in the administration of letters of credit is their apparent independent impartiality. A negotiating bank, acting in this way, robs the process of this impartiality. It may be human nature, consciously or otherwise for the negotiating bank to favour the beneficiary, especially if that bank is the beneficiary's bank, which is very common. However, this underlines the need for rules which must be applied equally to all parties. If this case went to litigation, the negotiating bank runs the risk of being shown to be in acting in collusion with the beneficiary. It is the beneficiary's responsibility alone to ensure that documents presented are in accordance with the credit and UCP. The negotiating bank's responsibility is to accept or reject such docuents presented.
Laurence A. J. Bacon
Credit requires BL to be made out to the order of the issuin
If the LC says "made out to the order of the issuing bank" then the shipper must fill up the "Consignee box" with "To order of (Name of) issuing bank". This box cannot be filled with the name of a party other than the issuing bank and then with multiple endorsements back to the issuing bank. This is not what UCP 500 means by "made out to order of issuing bank".
Looking from another angle, when the negotiating bank received the BL, it was already discrepant on the Consignee Box. The negotiating bank has no right, unless authorised by the principal, the issuing bank, to make such endorsement(s). This may be considered as "ultra vires" ("exceeding its powers", please excuse me for quoting a legal jargon here) in a court of law. And the negotiating bank, as a non-party in the contract of carriage represented by the BL, may have to meet claims from another party.
I am from www.tolee.com
[edited 2/2/02 7:59:21 PM]
Looking from another angle, when the negotiating bank received the BL, it was already discrepant on the Consignee Box. The negotiating bank has no right, unless authorised by the principal, the issuing bank, to make such endorsement(s). This may be considered as "ultra vires" ("exceeding its powers", please excuse me for quoting a legal jargon here) in a court of law. And the negotiating bank, as a non-party in the contract of carriage represented by the BL, may have to meet claims from another party.
I am from www.tolee.com
[edited 2/2/02 7:59:21 PM]