UCP Protection

[Shahed]

L/C requires presentation of original documents.

There is an agreement between the beneficiary and its Bank "X", which allows the beneficiary to present the photocopy of all original documents by e-mail attachment to the negotiating bank.

Upon receipt, Bank X checks the photocopy of all original documents, and if it is in order, negotiate/discount, and pay to the beneficiary.

The beneficiary then forward all original documents to the issuing bank (as per LC terms)under Bank X's covering letter.

My question is in the event of any dispute will the negotiating bank get UCP protection ?

Regards,
[edited 4/8/2014 4:36:50 PM]

[GlennRansier]

If the issuer receives the original documents and they are complying, the issuer is obligated to honour. Anyone can present documents i.e. a forwarder, etc.

[asamaha]

The Negotiating Bank cannot be sure from the emailed copies of the number of original and copy documents held by the beneficiary and if the required originals comply with the UCP definition for original copy.
Regards
Antoine

[JudithAutié]

It would be interesting to see the wording if the reimbursement undertaking given by the Issuing Bank to the Negotiating Bank, and at what point of time. My worry, as a Nego Bank would be to ensure that the funds were irrevocably sent through me, and not directly to the presenter of the documents.

[Shahed]

Since the bene would use the negotiating bank's covering letter, funds will be remitted diredtly to the negotiating bank as per instructions contain in the covering letter.

[RitaRicci]

I believe the question is if Bank X is entitled to reimbursement in the event of any dispute? Bank X cannot prove that it received the original documents (required by LC) at its counters. It received only photocopies rendering the presentation discrepant. To be entitled to reimbursement under UCP600, Bank X would have to have honoured or negotiated a 'complying' presentation AND forwarded the documents to the issuing bank (UCP600 Art. 7c). It seems Bank X did neither. It should also consider regulatory compliance risks under such an arrangement.

[Shahed]

I think it is similar to a bank that has the original presented in one place, scan them to another and the examination and decision is made in that place. This is how it operates when a bank outsource its trade service business.

[RitaRicci]

Usually with outsourcing, the nominated bank receives the original documents and scans copies to its processing agent for examination. As such the nominated bank's position remains intact since complying documents were presented to it (UCP600 Art. 7a) and it forwards them to the issuing bank (UCP600 Art. 7c. & Art.15c.). In your scenario the original complying documents never reach the nominated bank and it is not the party forwarding them to the issuing bank. Another situation that could arise is the documents getting lost. If proven that the documents got lost between the beneficiary's address and the issuing bank, and that in fact the orginal documents were never in the possession of the nominated bank, the protections of UCP600 Art. 35 would not apply. All to say, I would feel more comfort if the LC specifically allowed the arrangement described.

[Shahed]

Documents lost in transit (plus any late presentation) will be covered under the Agreement between the negotiating bank and the beneficiary. My point is when the documents will be reached at the issuing bank, they will get all in original under the negotiating bank's covering letter as per L/C terms. Payment will be effected by the issuing bank to the beneficiary's bank directly.

[NigelHolt]

It really is very simple: if a complying presentation is not made to the nominated bank the nominated bank cannot claim the rights of a nominated bank under the UCP; no 'ifs or buts'.

This idea was put forward some years ago in my own organisation and rejected precisely for this reason.