I post the following query as received
“We receive l/cs indicating expiry date as 1/08/2002 and latest shipment date 1/7/2002 however the presentation period is stated as 15 days”
I deem the following terms inconsistent with each other, since the expiry date is the maximum date for presentation of documents and therefore the gap between the shipment date and expiry should not be more than 21 days as per article 42 which reads “an expiry date stipulated for payment, …, will be construed to express an expiry date for presentation of documents” and article 43.
unquote
expiry versus presentation period
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
expiry versus presentation period
Hatem,
On the face of it the expiry should be no later than 16 Jul 02, given the post-shipment presentation period is 15 days. I believe the advising bank has two choices:
1. Revert per Article 12 (the technically correct approach), or:
2. Advise the benef documents received after 16 Jul 02 will be treated as non-compliant (the quicker & cheaper approach).
Jeremy
[edited 7/23/02 12:07:29 PM]
On the face of it the expiry should be no later than 16 Jul 02, given the post-shipment presentation period is 15 days. I believe the advising bank has two choices:
1. Revert per Article 12 (the technically correct approach), or:
2. Advise the benef documents received after 16 Jul 02 will be treated as non-compliant (the quicker & cheaper approach).
Jeremy
[edited 7/23/02 12:07:29 PM]
expiry versus presentation period
This is a poorly issued credit but workable as long as the beneficiary is/was aware that July 16th 2002 is the de facto expiry date.
[edited 7/23/02 12:23:53 PM]
[edited 7/23/02 12:23:53 PM]
expiry versus presentation period
I agree with both Jeremy and Leo above. This is very poorly worded L/C. The policy of our local banks is to never issue a L/C with a similar time gap. If a L/C with this provision is received, we as a rule, contact the issuing bank to correct it.
Pavel Andrle
Pavel Andrle
expiry versus presentation period
Hatem,
HATEM, WELCOME BACK!
Welcome back to the Discussion Forum! Please review the past postings where we have nominated you to do certain things, such as to explain the implication of certain terms, from your English literature background. We also understand that now you take on a new assignment in a different country. So you may treat this as a low priority task.
A HADICAP OR AN ADVANTAGE?
Now it is always our handicap residing in North America. When this query comes from the Middle East, Jeremy and those members from Europe would have 6 hours advantage to post their responses. When we wake up, we find that there may be not much left for us to respond.
In spite of the fact that the last one to post an opinion is more difficult, we do see this as a good opportunity to sharpen our mind, to make us work harder, being forced to look for a new perspective. In this sense it may be our advantage, from lateral thinking point of view.
THE ISBP TELLS US HOW TO PRESENT THE MONTHS
Now we would like to point out that in the ISBP draft, we are told not to state the months with figures. Months should be written as words, such as Jan, Jan. or January. Otherwise Hatem' DC could be interpreted as shipment deadline 7th January 2002 and expiry 8th January 2002. This is no kidding. We have actually seen bankers arguing like this in fraud cases where the ball is to be tossed back and forth between a negotiating bank and a issuing bank, as both the applicant and the beneficiary disappear together since they are of the same pack (of wolves).
However, it is not said in the ISBP whether the advising bank has an obligation to check for such inconsistency between the shipment deadline date and the expiry date. Is this a legal duty? Better let Jeremy scratch his head for a good answer. We think this sort of unclear area is to be determined by a court of law - To what extent an advising bank has to check for the data content of a DC when it chooses to advise it?
Hence we have posted this as another query for Jeremy in the UCP 500 section.
www.tolee.com
[edited 7/23/02 4:20:27 PM]
HATEM, WELCOME BACK!
Welcome back to the Discussion Forum! Please review the past postings where we have nominated you to do certain things, such as to explain the implication of certain terms, from your English literature background. We also understand that now you take on a new assignment in a different country. So you may treat this as a low priority task.
A HADICAP OR AN ADVANTAGE?
Now it is always our handicap residing in North America. When this query comes from the Middle East, Jeremy and those members from Europe would have 6 hours advantage to post their responses. When we wake up, we find that there may be not much left for us to respond.
In spite of the fact that the last one to post an opinion is more difficult, we do see this as a good opportunity to sharpen our mind, to make us work harder, being forced to look for a new perspective. In this sense it may be our advantage, from lateral thinking point of view.
THE ISBP TELLS US HOW TO PRESENT THE MONTHS
Now we would like to point out that in the ISBP draft, we are told not to state the months with figures. Months should be written as words, such as Jan, Jan. or January. Otherwise Hatem' DC could be interpreted as shipment deadline 7th January 2002 and expiry 8th January 2002. This is no kidding. We have actually seen bankers arguing like this in fraud cases where the ball is to be tossed back and forth between a negotiating bank and a issuing bank, as both the applicant and the beneficiary disappear together since they are of the same pack (of wolves).
However, it is not said in the ISBP whether the advising bank has an obligation to check for such inconsistency between the shipment deadline date and the expiry date. Is this a legal duty? Better let Jeremy scratch his head for a good answer. We think this sort of unclear area is to be determined by a court of law - To what extent an advising bank has to check for the data content of a DC when it chooses to advise it?
Hence we have posted this as another query for Jeremy in the UCP 500 section.
www.tolee.com
[edited 7/23/02 4:20:27 PM]
expiry versus presentation period
T.O.,
I’m afraid I do not have time to reply comprehensively to your new subject posting.
Article 12 refers to ‘incomplete or unclear instructions’. To me, the scenario outlined is an example of an unclear instruction.
I do not see that the ICC ISBP document is relevant, as this should be confined solely to the determination of facial compliance pursuant to sub-Article 13a. However, I note with regret that the latest draft seems to go beyond this (sections 1 – 6). Nonetheless, I would (predictably) expect Article 12 to be interpreted in the context of the knowledge a doc credit banker would -in law- be expected to have and be entitled to apply.
Jeremy
I’m afraid I do not have time to reply comprehensively to your new subject posting.
Article 12 refers to ‘incomplete or unclear instructions’. To me, the scenario outlined is an example of an unclear instruction.
I do not see that the ICC ISBP document is relevant, as this should be confined solely to the determination of facial compliance pursuant to sub-Article 13a. However, I note with regret that the latest draft seems to go beyond this (sections 1 – 6). Nonetheless, I would (predictably) expect Article 12 to be interpreted in the context of the knowledge a doc credit banker would -in law- be expected to have and be entitled to apply.
Jeremy
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DimitriScoufaridis
- Posts: 85
- Joined: Fri Apr 05, 2019 5:17 pm
expiry versus presentation period
Hatem,
We are seeing this similarly practiced in import LC’s opened in Saudi too but without the 15-day presentation period. This is certainly attributed to the parties’ lack of DC knowledge. Some int’l sellers have the misconception that a longer period between the latest date of shipment and the expiry would also accommodate the maturity date under acceptance credits. You could also have buyers who are not willing to listen to their bankers’ advice. These issuing banks sometimes add a clause to the credit that stale documents are not acceptable (Note: According to R.54 of the Decisions (1975-1979 of the ICC Banking Commission, since the term “stale” no longer appeared in the UCP, it should no longer be used in credits. Consequently, a credit, which included the words “stale documents acceptable”, should be considered vague, and additional instructions should be asked. However, under point 30 of ISBP doc. 470/951rev such an expression appears to be acceptable now).
I have also heard about a case where a large int’l bank operating in the Gulf considered this one month gap between the latest shipment date and the expiry as an implied acceptance of doc’s presented later than 21 days after the date of shipment!
Dimitri
We are seeing this similarly practiced in import LC’s opened in Saudi too but without the 15-day presentation period. This is certainly attributed to the parties’ lack of DC knowledge. Some int’l sellers have the misconception that a longer period between the latest date of shipment and the expiry would also accommodate the maturity date under acceptance credits. You could also have buyers who are not willing to listen to their bankers’ advice. These issuing banks sometimes add a clause to the credit that stale documents are not acceptable (Note: According to R.54 of the Decisions (1975-1979 of the ICC Banking Commission, since the term “stale” no longer appeared in the UCP, it should no longer be used in credits. Consequently, a credit, which included the words “stale documents acceptable”, should be considered vague, and additional instructions should be asked. However, under point 30 of ISBP doc. 470/951rev such an expression appears to be acceptable now).
I have also heard about a case where a large int’l bank operating in the Gulf considered this one month gap between the latest shipment date and the expiry as an implied acceptance of doc’s presented later than 21 days after the date of shipment!
Dimitri
expiry versus presentation period
SHIPMENT DEADLINE AND EXPIRY FALL ON THE SAME DATE
In Asia and other areas, we also observe that some DCs have shipment deadline date and expiry date on the same date.
The intention is to let a beneficiary has as much time as he needs to prepare his last minute shipment. In China trade, some of the goods are fabricated in China, but sale is under Hong Kong quota (for example, in textile goods). Hence shipment must be made in Hong Kong. Such process would make the beneficiary not certain when the shipment can be made as part of the production is not under his absolute control, since the goods are fabricated by a third party.
Where there is a need, there is a solution. But is this a good solution to the problem?
www.tolee.com
In Asia and other areas, we also observe that some DCs have shipment deadline date and expiry date on the same date.
The intention is to let a beneficiary has as much time as he needs to prepare his last minute shipment. In China trade, some of the goods are fabricated in China, but sale is under Hong Kong quota (for example, in textile goods). Hence shipment must be made in Hong Kong. Such process would make the beneficiary not certain when the shipment can be made as part of the production is not under his absolute control, since the goods are fabricated by a third party.
Where there is a need, there is a solution. But is this a good solution to the problem?
www.tolee.com
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
expiry versus presentation period
MAKE ALLOWANCE FOR EXCEPTIONS
In general, I agree with the comments about the gap of time being misleading, but I do not consider it the duty of the advising bank to seek clarification or to issue a warning to the beneficiary. However, when an advising bank acts in this way, it displays a proactive approach to customer service.
It is assumed that such a gap is an indication of an oversight on the part of the issuing bank and this is the most likely case. However, there are reasons for exceptions to this. One I encountered some years ago involved several shipments, but the L/C was only opened for the first shipment. The L/C was subsequently extended and increased in value a number of times. When I asked the applicant why he did not open a L/C for more than one shipment, he gave the reason as cost - it was cheaper for him to extend & increase value than open new L/Cs. Since this was his intention, he deliberately left a gap between latest shipment date and expiry to allow him to receive documents and then decide if he wanted to receive another shipment.
One can envisage new DC business also making use of this gap, where the applicant may want to receive goods before deciding on whether to increase value & extend DC calling for more of the same goods. The gap gives the beneficiary an indication that subsequent shipments are subject ot agreement between bene & applicant, but that the applicant has the final say in determining whether or not to extend & increase value.
Laurence
In general, I agree with the comments about the gap of time being misleading, but I do not consider it the duty of the advising bank to seek clarification or to issue a warning to the beneficiary. However, when an advising bank acts in this way, it displays a proactive approach to customer service.
It is assumed that such a gap is an indication of an oversight on the part of the issuing bank and this is the most likely case. However, there are reasons for exceptions to this. One I encountered some years ago involved several shipments, but the L/C was only opened for the first shipment. The L/C was subsequently extended and increased in value a number of times. When I asked the applicant why he did not open a L/C for more than one shipment, he gave the reason as cost - it was cheaper for him to extend & increase value than open new L/Cs. Since this was his intention, he deliberately left a gap between latest shipment date and expiry to allow him to receive documents and then decide if he wanted to receive another shipment.
One can envisage new DC business also making use of this gap, where the applicant may want to receive goods before deciding on whether to increase value & extend DC calling for more of the same goods. The gap gives the beneficiary an indication that subsequent shipments are subject ot agreement between bene & applicant, but that the applicant has the final say in determining whether or not to extend & increase value.
Laurence
expiry versus presentation period
Laurence's tory tells us how important it is for a consultant to go to the kitchen and find out the facts instead of commenting only on the face of the documents.
Laurence's input reminds us that this practice of givng long expiry date in a DC to accommodate partial shipments is not uncommon in Asia.
www.tolee.com
[edited 7/29/02 4:20:56 PM]
Laurence's input reminds us that this practice of givng long expiry date in a DC to accommodate partial shipments is not uncommon in Asia.
www.tolee.com
[edited 7/29/02 4:20:56 PM]