Bank's refusal message regarding discrepant documents

samirk · Post by **samirk** » Thu Jun 12, 2003 1:00 am

I am looking for opinions regarding the wording in the refusal swift message that banks have to send with 7 working days. Would it be OK to say "Documents Not Accepted Yet" i/o: "Documents Refused", do they mean the same? The history behind this is that when I sent the refusal message to a beneficiary's bank, the beneficiary and the Applicant 'panicked' and they both thought that it was a final refusal (eventhough the rest of the wording in the message clearly stated that documents are at the disposal of the beneficiary's bank, and that we were awaiting their instructions). So I thought of changing the wording to give a better understanding that there is is negotiation going on, and that we did not reach the final refusal and return of documents. Thank you.

NigelHolt · Post by **NigelHolt** » Thu Jun 12, 2003 1:00 am

For the dangers of not following Article 14 strictly (unless one has modified its effect in the credit terms*) see:

Voest-Alpine Trading USA Corp. v. Bank of China
288 F.3d 262 (5th Cir. 2002) [U.S.A.]
2002 LC CASE SUMMARIES

Credit Industriel et Commercial v. China Merchants Bank
[2002] EWHC 973 (Q.B. Comm. 2002) [England]
2002 LC CASE SUMMARIES

*You may find my article in DCI on this subject, available on this site, of interest.

[edited 6/12/03 9:10:24 PM]

larryBacon · Post by **larryBacon** » Fri Jun 13, 2003 1:00 am

Documents can only be accepted or rejected within the permitted time allowed, which is NOT automatically 7 working days.

The basis for such decision is restricted under UCP to documents in compliance or not. If documents are in order, the bank is compelled to so indicate within the permitted time. If not in order, the bank is compelled to hold documents at the disposal of the presenter and to advise the presenter of the basis of rejection within the permitted time. Therefore there is no basis for negotiation without the consent of the presenter.

For further information, please see my article in DCInsight archive above.

Laurence

LeoCullen · Post by **LeoCullen** » Fri Jun 13, 2003 1:00 am

The document "Examination of Documents, Waiver of Discrepancies and Notice under UCP 500" in the ICC Policy Statements section of the site may be of some help to you.

The link to this section is on the right of the screen.
[edited 6/13/03 10:00:02 AM]

PavelA · Post by **PavelA** » Fri Jun 20, 2003 1:00 am

I agree that any „departure“ from strictly following article 14 is very dangerous. Re. some comments above I wish to add some words for better clarity:

If documents are not in order, the issuing bank, confirming bank, if any, or a nominated bank acting on their behalf MAY REFUSE to take up the documents – as per article 14 of UCP 500. „May refuse“ does not mean „must –is compelled“. However if the bank does not refuse the documents during reasonable time, it might have very significant implications for it (it depends whether it was an issuing bank, a confirming bank or a nominated bank).

The bank may accept documents despite discrepancies – as for instance all issuing banks do after having received waiver from the applicant.

The statement that this bank is compelled to hold documents at the disposal of the presenter (after refusal) ….. is not precise. As the sub-article 14 d(ii.) states, the bank may also return the documents to the presenter.

I also recommend to consult the ICC Banking Commission Policy statement as suggested by Leo Cullen above.

Best Regards,

Pavel Andrle

vobrien · Post by **vobrien** » Tue Aug 05, 2003 1:00 am

Just a note to highlight that the notice of refusal applies to a specific presentation of documents.

The beneficiary always has the right to take back the documents and re-present within the time/date constraints

Vin