Fluctuation of L/C value (in petroleum import L/C)

[PhanThanhNhan]

Pls give your comments and advice for the following case:
- The L/C was subject to UCP600
- Amount: USD800,000.00
- Tolerance: +/-10pct
- Conditions: The price in USD per barrel based on the quantity as determined under clause 12 of the contract shall be on a ex tank price at Pyongtaek, Korea Basis shall be equal to the average of the mean quotations published in the Platt’s Asia Pacific/Arabian Gulf Marketscan for gasoil reg 0.5% quotations under the heading Singapore plus a premium of USD 3.38 per USD BBL. The amount of this L/C shall automatically fluctuate to cover any increase/decrease according to price clause without further amendment to this credit.
- On 16Dec2007, Bank A negotiated a set of documents for USD900,000.00 and delivered the documents to Issuing Bank seeking reimbursement under the L/C
- Late 2007: Applicant became insolvent, so Issuing Bank would have been unable to obtain reimbursement from Applicant if it had paid the L/C
- On 27Dec2007, Issuing bank sent a refusal notice to Bank A refusing the documents on the following ground “The amount was overdrawn.”
- Bank A replied 2 days later, refuting the discrepancy alleged as the amount was calculated from the Patt’s price index.
.
So our questions in this case are:
1. Is the discrepancy cited by Issuing Bank valid?
2. Whether the amount of the L/C was overriden by an express provision that the amount could fluctuate without further amendment to the credit?
3. How to avoid this situation?

[DanielD]

See docdexes 243,244,238,248 and 255
Regards
Daniel