Issuing bank silent after the fifth banking day...

MargaretaSkoglund · Post by **MargaretaSkoglund** » Thu Nov 27, 2008 12:00 am

Dear members,

Which appropriate actions can a Confirming Bank (CB) take towards an Issuing Bank (IB) if the IB does not determine if a presentation is complying within five banking days according to article 14 in UCP600?

What is in your opinion banking practice for a CB to act when the fifth banking day has elapsed?
Remind the IB by SWIFT and claim interest after the fifth banking day (if the CB has determined that the documents are complying at its counters)?

Your comments are most welcome,
Kind Regards,
Niklas Andersson

NigelHolt · Post by **NigelHolt** » Wed Dec 03, 2008 12:00 am

I assume the situation is that the issuing bank has failed to refuse documents within 5 banking days etc.

Regarding appropriate action: demand honour per 16(f) and if this does not occur threaten legal action and if honour still does not occur sue if practical or write-off the loss. Of course, one might want to involve one’s correspondent banking dep’t if there is a ‘relationship’ with the issuing bank in order to avoid having to threaten legal action etc.

I do not think that there is any ‘practice’ as such but am happy to be proved wrong.

ThuHoangAnh_ · Post by **ThuHoangAnh_** » Thu Dec 04, 2008 12:00 am

Dear Niklas Andersson,

Threatening to take legal action against the issuing bank just because it fails to pay penalty interest for any delay in payment is not a good solution and that may damage the correspondent banking relationship between the two banks.

I agree with you that at first the confirming bank just sends a message reminding the issuing bank of penalty interest arising out of its delay in reimbursement. However, if the reimbursement is made but the issuing bank fails to pay the delay interest, the confirming bank may insist on the payment by sending more messages claiming delay interest plus cable fees until it pays. This is the common practice that we often come across in our real life.

I agree with J. Smith that a message sent to the correspondent banking department may be helpful and may help avoid threatening a legal action.

Best regards,
N.H. Duc

NigelHolt · Post by **NigelHolt** » Thu Dec 04, 2008 12:00 am

For the avoidance of any misunderstanding I was not suggesting threatening to take legal action against the issuing bank just because it fails to pay interest. I was suggesting threatening to take legal action against the issuing bank if it fails to pay. (My understanding of the situation outlined by Niklas Andersson is that the issuing bank has failed to pay.)

ThuHoangAnh_ · Post by **ThuHoangAnh_** » Fri Dec 05, 2008 12:00 am

Dear J.Smith,

Very sorry. I understand your point.

Best regards,
N.H. Duc

MargaretaSkoglund · Post by **MargaretaSkoglund** » Fri Dec 05, 2008 12:00 am

Dear JSmith and N.H. Duc, I appreciate your comments and insights.

The situation is, as JSmith correctly mentioned, that the IB does not pay/honour after the fifth banking day.

Kind Regards,
Niklas

SvetlanaS · Post by **SvetlanaS** » Mon Dec 08, 2008 12:00 am

It may be a simple point and may seem very obvious but it would be worth pointing out the issuing bank UCP 600, sub-article 16 (f).

"f. If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation"

It is hard to believe but many banks are not aware of this stipulation and do not include reference to this point in their operational risk procedures concerning the 'preclusion rule".

Sveta