Article 10 (c)

[HOANGTHIANHTHU_invalid]

Hi all,

Your comments on the following are appreciated.

The issuing bank issued an LC for USD100,000.00, with partial shipments not allowed. Later the issuing bank issued an amendment to decrease the LC amount from USD100,000.00 to USD50,000.00.

The beneficiary did not give notification of acceptance of the amendment but he presented a set of documents for USD50,000.00 which was equal to the new LC amount after amendment.

The issuing bank refused the documents stating the discrepancies: (i) C/O: C/O FORM A PRESENTED I/O C/O FORM E; (ii) B/L: LACK OF LC NO AND DATE, and returned the documents to the presenter.

Later the beneficiary presented a new set of documents for USD100,000.00. However, the issuing bank refused the documents stating the discrepancy “overdrawn” based on the amendment. The issuing bank reasoned that according to Article 10 (c) the amendment was deemed to have been accepted by the beneficiary as of the time the first presentation was made.

The presenter rejected the discrepancy raised by the issuing bank reasoning that the first presentation was refused and the discrepant documents were returned to the beneficiary, hence, it could not be deemed to be notification of acceptance by the beneficiary of the amendment. The issuing bank must honour as the new presentation was complying with the original LC

I tend to support the presenter’s view.

Thanks and regards,
N.H.Duc


[edited 1/5/2010 6:34:57 AM]

[NigelHolt]

10(c) only applies if the documents WHOLLY comply with the amended credit. Thus, 10(c) does not apply if the documents do not comply in any respect at all with the amended credit even if it appears that the beneficiary has taken account of the amendment. It is for this reason that where say:
1. an expiry date has been extended but the beneficiary not expressly affirmed acceptance of the amendment;
2. documents are presented after the previous expiry date but before the amended expiry date;
3. the documents contain one or more discrepancies;
the refusal notice should logically include as a discrepancy that the credit has expired as one has no basis, under UCP600, for taking it that the amendment has been accepted.

Anyway, if the issuing bank regarded the documents as non-compliant it is abundantly clear they were not entitled to apply 10(c) to the presentation as the documents did not wholly comply with the amended credit.

[DonSmith]

See TA638rev, query 5 regarding amendments.
Regards,
Don

[GlennRansier_]

UCP 500 did have a failing with regards to amendments and unfortunately UCP 600 article 10c. continued the failing. With UCP 600, 10 c. you have the following: "If the beneficiary fails to give such notification, a presentation that complies with the credit and to any not yet accepted amendment will be deemed to be notification of acceptance by the beneficiary of such amendment. "As of that moment the credit will be amended." My guess is that the issuer is concentrating on the last line. The LC did not allow partials and though the original presentation was rejected, they are attempting to argue that the first presentation was the amendment notification. It really depends on how you read the first sentence I have in quotes above. Did the presentation comply with the LC and any outstanding amendment?

[NigelHolt]

To me the position is quite clear: if a presentation does not comply with the credit and to any not yet accepted amendment 10(c) simply cannot have any application. In the example given the presentation did not comply with the credit and to any not yet accepted amendment as it was refused as being discrepant. Therefore, there was absolutely no basis for applying 10(c) to the reduction amendment.

Had the presentation complied with the credit as amended by the reduction amendment then I agree that TA638rev, query 5, would have been relevant.

[DanielD]

Since partial shipments were not allowed, I would like to know how a presentation for USD 50'000.-- could be turned into one for USD 100'000.--
Daniel