Can an issuing bank omit to notify of discrepancies when the

[SOOEYOUNKIM]

Recently, we have a confrontation with two oversea banks as to the responsibility of their duty to notify us of the discrepancy when they honor the docs.

The facts are as follows :

A. Issuing banks advised us of their acceptance and undertaking to pay at maturity with no discrepancy notice.

B. On the maturity, they deducted discrepancy fee being some of us dollars.

C. As they do not follow the rule UCP600 art no.16-c, we strongly insisted that the discrepancy fee is not justifiable since issuing banks did not fulfill their duty to advise us of the discrepancy at the time of their acceptance.

D. The issuing banks argued that they acted in accordance with UCP600 art no.16-b, according to which their duty is not applicable if the discrepancy is accepted by their own decision.
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We do understand that in any event except the credit is expired, an issuing bank must notice the discrepancy details to the nego bank as per ucp600 art no.16-c.
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In sum, an issuing bank is allowed not to advise discrepancy to the nego bank when they act in ucp600 art no.16-b?

If not, pls provide us with any opinion published from ICC.

Any ideas will be greatly appreciated.

Thank you.

[NigelHolt]

I think it is quite clear from 16(c) a bank only needs to send a refusal notice if it decides not to honour / negotiate and that from 16(b) an issuing bank can decide to honour discrepant documents after seeking and receiving a waiver from the applicant, thereby sparing it the need to send a notice of dishonour.

While I agree that an issuing bank ought to be obliged to notify discrepancies, once they have been determined, if it intends to deduct a discrepancy fee, I am not aware of any authoritative source to support this view.

[GlennRansier_olsABN]

I agree with Jeremy. 16 gives an issuer the right to consult with the applicant and/or to waive any discrepancies and if waived, honour a presentation. Any issue such as this would need to be discussed at the correspondent relationship level. As you have inquired, the issuer should be able to inform you what discrepancies they found & waived.

[SOOEYOUNKIM]

Thank you for answers. Actually we found a precise proof for this dispute from one of ICC members, which is R741/TA700rev recently released ICC opinion.

There, intention is very clear and the matter is categorized into following two.

First. A presenter indicated a disc in its covering letter. and the issuing bank acts as per art no.16-b. Issuing bank noticed the payment or acceptance only stating ''disc accepted''.
==> then, this could be acceptable for deducting discrepancy fee.

Second. A presenter indicated no discrepancy in its covering letter. and the issuing bank found a disc in the docs and acts as per art no.16-b without notifying the discrepancy to the presenter.
==> then, the issuing bank must (should) list and indicate the list of discrepancy in the payment msg or acceptance msg.
(as you know, payment or acceptance should be made within 5 banking days)

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The matters concerning the dispute is all about ""discrepancy charge and fee"". We do not argue the validity of discrepancy itself.
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In any event, the issuing bank must list or notify the list of discrepancy if they want to deduct a discrepancy fee. Otherwise, their right to deduct discrepancy charge is not justifiable AS PER R741.
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Thank you.

[GSham]

Let's say the L/C contains a provision like this: "A DISCREPANCY FEE OF USD 50 SHALL BE LEVIED FOR PRESENTATION OF DISCREPANT DOCUMENTS.THE SAME SHALL BE DEDUCTED AT THE TIME OF SETTLEMENT." In accordance with the L/C terms, the issuing bank is entitled to charge a discrepancy fee when the presentation is discrepant. Whether the discrepancy is notified to the presenting bank does not change the position.

Regards, Gabriel

[GlennRansier_olsABN]

If a valid discrepancy is cited and waived by the issuer they are entitled to a fee. If the presenting party desires to challenge the fee they need to do so based upon the discrepancy. A wire transfer holds little space for discrepancies to be listed. However, if issuer is contacted by the presenter they must advise what discrepancies were cited. If the discrepancies were not valid then the presenter can request a refund of said discrepancy fee.

[SandraBoxley]

Does the question imply that a/the purpose of a discrepancy fee is to cover - or partially cover - the expense that an issuer incurs when notifying a presenter of discrepancy(ies)? Must we assume that a discrepancy fee equates to or necessarily includes the cost of so notifying the presenter?
Whether or not the issuer apprises the presenter of noted discrepancy(ies) does not alter the fact that the presentation has been found to be non-compliant. I agree with Glenn's point that, "If a valid discrepancy is cited and waived by the issuer they are entitled to a fee". If a presentation is found to be non-compliant, an issuer incurs additional handling expenses when processing non-complying documents, i.e. if it elects to do so (UCP600, sub-article 16(b) ), the issuer contacts the applicant, records the applicant's response, determines whether or not to honor the presentation and then acts upon its decision.
UCP600 sub-article 16(c) specifically addresses what a nominated bank acting on its nomination, a confirming bank or the issuing bank must do if it decides to refuse to honor or negotiate a non-complying presentation.