Under Documents Required in a credit, the following was noted: -
'Should any changes occur regarding details of goods & all documents requirements (except invoices), applicant shall from time to time inform beneficiary by fax on each individual shipment through fax no. 089-123456. In such cases, the copy of such fax is required.'
I feel that this condition/requirement is not practical . How would the negotiating bank be expected to know whether there are any changes if the beneficiary does not disclose? Furthermore would the issuing bank be bound by such changes conveyed directly by the applicant to the beneficiary thru fax?
Thank you for your comments.
Changes by fax
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serenachang
- Posts: 10
- Joined: Fri Apr 05, 2019 5:26 pm
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Changes by fax
The issuing bank should never agree to such a condition in the issue of a L/C. This permits amendments "through the back door". An official amendment is subject to the normal checking by the issuing bank before issue. These type of amendments are not subject to any such checking. By agreeing to this clause in the L/C, the issuing bank has allowed the applicant to avoid the banking system for such amendments.
You are right in saying that this puts the negotiating bank in an impossible position, as they will not be able to know whether any such amendments have been requested. If amendments were made under normal circumstances, the beneficiary would have the option to accept or reject such amendments. This case is not covered by UCP 500, so it is impossible to tell whether such
"back door" amendments are compulsory on the beneficiary or not.
If I were the advising or nominated bank, I would refuse to agree to advise or negotiate/pay this L/C because this looks like a court case waiting to happen, even with the best intentions of all banks.
Laurence A. J. Bacon
You are right in saying that this puts the negotiating bank in an impossible position, as they will not be able to know whether any such amendments have been requested. If amendments were made under normal circumstances, the beneficiary would have the option to accept or reject such amendments. This case is not covered by UCP 500, so it is impossible to tell whether such
"back door" amendments are compulsory on the beneficiary or not.
If I were the advising or nominated bank, I would refuse to agree to advise or negotiate/pay this L/C because this looks like a court case waiting to happen, even with the best intentions of all banks.
Laurence A. J. Bacon
Changes by fax
Due to the fact that more and more LC seminars and workshops become available to the traders, some importers think that they know about LC and may be tempted to start creating special terms and conditions in the LC with an intent to "police" the trade wihout knowing that what they are doing is against the back bone doctrine of LC, partly because they are not fully trained to such a level to pass the CDCS.
Some banks have to do as the power applicants want in order not to lose them, due to keen competition in the banking arena.
It is quite obvious that this special condition may bring risk to the issuing bank, the nominated bank, the confirming bank and the transferring bank as well as the beneficiary.
It may also open an opportunity to the beneficiary to create frauds by changing the quantity and grade of the goods.
We are from www.tolee.com
[edited 4/2/02 8:33:01 PM]
Some banks have to do as the power applicants want in order not to lose them, due to keen competition in the banking arena.
It is quite obvious that this special condition may bring risk to the issuing bank, the nominated bank, the confirming bank and the transferring bank as well as the beneficiary.
It may also open an opportunity to the beneficiary to create frauds by changing the quantity and grade of the goods.
We are from www.tolee.com
[edited 4/2/02 8:33:01 PM]