Maturity / discrepant documents / ISBP paragraph 48

[KimChristensen]

I have noted that various “practices” exists when it come to determining maturity dates on discrepant documents.
Here is one example – please let me know how you would calculate tenor.

Issuing bank: Bank I
Nominated bank: Bank N
L/C: Irrevocable unconfirmed

Place of expiry: Country of Bank N

Available with Bank N by Acceptance
Drafts at 60 days after sight
Drawee: Bank N

Documents are presented to the Bank N with discrepancies.
Bank N accepts the documents/drafts on the condition that the documents are subsequently accepted by Bank I. Bank N sets the maturity date based on the presentation of documents at his counters.

Is that correct – or should tenor be calculated based on issuing bank accepting the documents.

Would it make a difference if the L/C were expired.

I thank you in advance.

Best regards
Kim

[asamaha]

I think the 60 days sight term implies acceptance of the documents first. So tenor should be calculated from the time the documents are accepted by the designated bank ; just like sight payment under sight payment credit is deferred until the time the documents are considered in order by the paying bank or, in case they are discrepant, when they are paid by the issuing bank.
Best Regards
Antoine Samaha

[NigelHolt]

Kim,

I am rather puzzled as to how Bank N can ‘accept the documents/drafts [particularly drafts] on the condition that the documents are subsequently accepted by Bank I’. If you can find the time, and it would not reveal any commercially sensitive information, perhaps you could explain this.

As to your question, I cannot answer it as this is a practice I have never come across before. Hence my puzzlement.

Thanks and regards, Jeremy

[Yahya]

Dear kim,
My opinion,where the Credit is not expired and the Bank I provided a proper notice of refusal NOR) under UCP,the tenor is calculated from date of acceptance of the Bank I.
And where Bank I did not provide a NOR,it should be from the date
of presentation of docs to the counters of Bank N.The conditional acceptance of Bank N is irrelevant to the matter.
If the Credit expired,as you know,the Bank I has no obligation to accept the docs or to provide a NOR.In this case, as the Credit expired,there should be no rule which can be applied for calculation and it is subject to the agreement between the related parties.

Yahya,



[edited 5/31/2005 9:50:18 AM]

[KimChristensen]

Dear Antoine, Jeremy and Yahya,

Antoine: Thanks for comments – appreciated!

Jeremy: Thanks for answering without answering & gosh – I had hoped you would not ask so direct. Anyway since you did … This is a real case, where I am helping to “facilitate” a solution; so I needed a second opinion just to be sure. Also I found that this way of doing it, was indeed the current practice at “Bank N” – and I wanted to “check” this as well. My guess is that this way is – system/process wise – easier, than waiting for a date from the issuing bank: The date can be set – and beneficiary informed – once documents are presented – and in most cases they will just receive the acceptance from the issuing bank; and will not have to add/change any dates. In addition to that, in most cases the maturity can be established based on the documents (e.g. shipping date) – so I would guess that the example expressed here covers rather few cases (this is on course not an excuse). This sound like one of those practices that have just come sneaking in over the years; and have not been brought up … until now.
I am not sure what else I can tell you; if required – I will of course provide you the information that is available to me.

Yahya: Thanks for comments. This really gave me something to think about. Which I will do

Best regards
Kim

[larryBacon]

If bank N is the nominated bank, by definition the credit is available at their counters & therefore acceptance is also based on presentation at their counters, regardless of discrepancies or not. By this I mean that one can establish the maturity date without reference to whether or not the presentation is discrepant.
Similarly, the date of receipt by the issuing bank is not relevant to the maturity date, nor whether or not the documents are found to be discrepant by the issuing bank or disputed.

Laurence

[KimChristensen]

Dear Laurence,

Thanks – I really appreciate your comments – although it did not make me less confused. So what you are saying, is that Bank N should set the maturity date based on the presentation, and then forward the documents “with reserve” or “in trust” or whatever you may call it? At the same time Bank I should acknowledge the maturity date set by Bank N?

Best regards
Kim

[larryBacon]

Kim,

Article 14 tells us that discrepant docs must either be returned to the presenter or held in trust. This implies taking instructions from the presenter, or failing that to return docs.
In this case, bank N should seek instruction from the presenter. Assuming that instruction is to forward docs in trust to bank I, bank N should include in their covering letter the maturity date of the draft, as it cannot be ascertained from the docs alone.

Laurence

[NigelHolt]

Kim,

Thanks for clarifying.

The problem I see is as follows:
1. If the NB takes up -in the true sense of the word- documents under a credit available by DP/acceptance X days after sight it knows to be discrepant:
A. It must give the presenter a definite due date ‘there and then’.
B. It ought to notify the IB of the discrepancies as otherwise it is misleading the IB.
2. The IB will need the applicant’s authority to take up the discrepant documents. The applicant and IB are entitled to have the due date calculated from the date authority to take up the documents is given (assuming it is).
3. Thus it is quite possible that the due date given by the NB will be much sooner than that authorised by the IB.
Overall, the practice of the IB seems to me most ‘irregular’.

Regards, Jeremy