Credit required beneficiary to send 2nd & 3rd original BL (which are made out to order & blank endorsed) directly to a third party. The remaining 1st original is to be routed through the bank.
Now instead of the 1st original being presented, the beneficiary has despatched the 1st & 2nd directly to the applicant leaving the 3rd original for the bank. As far as we are concerned, any one original is capable of achieving the purpose of taking delivery of the goods & hence should not make a difference.
Are we correct in our opinion?
3rd Original
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melissachin
- Posts: 11
- Joined: Fri Apr 05, 2019 5:22 pm
3rd Original
UNCLEAR INFORMATION
This query is unclear as to the precise instructions in the DC regarding the despatch of the bill of lading.
The 2nd and 3rd originals are to be sent to a "third party". Who is he, the applicant? the ultimate buyer? or someone else?
The 1st original is to be sent to the issuing bank? or to the applicant via the issuing bank? or to the applicant directly?
RISK IN "TO ORDER AND BLANK ENDORSED" BL
To send a "To order and blank endorseed" bill of lading to the applicant or to the ultimate buyer directly is very risky. The receiving party may disappear after receipt of the goods or he may come back to ask for a reduction in price. Otherwise he will not pay, relying on an excuse that the quality of the goods is not matching the contractual specifications.
If there is a discrepancy in the documents, then the seller does not get paid and the goods are gone. There is no chance to re-sell the goods to a third party in the importing country as the goods have already been claimed by the applicant or the ultimate buyer.
The issuing bank also faces risk for losing control of the goods, not to mention the lien power to the goods or holding the BL as a collateral against the loan extended by way of T/R or DC arrangements.
If the seller intends to use the bill of lading like that, why should he choose a more expensive payment mechanism like DC? Why not use D/A or D/P instead? or even open account?
It appears that the seller is not aware of the impact of "To order and blank endorsed" BL and the associated risk.
To understand more on bill of lading made out "To roder and blank endorsed", please refer to the article "What To Order and Blank Endorsed Actaully Means" in our website.
We are from http://www.tolee.com
[edited 8/6/01 5:04:59 PM]
This query is unclear as to the precise instructions in the DC regarding the despatch of the bill of lading.
The 2nd and 3rd originals are to be sent to a "third party". Who is he, the applicant? the ultimate buyer? or someone else?
The 1st original is to be sent to the issuing bank? or to the applicant via the issuing bank? or to the applicant directly?
RISK IN "TO ORDER AND BLANK ENDORSED" BL
To send a "To order and blank endorseed" bill of lading to the applicant or to the ultimate buyer directly is very risky. The receiving party may disappear after receipt of the goods or he may come back to ask for a reduction in price. Otherwise he will not pay, relying on an excuse that the quality of the goods is not matching the contractual specifications.
If there is a discrepancy in the documents, then the seller does not get paid and the goods are gone. There is no chance to re-sell the goods to a third party in the importing country as the goods have already been claimed by the applicant or the ultimate buyer.
The issuing bank also faces risk for losing control of the goods, not to mention the lien power to the goods or holding the BL as a collateral against the loan extended by way of T/R or DC arrangements.
If the seller intends to use the bill of lading like that, why should he choose a more expensive payment mechanism like DC? Why not use D/A or D/P instead? or even open account?
It appears that the seller is not aware of the impact of "To order and blank endorsed" BL and the associated risk.
To understand more on bill of lading made out "To roder and blank endorsed", please refer to the article "What To Order and Blank Endorsed Actaully Means" in our website.
We are from http://www.tolee.com
[edited 8/6/01 5:04:59 PM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
3rd Original
Where 3 original Bs/L are called for, most carriers do not show any distinction between them, but a few do show 1st original, 2nd original etc or 1/3 original, 2/3 original etc. Such numeric additions have no significance to the title of the goods, and merely indicate the existence of other originals. Therefore, in my opinion, any original presented to the bank satisfies the L/C requirement for a 1st original.
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melissachin
- Posts: 11
- Joined: Fri Apr 05, 2019 5:22 pm
3rd Original
In answer to Mr Lee's enquiries, we do not know whether the third party is the ultimate buyer. All we know is that he is not the applicant.
The remaining original BL (First Original) is to be presented together with the rest of the docs as called for under the credit to the issuing bank thru the beneficiary's bank.
Thank you.
The remaining original BL (First Original) is to be presented together with the rest of the docs as called for under the credit to the issuing bank thru the beneficiary's bank.
Thank you.
3rd Original
Sending a "To Order and blank endorsed BL directly to a third party, who is not the applicant, is a very risky decision indeed. The issuing bank should not issue DC like that, unless the applicant has very strong financial health to warrant that the issuing bank can be reimbursed fully in case it chooses to exercise its recourse action.
WHAT IF CARRIER DOES NOT PRE-PRINT BS/L AS 1ST, 2ND & 3RD ORIGINAL?
For the beneficiary, there is an additional risk. What about the carrier that he has chosen does not pre-print its Bs/L as 1st, 2nd and 3rd Original? In that case how can the beneficiary know which one is the 1st original?
We are from www.tolee.com
[edited 8/7/01 2:27:54 PM]
WHAT IF CARRIER DOES NOT PRE-PRINT BS/L AS 1ST, 2ND & 3RD ORIGINAL?
For the beneficiary, there is an additional risk. What about the carrier that he has chosen does not pre-print its Bs/L as 1st, 2nd and 3rd Original? In that case how can the beneficiary know which one is the 1st original?
We are from www.tolee.com
[edited 8/7/01 2:27:54 PM]