Does anyone know about the bank practice when the credit is already expired?
If the credit is expired, but the documentation does not contain any discrepancies, is this a discrepancy where art. 14 also applies ? Is there a need for the issuing bank, if the credit is already expired, to make an official advice of refusal and in case they do not, is there an obligation to pay ?
Are all documents (the documents themselves are in order) automatically for collection under urc 522, if the credit is expired ?
Hope to get some interesting answers!
Art. 14 and discrepancy 'L/C expired'
Art. 14 and discrepancy 'L/C expired'
Gerhard,
Once a Credit has expired it ceases to have any legal existence, except in respect of documents presented on or before expiry. Therefore, the issuing and any confirming bank do not have any contractual obligations of any kind towards the beneficiary under the Credit -and therefore the UCP- in respect of documents received after expiry. As a result Article 14 -or any other article- of the UCP has absolutely no application to such documents. Notwithstanding this, banks typically examine and refuse them in the usual way even though under no legal obligation to do so.
While I would consider that URC is the correct set of rules to use for documents received after expiry, to do so risks confusion, as the beneficiary invariably only wants the documents released to the applicant if the issuing bank itself takes them up in accordance with the availability terms of the -now ‘dead’- Credit. Therefore -although strictly speaking inappropriate- I would suggest a bank forwards documents received after expiry to the issuing bank subject to the UCP and not the URC.
Jeremy
[edited 8/7/2006 4:32:42 PM]
Once a Credit has expired it ceases to have any legal existence, except in respect of documents presented on or before expiry. Therefore, the issuing and any confirming bank do not have any contractual obligations of any kind towards the beneficiary under the Credit -and therefore the UCP- in respect of documents received after expiry. As a result Article 14 -or any other article- of the UCP has absolutely no application to such documents. Notwithstanding this, banks typically examine and refuse them in the usual way even though under no legal obligation to do so.
While I would consider that URC is the correct set of rules to use for documents received after expiry, to do so risks confusion, as the beneficiary invariably only wants the documents released to the applicant if the issuing bank itself takes them up in accordance with the availability terms of the -now ‘dead’- Credit. Therefore -although strictly speaking inappropriate- I would suggest a bank forwards documents received after expiry to the issuing bank subject to the UCP and not the URC.
Jeremy
[edited 8/7/2006 4:32:42 PM]
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Art. 14 and discrepancy 'L/C expired'
Dear Gerhard
& welcome back from France Jeremy – I hope it was “trés bonne”.
When this question comes up, it always reminds me of Monty Pythons "The Dead Parrot Sketch", where the following classic lines are heard:
'E's not pinin'! 'E's passed on! This parrot is no more! He has ceased to be! 'E's expired and gone to meet 'is maker!
The same goes for an expired credit
See also ICC opinion R.331/TA.207.
Somehow I think it is difficult to advise exactly what to do, when expired documents are presented by the beneficiary to a nominated bank – but in any case it is important that the choice made is made together with the beneficiary, and that he knows the consequence of any choice made – e.g. whether to forward under UCP or URC.
Although I will agree that confirming/issuing banks has obligation in this case, I would expect that they are still responsible for what they do with the documents. E.g. they can not just throw them out or pass on to the applicant.
Best regards
Kim
& welcome back from France Jeremy – I hope it was “trés bonne”.
When this question comes up, it always reminds me of Monty Pythons "The Dead Parrot Sketch", where the following classic lines are heard:
'E's not pinin'! 'E's passed on! This parrot is no more! He has ceased to be! 'E's expired and gone to meet 'is maker!
The same goes for an expired credit
See also ICC opinion R.331/TA.207.
Somehow I think it is difficult to advise exactly what to do, when expired documents are presented by the beneficiary to a nominated bank – but in any case it is important that the choice made is made together with the beneficiary, and that he knows the consequence of any choice made – e.g. whether to forward under UCP or URC.
Although I will agree that confirming/issuing banks has obligation in this case, I would expect that they are still responsible for what they do with the documents. E.g. they can not just throw them out or pass on to the applicant.
Best regards
Kim
Art. 14 and discrepancy 'L/C expired'
Kim,
Pleased to report France was ‘trés bonne’ indeed, thanks. I hear it has been ‘bien chaud’ in Denmark, as elsewhere in Europe, recently.
I agree the bank receiving documents is responsible for handling them in accordance with the instructions received from the prior party (unless those instructions are not acceptable in which case the documents must be returned or held pending receipt of acceptable instructions).
Regards, Jeremy
Pleased to report France was ‘trés bonne’ indeed, thanks. I hear it has been ‘bien chaud’ in Denmark, as elsewhere in Europe, recently.
I agree the bank receiving documents is responsible for handling them in accordance with the instructions received from the prior party (unless those instructions are not acceptable in which case the documents must be returned or held pending receipt of acceptable instructions).
Regards, Jeremy
Art. 14 and discrepancy 'L/C expired'
The central point for me is:
If a credit is expired and the issuing bank does fail to send an advice of refusal, would there be further obligation on their part. Provided that such documents would have been sent under UCP 500.
Is there any strong statement ?
If a credit is expired and the issuing bank does fail to send an advice of refusal, would there be further obligation on their part. Provided that such documents would have been sent under UCP 500.
Is there any strong statement ?
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Art. 14 and discrepancy 'L/C expired'
Dear Gerhard,
From an LC point of view article 13 and 14 does not apply. So an issuing bank will not be obligated to pay for “refusing” later than 7 days.
So basically the handling of such documents by issuing/confirming banks is not regulated by the UCP.
So any “obligation further than that” is hard to say; and will in any case be based on “something completely different” … e.g. creatures like “local law” and “the instructions given”.
I think that a strong statement is actually found in ICC Opinion R.331:
Quote
… Bank A has complied with the requirements of UCP500 in providing a notice of rejection within the specified period in Sub-article 14di, even though they were not obliged to do so because the credit was expired.
Unquote
Best regards
Kim
Ps. Yes ‘bien chaud’ indeed - but I do love that!
From an LC point of view article 13 and 14 does not apply. So an issuing bank will not be obligated to pay for “refusing” later than 7 days.
So basically the handling of such documents by issuing/confirming banks is not regulated by the UCP.
So any “obligation further than that” is hard to say; and will in any case be based on “something completely different” … e.g. creatures like “local law” and “the instructions given”.
I think that a strong statement is actually found in ICC Opinion R.331:
Quote
… Bank A has complied with the requirements of UCP500 in providing a notice of rejection within the specified period in Sub-article 14di, even though they were not obliged to do so because the credit was expired.
Unquote
Best regards
Kim
Ps. Yes ‘bien chaud’ indeed - but I do love that!
Art. 14 and discrepancy 'L/C expired'
Gerhard,
Just to reinforce Kim’s posting, if a Credit is expired and the issuing bank does not send an advice of refusal in respect of documents presented after expiry it does not have any liability by reason thereof.
As for a ‘strong statement’, how about: 'This is elementary contractual law'?
Regards, Jeremy
[edited 8/8/2006 10:26:34 AM]
Just to reinforce Kim’s posting, if a Credit is expired and the issuing bank does not send an advice of refusal in respect of documents presented after expiry it does not have any liability by reason thereof.
As for a ‘strong statement’, how about: 'This is elementary contractual law'?
Regards, Jeremy
[edited 8/8/2006 10:26:34 AM]
Art. 14 and discrepancy 'L/C expired'
Dear Gerhard,
I think the only obligation an issuing bank has in case receive docs after expiry date is to hold them at remitting bank's disposal and release them only on approval basis,meaning against acceptance and payment thereof.Even if docs are sent under ucp500,ucp does no longer apply. when not receiving any reply from issuing bank you cannot invoke art.14.
you can only,day by day,ask issuing bank about fate of docs/payment.also,issuijng bank can return the docs to you whenever wish to act so.
wish you the best,
bogdan.
I think the only obligation an issuing bank has in case receive docs after expiry date is to hold them at remitting bank's disposal and release them only on approval basis,meaning against acceptance and payment thereof.Even if docs are sent under ucp500,ucp does no longer apply. when not receiving any reply from issuing bank you cannot invoke art.14.
you can only,day by day,ask issuing bank about fate of docs/payment.also,issuijng bank can return the docs to you whenever wish to act so.
wish you the best,
bogdan.
Art. 14 and discrepancy 'L/C expired'
Although I tend to agree with the forum on this but it would be interesting to know if the forum would still hold this view if the credit itself states “that all discrepancies acceptable except the amount & the description of goods”
Regards
Khalid
Regards
Khalid
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm