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Acceptance of discrepancy documents

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Tue, 10/28/2008 - 01:05
rajankc2004
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Joined: 06/04/2008
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Hi LC experts!

Can anybody clarify the doubt!.

 We submitted documents to our bank for LC negotiation and it was forwarded to issuing bank. Issuing bank has raised discrepancy in B/L which we are unable to correct it.

1. If customer is ready to accept the documents with discrepancy and if issuing bank release the documents then does issuing bank is liable for payment on maturity date. Can issuing bank refuse the payment, if customer doesn't make payment on maturity date.

2. If customer is not ready to accept the discrepancy, do issuing bank has the right to hand over documents.

In nutshell, I want to know if shipping documents submitted to bank contains discrepancy and customer collects document then is there any risk of refusal on maturity date either from customer or issuing bank. 

 

 

 

‹ Condition in an LC Confirmation doubt ›
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Wed, 09/15/2010 - 20:49
#1
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Tue, 10/28/2008 - 23:56
#2
tulsi
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Joined: 04/09/2008
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L/C Discrepant Dox

The process is as follows. The beneficiary will prepare the dox and submitting to the advising  bank.Advising bank will checkup the documents and clear the dox if any discrepancy.Dispatching dox to the issuing bank.This dox will checkup by the issuing bank.Dox will hand over to the applicant ,if the dox are clean (no discrepancy)Issuing bank will intimate the applicant, if they found any discrepancy. Either accept or reject the dox.If the applicant is accepting the dox with discrepancy , the payment will be due on maturity date as per the L/C.If  the applicant is not accepting the dox with discrepancy, the issuing bank will intimate the advising bank about the discrepancy. Advising bank will intimate the same to the beneficiary.If so, the beneficiary need to contact/ push the applicant to accept the dox with discrepancy.This is the only solution. Mostly the applicant will accept the dox with minor discrepancies, which are not harmful to their business. If the applicant not accepting the request, call back the discrepant dox and correct the same and resubmit the dox to the advising bank.But you have to complete all negotiation works before the expiry date of the LC as well as the negotiation date of the dox accordingly. If you required any clarification, pls contact me on my E mail: tulsipillaiex@hotmail.comRegardsTulsi

Dubai

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Thu, 10/30/2008 - 05:27
#3
prem_kumaran
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Joined: 10/24/2007
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tulsi/ sam/peter.

The issuing bank has a maximun of 5 banking days following the presentation date within which it has to confirm its acceptance/rejection of docs . Now if the documents are found to be discrepant the issuing bank has to give a single notice in effect to the presenter. The notice must state

1.bank is refusing to honour/negotiate

2. all the discrepancies and any oneof the following below

a. bank is holding docs pending further instructions

b. is holding the documents until it receives a waiver from applicant

c. bank is returning the docs

d.bank is acting in accordance with instructions previously received from the presenter.

Hope the above which is an extract of artice 16 shld make the things clear .

Now coming to the question from rajan,.. If the docs are discepant and the docs have been accepted by the customer, the issuing bank will send an advice of acceptance(MT 752)  stating the maturity date. It means that the issuing bank has accepted to pay at maturity .Even though the presenter has lost protection under UCP , the issuing bank is liable to pay at maturity once it has sent the advice of acceptance. It implies that the issuing bank in addition with the customer has agreed to waive the discrepancies.Please note that the issuing bank on its own regard may reject the discrepancies even though the customer accepts and  return the documents to the presenter.

We have had many discussions on this and hope frammi had already given an elaborate answer on this . Please visit previous topics on this for addition.

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Thu, 11/06/2008 - 16:19
#4
Frammi
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Joined: 08/17/2007
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Dear Prem

Nice to see you here and then!

Well in this case, I have nothing to add. Your answer and those of the others were perfect.

_____________________________________________

Just that I say there are minor "discrepancies"!

For example the weight of a bale of textiles is never ever the same, because humidity makes a lot of difference For a 40'' container the weight should be let's say 3 tons. If weighed on different occasions the net weight will differ by as much as two to three percents up and down, as it i always a "different wet" weight (caught the  wordplay?!).

So, if the packing list shows 2995 kg and the B/L shows a weight of 3002 kg it is formally a discrepancy. There is no allowance in the UCP or the ISBPs to any difference.

But if this was the only discrepancy, would you advise applicants to reject the docs and wage a lawsuit on it? If so, would you feel well with it and that you would win it?

And then there are the myriads of discrepancies the middle banks ask the issuing banks, even if these are no discrepancies at all like "only 99.5 percent delivered" where the goods description was only "goods as per P/I 123456" and so on.

__________________________________

I think a swift-negotiation is a waste of time and resources. It's always best to send the docs out to issuing bank, so that they can ask for a waiver. If they don't reject the docs in time, they have thus taken up the goods and payment should follow. If they reject in time, the docs are in the same country as the goods and held in safe custody with the issuing bank. Goods can then be sold to another buyer in that country and docs be collected at issuing bank.

   -Each long journey starts with a small step-

Best regards

Frammi

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Wed, 10/29/2008 - 11:28
#5
LC Sam
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Joined: 08/09/2007
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Minor discrepancies

Hi Tulsi,

Great information.  I would like to make 1 comment on this.  There is no such thing as a minor discrepancy. Either the documents comply or the documents are discrepant.  Any discrepancy can prevent payment.

 To this I would like to add that many times when the applicant refuses to provide their waiver to the issuing bank, it has little to do with the noted discrepancies. Usually there is something entirely different going on, and the applicant is using the discrepancy as a reason to either prevent, reduce or delay payment.

So if there is an issue with the market price of the good, and there is a discrepancy between the packing list and the bill of lading, the applicant may use the discrepancy to renegotiate the deal.

The beneficiary's best defense is to present compliant documents.

Regards,

LC Sam

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Thu, 10/30/2008 - 00:01
#6
smmujeeb
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Joined: 07/29/2008
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agree with sam

Just wanted to inform all that there is no such minor or major discrepancies in the documents, discrepancy is a discrepancy.

Either dox should be comply with the terms and conditions or discrepant.

 

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Tue, 10/28/2008 - 08:14
#7
Peter M
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Joined: 09/02/2008
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Discrepant docs

If the applicant accepts the discrepancy then the issuing bank is liable to pay you at maturity, whether the buyer has funds at that time or not.

If the customer does not accept the discrepancy then the issuing bank cannot release documents to them.  You will be notified through your advising bank of the documents rejection. 

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