Issuing bank authorise us to release documents to the 3rd party other than Applicant
Hi,
We, the presenting bank, are authorised by Issuing bank(our group office) to scan the documents to them.
After processing documents checking, Issuing bank will excute payment and authorise us to release original documents to the 3rd party(the subsidiary of applicant which is located in other country).
The above mentioned process flow is totally new to us. Could anyone be kind enough to advise 1. whether is is a workable process? 2. any risk arise on our side? 3. how to avoid potential risk from our side?
Thanks a lot in advance!
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What role is your branch undertaking, i.e are you a nominated bank under the LC? Is your branch an overseas branch of the issuing bank?
If you are the designated nominated bank, the issuing bank should be aware that the beneficiary having presented documents to your branch is expecting your branch to examine and negotiate/pay the documents. If this responsibility is devolved to the issuing bank, without the express agreement of the beneficiary (especially if the issuing bank is based in a different country to your branch, and in which case it would be considered to be a separate bank), you might find yourself acting outside the mandate of the UCP, and thereby suffer the financial consequence for doing so, in the event that documents are refused by the issuing bank.
As regards the release of documents to a third party (after taking up the documents), you are perfectly free to follow the issuing bank's disposal instructions without incurring any liability.
Thanks a lot for your reply, Abrar!
Yes, we are a nominated bank under LC, meanwhile, our branch is an overseas branch of IB.
What my concern is will our branch be involved in potential troubles if applicant has dispute with IB? Since we will not send original documents to IB and release it to a 3rd party, does it mean we will be outside the mandate of UCP?
Provided you have the full backing of your H/O and this is clearly articulated in some form of internal agreement, from a legal recourse point of view, it should not put you under any additional financial risks. However, as a nominated bank you would have to ensure compliance under Art. 14 & 16. This would mean holding documents at disposal of benefciary until paid for, and not referring discrepancies (if any) to the issuing bank unless specifically agreed to by the beneficiary.
It appears that certain aspects of the process may compromise your position under UCP, and therefore it would be as well to be up-front with the beneficiary and explain the process to them and obtain their approval.
As regards the disposal of documents to a third party, even in the event of a dispute between the issuing bank and the applicant, as the o/s branch of the IB, and since you would be taking direct disposal instructions from the issuing bank, you would be protected.
Clear. Thanks a lot, Abrar!
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