Letter of Credit Forum

[quote=shirkunya]

hi experts

nominated bank sends docs with overdrawn invoice for approval under l/c.

can nominated bank instruct to deliver docs only upon payment of full invoice amount?

has applicant the right to waive discrepancy but to pay l/c amount only.

your prompt reply will be appreciated

shirkunya 

[/quote]

To amplify on Phill's comments:

Documents have been sent on approval. If sent under protection of UCP600, the issuing bank would be obliged to examine under LC and UCP, and if sent under URC, documents would not need to be examined. In either case, the documents remain at disposal of the presenting bank/beneficiary until paid for.

Depending on which of the two Rules the presentation is subject to, different processes would apply:

Under URC : The issuing bank must hold documents until either the full invoice value is paid for, or, in the case of a lesser amount, only on the express agreement of the presenting bank/beneficiary.

Under UCP: Notwithstanding value of invoice, the issuing bank has right to exercise discretion under provision of sub-art. 18 b. In theory, if the only discrepancy is "LC overdrawn", the issuing bank would not be obliged to seek applicant's waiver for this discrepancy, and may at its discretion, pay up to the LC value only, leaving the balance to be settled by the applicant to the beneficiary, (if appropriate), under the terms of the underlying contract.    

Hello Shirkunya

I think the simple answer is that IF the invoice is accepted, the credit cannot pay more than its initial value, allowing for any agreed tolerance. So, any excess amount, although not necessarily seen as a discrepancy, would need to be settled outside of the credit between the buyer and seller.

I do not think the nomintaed bank can instruct otherwise.

A more detailed, technically proficient and elegant answer will be forthcoming shortly from other posters, I am sure...but that is the gist of it

Cheers

phill

“in the kingdom of the blind: what you see is what you get”