L/C Documents Direct to Issung Bank?
Dear Expets,
Plz comments We prepare a documents as per LC. We may present these documents direct to issuing bank? on collection basis or we submit these documents to our bank and then our bank forward these documents to LC issuing bank.
... are one of the worst ideas I ever heard of!
I can't understand the ICC is supporting this without also showing the negative effects this would have - especially with freely negotiable credits.
I had it twice under the old UCP 500s in 2007 and it was awful. I was issuing bank, the credits were both freely negotiable and the exporter knew nothing about credits:
- Our L/C number was missing!
- There was no confirmation that the amount of the
drawing was endorsed on the back of the credit
instrument (and if so, I wouldn't want to have received
it from beneficiaries!!!!!)
- There was no instruction about what to do with the docs,
just a cover letter saying "Enclosed please find the
following documents". The letters didn't even mention the
words L/C or credit.
- No payment details were contained- how should we pay?!
- I had at least a dozen discrepancies, but how shall I send
the timely refusal? Beneficiaries usually do not have
SWIFT!
Under the new Rules I strictly prohibit direct presentations and in the cases mentioned above, the exporters didn't even save charges as their bankers and I had plenty of extra charges for them!!
So, Please always contact your bank and let them earn something, too.
-Each long journey starts with a small step-
Best regards
Frammi
Hi,
To respond in brief, generally speaking:
- When you have an LC in hand, why submit docs on "collection basis"?
- If you wish to submit documents on "collection basis", you are free to do so, but under URC 522, NOT under the UCP.
- UCP provides that, under a credit, documents may be submitted to the nominated bank (Art. 12) or to the issuing bank (Art. 7 of UCP).
- If your bank is a nominated bank, it may negotiate/accept docs. If your bank is not a nominated bank, it may receive the compliant docs from you, but must present them to the LC issuing bank before the expiry of the credit, and otherwise comply with the terms of the credit.
Cheers!
be sent on collection basis and especially not under URC 522!
This is not a mistake, it's an imbecity!!!!!
=============================
Imagine, The applicant holds credit lines for USD 100,000.00. The credit is also for USD 100,000.00.
Now the credit has not yet expired and also has not been cancelled and you present documents under a collection!
By which means shall they be paid???!! The whole credit-line is blocked by an unutilized doc. credit!
The applicant has no chance but has to wait until the L/C is finally cancelled to then be able to pay the collection!
For the same reason, please never ever use the word "collection basis" for documents under credits! Use "approval basis" and mention the UCP 600 instead! It has the same meaning but avoids confusion. And for the exporter it keeps the pressure on the issuing bank's side to reject the presentation within five banking days!!
Otherwise, if the credit was still valid when docs were presented and if more than five banking days have passed without an rejection the issuing or confirming (if so) bank has to take up the documents!
-Each long journey starts with a small step-
Best regards
Frammi
Dear Frammi,
I agree with you. However, it was never my intention to suggest that docs under a credit (governed by UCP 600) could or may be submitted on collection basis under URC 522. No earthly reason why one should; far from it!
I should have made the distinction clear in my response. Thanks.
Dear Student,
Beneficiary has all right to present the documents to issuing bank.
Already so many comments posted in this forum you can search.
Regards!!!!
Mujeeb :-)
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