Letter of Credit Forum

If presented under UCP 600 the bank has the duty to reject docs in due time, i.e. latest within 5 banking days after receipt of docs. If they fail, they have to honour the presentation.

Of course I agree that it would be desirable that if docs were presented to them, openly stating a discrepancy, this rejection should not be necessary and the issuing bank should have more time to contact applicants for a waiver, but even under the new rules this is not covered.

That's why any bank should treat any presentation, if openly stating to be discrepant or not, as if no indication of a discrepancy was made.

Considering the initial question, I would recommend to issue the presentation under the credit and under the UCP 600. No one is forced to openly state any discrepancy. But if anyone does, the wording is not so essential. I would avoid the wording "collection basis" as someone might erroneousely feel the presentation was not made under the credit.

A further advantage of a presentation under the credit is the following:

Imagine that an applicant is a quickly growing company, always in lack of credit limits. If the presentation amount is a considerable one, let's say USD 1,000,000.00, the issuing bank and the applicant would definitely prefer a presentation under the credit, as by paying docs under the the credit lines would be definitely relieved, whereas under a credit, especially if expiring in another country, the issuing bank might want to wait for a certain time whether credit docs were still presented or not. A collection might not fit in the remaining credit lines and get paid later - when the credit is finally cancelled. Another reason for a presentation under the credit!

-Each long journey starts with a small step-

Best regards

Frammi