Letter of Credit Forum

Dear All,

I have a question on the Foreign Currency realization date against export proceed, considering the following points –

1.       Export under LC –

2.       Payment terms – 60 days from B/L date

3.       LC advising bank – XYZ, India, LC confirming bank – XYZ, Zurich

4.       Exporter present documents for negotiation with XYZ bank, India and XYZ bank, India has remit the payment after received documents confirmation from XYZ, Zurich. It will take 7-10 days from the date of documents presentation.

Then what will be the actual foreign currency realization date? 1. Date of received the payment against documents negotiation or the actual payment received by the bank on maturity i.e. 60 days from B/L date.

Please advice with explanation……..

It is clear that only Bank Y has the authority of the issuing bank to act as a nominated bank and negotiate the documents. Bank Z in this case is acting simply as a post office in advising the beneficiary. There is no requirement for the beneficiary to allow Bank Z to check documents but if the beneficiary elects to use this service of Bank Z, Bank Z will provide this service without responsibility or engagament on its part. If discrepancies are found by Bank Z, the beneficiary should be well adviosed to correct the disrepancies if possible. If not possible, the beneficiary should simply request Bank Z to forward documents on approval to Bank Y and ensure that Bank Y receives the documents within the expiry date of the LC. There is no need to mention any discrepancies on the covering schedule and any discrepancies found by Bank Y would be conveyed to Bank Z for further communication to the beneficiary.

Regarding Bank Y's requirement to authenticate, assuming that the benefiociary manintians an account with Bank Z, if Bank Z's covering schedule were to contain a clause such as : " Without responsibility or engagement on our part, we confirm that the beneficiary (XYZ Co) maintains an account at our bank (or relevant branch) and all relevant due diligence procecss has been conducted in respect of this relationship.

In any case, my view is that Bank Y has no right to require this information as a condition for making payment as such conditions are outside the scope of the UCP and also, the fact that the payment is to be made by Bank Y to Bank Z and not direct to the beneficiary should provide adequate comfort (assuming that Bank Y and Bank Z are already in a pre-existing correspondent relationship) to Bank Y that payment under the LC is being legitimately made. As for documents, neither Bank Z (nor Bank Y) should concern themselves with the authenticity of the documents provided that at face value, there is no reason to believe that the doucments may be unauthentic or fraudulent                          

Hi Friend,

the l/c is poorly worded. However the bank Z following the beneficiary's instructions will send documents to bank Y, where the l/c was available, and wait.

On receipt of advice of refusal, under beneficiary's consent will  instruct the bank Y properly.

IMHO, bank Z is the advising bank, specially if the l/c has been issued by Swift and bank Y is the nominated bank.

I thnk that due to KYC AML rules the issuing bank requires the identification of beneficiary by the bank Z.

Other comments appreciated

Ciao

HI,

NOBODY ADVISE THE SUBJECT ?

THANKS

R.