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NON RECEIPT OF PAYMENT UNDER LETTER OF CREDIT.

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Fri, 09/25/2015 - 05:25
Toni.lorenge
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Joined: 09/25/2015
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Respected Sir,

We had one LC with an agreement that BL would be sent directly to the consignee. And there was no any clause mentioned in the LC about BL. So under this LC we sent documents which were mentioned in the LC to issuing bank and BL directly sent to the client. and after that they found some normal discrepancies and client refused to accept the documents and also refused payment. We also spoke in this matter to our bank as well as issuing bank,but their issuing refused to send payment by saying that their client intimated them not to forward this payment until we don't give intimation. 

In this case, the client had a problem with an origin of material which we kept hidden from them initially but later when they asked to us we refused as there was against our company rules. 

Now, In this case, I want to know how to get the payment from issuing bank as the shipment was done under LC and we all know that the LC is the of the safest and secure payment term. Moreover, if under LC, if we didn't receive payment then what is the meaning of LC.

So for this case, Please let me know how to proceed ahead to get the payment. Please, sir, this is a burning issue which I want to solve as early as possible. Also, our bank is doing nothing by saying that there is no any liability for payment on us and we can't force on this matter to our bank due to restriction.

Waiting for your suggestions.

‹ TO THE ORDER OF -VS- CONSIGNED TO Credit risk of BA arising out of L/C transaction ›
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Sat, 09/26/2015 - 13:54
#1
pan
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Joined: 09/13/2007
Secure if you do.....

Hi Friends,

l/c is secure only if you respect the terms. However the l7c was risky for the reasons that Phill explained.

But what kind of discrepancies were found in the presentation, the banks acted properly or not?

I think you have to ask your bank for a revision of documents and try to find if the discrepancies were pretestous or correct.

However, outside the credit, the buyer must pay having accepted the goods as per contract terms.

Let us know. Ciao

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Fri, 09/25/2015 - 13:30
#2
phill doran
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Joined: 02/10/2009
Hello Toni I am sorry to read

Hello Toni

I am sorry to read of your situation.

It is not clear from your post if the discrepancies were corrected. If you have corrected the discrepancies and if the credit is still valid, you should have every expectation of being paid and your bankers should help you.
However, if you were not able to correct the discrepancies, then you have no means of being paid through the credit.

Remember; the credit is only ever about the documents, never about the cargo so all of this is unrelated to the fact that your client has the goods. Your mistake was to hand over the bills to the consignee. Once you have surrendered physical control of the cargo to them in this manner then they will have a reduced interest in the credit. In fact, they may benefit should the credit fail. It is always a risk to send the bills of lading to the consignee unless you are 100% certain that your credit will be honoured – either by presentation of exactly conforming documents or by means of having a waiver in place.

If the credit fails, you may still have the right to be paid in terms of your sales contract, but this is outside of the bank’s interest and it is an action you must pursue without them.

A credit is not the “safest and (most) secure payment term”. Rather “cash up front with the order, before production” is the safest term. Any other form of payment is risk, and any risk needs to be managed. In your case, the bill of lading was your key risk management instrument and once you had lost control of that, you had lost any security the credit and bill combination may have afforded you.

I wish you luck with this.

Cheers

phill
“…in the kingdom of the blind, what you see is what you get…”

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