L/C Amendment

[Rejaul17]

Hi Everybody.

Recently i have joined a new branch and faced a new problem regarding amendment of L/C. The case is described below:
In the original L/C:
44A: ANY PLACE OF U.S.A.
44B: CFR CHITTAGONG, BANGLADESH

Later the advising bank seek clarification regarding the above fields.
Thet wrote under message MT799
" PLEASE NOTE THAT THE LC CALLS FOR OCEAN ' BILL OF LADING' HENCE KINDLY PROVIDE US WITH PORT OF LOADING AND PORT OF DISCHARGE UNDER FIELDS 44E AND 44F RESPECTIVELY."

The issuing bank in reply wrote under Mt 799
" IN TERMS OF YOUR MESSAGE TYPE 799 DATED 29.06.209 WE WOULD INFORM YOU TEH FOLLOWING INFORMATION:
01. PORT OF LOADING. ANY PORT OF USA.
02. PORT OF DISCHARGE. CHITTAGONG, BANGLADESH."

The adivising bank take it as an amendment and realised US$125.00
The issuing bank did not agree to reimburse and claim for payback.
I appreciate your opinion.

Thanks everybody.

[jmitra]

Dear reja,
Why did the issuing bank used 799. I dont consider the content as clarification. You have altered the credit which can not be treated as "clarification". Its an amendment even though sent by 799. Advising bank is right to claim charges . Need to mention that its common to have amendment by 799

[Masoom Hasan]

Hi,
It is apparent from the contents of of the reply made by LC issuing bank in MT799 that intention of the issuing bank was to make a clarification of the query made by the advising bank and it didn't make any indication to treat the MT799 as an amendment. As there are specific SWIFT formats to transmit an amendemnt, I think issuing bank is in the right position and the MT799 produced by the issuing bank could be treated as a clarification rather than an amendment.

[nesarul]

Dear,
I agree with Masoom Vai.
Reagdrs
Nesar

[wongvv]

Hi !

Whether it is an amendment or clarification, the advising bank is entitled to charge the issuing bank. Because they made use of the service of other bank. However named the charge, amendment charges or handling charges, it doesn't matter. The issuing bank may choice not to use the bank's service next time.

V.V.

[ajoy]

Well you could dispute whether it is an amendment or a clarification but in either case the Bank spent time and resources acting as your agent and are entitled to thier charges though conventionally most banks do not insist on charges on clarifications.

As Issuing bank you can dispute /negotiate / bargain for a reduction or retraction of charges. In fact everything is negotiable. Another thing you could try is - dispute that the clarification was not required in the first place and the advising bank should not have asked for it as the information was already available in teh LC. Try it and they may back off after a few reminders.

On the other hand as agent of applicant you have a right to cliam the same from applicant provided you as Issuing bank did issue the LC exactly as per their LC application. Some applicants may not mind paying if you are thier favourite banker....

Cheers

[Masoom Hasan]

Dear,

Ajoy, i don't mind if the advising bank charges the issuing bank for SWIFT charge /Handling charge for the clarification asked for (if issuing bank agree to pay such charges). But is the issuing bank is bound to pay such charges? In contrary what will be the consequences if the issuing bank also call for it's cahrges (SWIFT charges) from the advising bank for making clarification? In this case I refer to sub-article 37(c) first para:

A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses ("charges") incurred by that bank in connection with its instructions."

Thanks.

[Masoom Hasan]

Dear,
Ajoy well I don't mind if the advising bank charges the issuing bank for SWIFT charges / clarification charge / handling charges (if the issuing bank agrees to pay such charges !) But is the issuing bank is liable to pay such charges ? In contrary, what will be the consequences if the issuing bank call for the SWIFT charges from the advising bank against clarification asked for by the advising bank ? In this case I refer sub-article 37(c) first para:

A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses ("charges") incurred by that bank in connection with its instructions."

Thanks.

[Tarzan]

Hi Mr. Ajoy and Mr. Masoom,
I went through your discussion over the subject mentioned item and enjoyed it. I want to share some views i.e when some party asks for some clarification and other party reply the first party (the party that request clarification) should not ask for charges as it becomes the instructing party. Moreover article 37c Paragraph one, the advising bank cannot claim charge for its clarification.
.
I think the clarification sought by the advising bank is "clarification" not an amendment as per article 10a.
.
Thanks

[ajoy]

[quoteIn this case I refer to sub-article 37(c) first para:

A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses ("charges") incurred by that bank in connection with its instructions."
][/quote]

Masoom, I dont think asking for a clarification is the same as asking another bank to perform services for you.

In other words 37 (c) does not apply here.

A bank asks for clarification when the instructions recieved from the instructing bank are not clear or contradictory or cannot be followed. The instructing bank is Issuing bank and the advisng bank is its agent. The agent has asked for a 'clarification'. The purpose of asking for clarification is to provide the service correctly i.e understand the instructions and act accordingly.

By giving a clarification message Issuing bank is nt providing any service , hence article 37 (c) as quoted by you should not apply..

I agree though that in priniciple an Issuing bank is well within its rights to claim swift expenses etc if the clarification was not required i.e the advising bank had recieved complete and correct instructions in the first place and the request for clarification was not required at all.

Cheers

Have a nice weekend..





Asking another bank to advise an LC is asking it to provide a service.

[Rejaul17]

Hi Everybody

Here is my opinion.

The advising bank has applied article 37c and deduct the amendment charges from our nostro account.
They treat this as an amendment. Their is nothing wrong with this. The question lies whether the reply was an amendment or not according to UCP 600.

Article 10a states, " ---- a credit can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary."

The reply was not made against any agreement. The applicant didn't apply for any amendment. So according to article 10a it is not an amendment.

Another thing is that according to Article 9b the advising bank is not obligated by the contents of the credit. The advising bank has to ensure the apparent authenticity of the credit. So i think the advising bank should not ask for any clarification. If there is any contradictory in the credit it should come through the beneficiary for making any amendment.

I agree most of you.

Thanks everybody.

[ajoy]

This is a very intersting question?

Should an advising bank merely authenticate and send the LC to bene without asking for any clarification? After all UCP merely expects an advsiing bank to authenticate the LC not interpret it for the beneficairy....

(Sometimes of course the calrification is asked for by the bene i.e bene asks the advisng bank to clarify with Issuing Bank regarding some caluse in which case Advisng bank is merely following a request and can charge the bene for the costs incurred. I am excluding this kind of clarification.)

What do you think? What do you practice?

I used to ask clarifications when I advised LCs. To be honest I just picked up the practice beacuse many of the bene always came back to my team asking about and complaining about the contradictory clauses as well as the quality of our advising. Though lot of banks/branches follow this practice and justify the same by various reasons.

As far as 10 a and 37 c are considered not sure if I agree with what Rejaul says about 10 a

( In my opinion if the IB's message is amending or changing the original credit it does not matter whether or not IB call it an amendment. Also if IB sends such a message it autamatically means that they are agreeing to the amendment. Te applicant does not come into the picture and even if the bene later rejects the amendments the IB is due to pay charges)

In this case I do agree that if the Advisng bank is asking for amendment charges then it has to be examined whether this was an amendment or simply a clarification.

Cheers

Cheers

[Md.zakir Hossen]

An advising Bank has the every right to seek clarification of any instructions in the Credit.
regarding charge:
I learnt from history that in ancient period teachers paid the students for delivering knowledge to the students.
Advising Bank here play the same rule.

All these activities once again raise the question about the future of L/Cs.
May allah bless them.

[ajoy]

I agree that Advsing bank should ask for a clarification when they are unable to understand a particluar clauses(s) in the LC or can see that the LC is not 'workable'.

My reasoning:

Although UCP limits responsibility to 'auhentication' as a bank you do need to provide the bene with a workable LC. This is simply good service which goes beyond UCP and any law. The ben has asked for an Lc to protect his rights. An LC which is not 'workable' is useless to a bene.

If the bene finds out that the LC is not 'workable' at a later stage when shipment has already taken place and docs are being submitted I think he has a right to feel cheated and in some cases the LC may be so badly worded that there is no protection for the bene at all.

So tomorow if the bene submits documents under the LC to you then you may have trouble as docs against an LC which is not workable cannot by defination be compliant. In such cases you will have trouble advisng the bene on how to corrrect the documents.

Even if the docs are submitted to another bank your reputation as an advising bank suffers because you have advised an LC which is not 'workable'.

Unfortunately, sometimes Advising banks asksfor unnecessary clarifications, leading to delas and cinfusion which is equally bad.

As Zakir rightly says these are the very things which raise questions about the future of LCs.
Comments welcome.

Cheers

[Rejaul17]

Thanks everybody.