Stating discrepancies on covering letter!

[Navi]

Dear friends,
.
Consider confirming bank determines discrepancies on the documents and advised beneficiary as per UCP 16. Then beneficiary instructed to send them on approval basis. Is the confirming bank obliged to state all the discrepancies on the covering letter while sending documents to issuig bank on approval basis? What may be results to confirming bank of non stating any discrepancy and only saying "docs sent on approval basis"?

Regards

[LCstudent]

Dear Navi ! I do not know if the conf. bank is obliged to state any discrepancy on the covering schedule, but for their own security it seems to be the best to do so. Furthermore I think it is unclear, what some countries understand, what "on approval basis" means. So to avoid future discussions state the mistakes on the letter and everybody is "happy". Other comments appreciated. Rgds LCStudent.

[edilee]

hello Navi and L/C student
my opinion there is no need obligation for inditation on cover note the discrepancies by confirming bank if the confirming banks prefers to protect the beneficiary
five working days after receipt of the docs by applicant bank there is no time limit for refuse about the documents
however if confirming bank does not mention about the discrepancies to the beneficiary
confirming bank can live promlem with beneficiary and applicant bank if applicant bank finds the discrepancies

[Navi]

Dear friends,
.
I posted the topic 2 weeks ago just for seeking an answer for a question which was in my mind for a long time, but this week we faced a problem with the issuing bank on this issue.

We recieved a non confirmed LC, available with us by negotiation. We advised it to beneficiary, without our confirmation informing both the beneficiary and issuing bank. We received docs from beneficiary instructing us to send them to issuing bank as presented. Documents were in fact complying but we sent them to issuing bank as presented asking them to remit proceeds to our account on our covering letter. However, we received MT734 from issuing bank stating that docs were refused due to following discrepancy:
* Documents were sent on approval basis without stating discrepancies.
.
We rejected this discrepancy on the grounds that
* we have not acted as nominated bank and send documents as presented. We had no responsibility to state discrepancies on the covering letter. (Even if we were confirming bank we did not have to do that)
* As per UCP 14-a, issuing bank must examine a presentation to determine, on the basis of documents alone, whether they appear on their face to constitute a complying presentation. Therefore, no discrepancy must be raised for the reason of covering letter not stating discrepancies.
.
But, issuing bank insisted that it was a discrepancy, saying on their message that we did not state "documents have been negotiated in conformity with the lc terms and conditions" as per field 78 of MT700 and not certified "negotiations are recorded on the original LC". They added that documents as presented means, without examining and not complying.
.
Are they right?

Regards

[edilee]

Dear Navi
I understand in your message that your not mentioning discrepancies is not problem
the problem is your indication that you said docs.were sent as presented
may be they stipulated on the L/C docs.must have been checked
but duties are clear on ucp 600 art.12 and 6a
by the way what about other discrepancies
other comments appreciated

[iLC]

dear navi,
(in response to your 2nd post)

this issuing bank just want to pick a quarrel with you. or they are just joking!
the answer is simply in article 7 which says

a. Provided that the stipulated documents are presented to the nominated bank or to the issuing bank and that they constitute a complying presentation, the issuing bank must honor if the credit is available by:

as far as THIS issuing bank is concerned, i am sure they will say that covering schedule is a part of the document!!

[Navi]

Dear Navi
I understand in your message that your not mentioning discrepancies is not problem
the problem is your indication that you said docs.were sent as presented
may be they stipulated on the L/C docs.must have been checked
but duties are clear on ucp 600 art.12 and 6a
by the way what about other discrepancies
other comments appreciated

Dear Metin,
The funny part of the case is that there is no discperancy on the documents. Although we have sent docs. as presented, we had checked them informally just for to warn our customer in case of discrepancies. But they were complying and perfect. Here the issuing bank raised discrepancy for not mentioning unexisting discrepancies with their MT734. But later via their MT799 they claim that we should not send docs as presented and state that each negotiation (which we didn't ) recorded on tle LC.

Dear ILC,
The issuing bank, informed us of acceptance of documents and will deduct commission. I will reject ones more quoting article 7 as you stated. Here my problem is not the commission. We often receive LCs from that bank and sometimes confirm them. Now, I will be anxious about future transactions with that bank.

Thanks for yr helpful comments

[21vita]

Dear friends,
.
IBut, issuing bank insisted that it was a discrepancy, saying on their message that we did not state "documents have been negotiated in conformity with the lc terms and conditions" as per field 78 of MT700 and not certified "negotiations are recorded on the original LC". They added that documents as presented means, without examining and not complying.
.
Regards

the issuing bank is ridiculous,why not disclose its name

[cristiand969]

An issuing bank nominating a correspondent cannot bind that bank to act under their nomination unless the nominated bank agree to act. So , the bla bla with 'documents have been negotiated in conformity with the lc terms and conditions' has no relevance.
A presentation means a presentation of documents required by the credit and not of the covering schedule against terms and conditions of LC.
For your best convenience you can send a message to issuing bank indicating that you have not agreed to act under your nomination and you forwarded docs ON BEHALF OF beneficiary having their instructions to send docs without any scrutinity.
The main problem i guess is a pressure from the applicant not honouring complying presentation.
regards