Compliance documents or now known as compliance presentation is still be the nucleus in making a payment by banks. Article 2 states that “…Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation”
Undertaking of the bank to pay is absolutely based on documents that comply with the terms and conditions of the LC. It is therefore, an obligation of the banks; the nominated bank, issuing bank or confirming bank, if any, to examine and check on the basis of the documents alone, whether or not they appear on their face to constitute complying presentation. This includes type of documents, number of copy, original or photocopies, issuer of a document as well as the data in a document to ensure they are consistent with each other and not to conflict with the LC. However, this does not include documents presented but not required by the LC.
What happens when the presentation is found not in conformity?
Article 16(a) says that “…when a nominated bank acting on its nomination, a confirming bank, if any or the issuing bank determines that a presentation does not comply, it may refuse to honour or negotiate”.
Article 16(b) further states “when an issuing bank determines that a presentation does not comply, it may in its sole judgment approach the applicant for a waiver…”
In the event the documents are discrepant, the bank can either:
1. refuse to take up the documents or;
2. refer to applicant for a waiver
These two options are still maintained in UCP 600 and has been the practiced for banker worldwide. What UCP 600 differs greatly from UCP 500 is the manner of refusal of discrepant documents (article 16(c)(iii)(b)).
Previously, in UCP 500, refusal of discrepant documents should not be subjected to or pending acceptance of a waiver from the buyer. This was not construed as a refusal. Refusal of this manner is considered as a bad practice and strongly discouraged.
However, drafters of UCP 600 now has interpreted differently where refusal of discrepant documents can be subjected to or pending acceptance of a waiver from the buyer. Not only this, the seller, now is given the privilege to issue instruction on how the documents should be disposed off (articles 16(c)((iii)(a), (b) and (d)). It is understandable, after going through all the articles in UCP 600, it is drafted with a main focus given to the users; traders, transport operators, insurance companies etc. with a view to reduce discrepant documents and upholding a concept of ‘payment mechanism’ of the LC. This article in particular, is seen to provide a safety cushion and more comforting to the seller instead of the buyer.
Undertaking of the bank to pay is absolutely based on documents that comply with the terms and conditions of the LC. It is therefore, an obligation of the banks; the nominated bank, issuing bank or confirming bank, if any, to examine and check on the basis of the documents alone, whether or not they appear on their face to constitute complying presentation. This includes type of documents, number of copy, original or photocopies, issuer of a document as well as the data in a document to ensure they are consistent with each other and not to conflict with the LC. However, this does not include documents presented but not required by the LC.
What happens when the presentation is found not in conformity?
Article 16(a) says that “…when a nominated bank acting on its nomination, a confirming bank, if any or the issuing bank determines that a presentation does not comply, it may refuse to honour or negotiate”.
Article 16(b) further states “when an issuing bank determines that a presentation does not comply, it may in its sole judgment approach the applicant for a waiver…”
In the event the documents are discrepant, the bank can either:
1. refuse to take up the documents or;
2. refer to applicant for a waiver
These two options are still maintained in UCP 600 and has been the practiced for banker worldwide. What UCP 600 differs greatly from UCP 500 is the manner of refusal of discrepant documents (article 16(c)(iii)(b)).
Previously, in UCP 500, refusal of discrepant documents should not be subjected to or pending acceptance of a waiver from the buyer. This was not construed as a refusal. Refusal of this manner is considered as a bad practice and strongly discouraged.
However, drafters of UCP 600 now has interpreted differently where refusal of discrepant documents can be subjected to or pending acceptance of a waiver from the buyer. Not only this, the seller, now is given the privilege to issue instruction on how the documents should be disposed off (articles 16(c)((iii)(a), (b) and (d)). It is understandable, after going through all the articles in UCP 600, it is drafted with a main focus given to the users; traders, transport operators, insurance companies etc. with a view to reduce discrepant documents and upholding a concept of ‘payment mechanism’ of the LC. This article in particular, is seen to provide a safety cushion and more comforting to the seller instead of the buyer.
No comments:
Post a Comment