L8 on UCP600 Article 07 April 2018 intake.pdf - UCP 600 Article 7 Issuing Bank Undertaking a Provided that the stipulated documents are presented to the

L8 on UCP600 Article 07 April 2018 intake.pdf - UCP 600...

This preview shows page 1 out of 36 pages.

You've reached the end of your free preview.

Want to read all 36 pages?

Unformatted text preview: UCP 600 Article 7: Issuing Bank Undertaking 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 i. honour if the credit is available by: sight payment, deferred payment or acceptance with the issuing bank; ii. sight payment with a nominated bank and that nominated bank does not pay; iii. deferred payment with a nominated bank and that nominated bank does not incur its deferred payment undertaking or, having incurred its deferred payment undertaking, does not pay at maturity; 2 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking a. Issuing bank undertaking subject to condition that (i) All stipulated documents are presented (ii) Presented to the nominated bank or to the issuing bank and (iii) Presentation constitute a complying presentation Under the above scenario, the issuing bank must honour. 3 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking How could issuing bank discharge it’s undertaking honour a. The issuing bank must i. sight payment, deferred payment or acceptance with the issuing bank; if the credit is available by: 4 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking How could issuing bank discharge it’s undertaking a. The issuing bank must honour if the credit is available by: ii. sight payment with a nominated bank/Confirming bank and that nominated bank/Confirming bank does not pay; 5 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking How could issuing bank discharge it’s undertaking a. The issuing bank must honour if the credit is available by: iii (a). deferred payment with a nominated bank/Confirming Bank and that nominated bank/Confirming Bank does not incur its deferred payment undertaking iii (b). deferred payment with a nominated bank/Confirming Bank and that nominated bank/Confirming Bank incurred its deferred payment undertaking but does not pay at maturity; 6 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking 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 honour if the credit is available by: iv. acceptance with a nominated bank and that nominated bank does not accept a draft drawn on it or, having accepted a draft drawn on it, does not pay at maturity; v. negotiation with a nominated bank and that nominated bank does not negotiate. 7 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking How could issuing bank discharge it’s undertaking a. The issuing bank must honour if the credit is available by: iv (a). acceptance with a nominated bank/Confirming Bank and that nominated bank/Confirming Bank does not accept a draft drawn on it iv (b). acceptance with a nominated bank/Confirming Bank and that nominated bank/Confirming Bank accepted a draft drawn on it but does not pay at maturity; 8 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking How could issuing bank discharge it’s undertaking a. The issuing bank must honour if the credit is available by: v. negotiation with a nominated bank/Confirming Bank and that nominated bank/Confirming Bank does not negotiate. 9 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7:Issuing Bank Undertaking a. (i) issuing bank must honour if the credit is available by sight payment, deferred payment or acceptance with the issuing bank. F41D: Available with,….By : Issuing Bank By Sight Payment F41D: Available with,….By : Issuing Bank By Deferred Payment F41D: Available with,….By : Issuing Bank By Acceptance 10 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7:Issuing Bank Undertaking a. (ii) the issuing bank must honour if the credit is available by sight payment with a nominated bank and that nominated bank does not pay. F41D: Available with,….By : Any Bank of China By Sight Payment 11 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Issuing Bank MUST Honour under conditions of : o All stipulated documents are presented o Presented to the nominated bank or Confirming Bank or Presented to the issuing bank o Constitute a complying presentation 12 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Issuing Bank’s Honour Manner:  Sight payment, deferred payment and acceptance if available with the issuing bank.  Sight payment, deferred payment, acceptance & Negotiation with the nominated bank and the nominated bank don’t act as a nominated bank or don’t completed the honour mechanism i.e. give deferred payment undertaking but not pay at maturity or give acceptance but not pay at maturity. 13 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Issuing Bank is liable to honor even when documents are presented to the nominated bank/Confirming Bank.. 14 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Is the Issuing Bank liable to honor when documents are presented to the nonnon-nominated bank?? If the answer is ‘Yes’ , why? If the answer is ‘No’ , why? If the answer is ‘Yes’ , under what condition? If the answer is ‘No’ , what will be the fate of docs? 15 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking b. An issuing bank is irrevocably bound to honour as of the time it issues the credit. credit. 16 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Binding effects of issuing bank commences…. An issuing bank’s irrevocable bindings to honour commences while issues the credit. 17 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Issuing Bank issued a credit favouring a beneficiary in country of China and sent the same to Advising Bank for advising. On the following day, Issuing bank sent a message to Advising Bank for cancellation of the credit. The credit still remained unadvised at the counter of Advising Bank. Which of the following statement is correct? A. Beneficiary's agreement to the cancellation is not required since the credit hasn’t been advised. B. Beneficiary's agreement to the cancellation is required even though the credit hasn’t been advised. Answer: (B) [due to UCP600 Article 7(b)] 18 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] A credit is issued at 10 AM on 1st January 2018. What is the liability of the issuing bank at 10 AM on 1st January 2018, if the credit is advised in meantime? A credit is issued at 10 AM on 1st January 2018. What is the liability of the issuing bank at 10 AM on 1st January 2018, if the credit is yet to advise in meantime? 19 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking c. An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank. Reimbursement for the amount of complying presentation under a credit available by acceptance or deferred payment is due at maturity, whether or not the nominated bank prepaid or purchased before maturity. 20 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] UCP 600 Article 7: Issuing Bank Undertaking c. ……………………………………………… …………………………………………………. An issuing bank's undertaking to reimburse a nominated bank is independent of the issuing bank's undertaking to the beneficiary. 21 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Two fold undertaking of issuing bank An issuing bank’s two fold irrevocable undertaking through issuing the credit whether there is a reimbursing clause or not: • To Beneficiary: for Honour • To Nominated Bank: for reimbursement 22 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] An issuing bank’s irrevocable undertaking to reimburse the nominated bank depends on the following: 1. Honoured a complying presentation or Negotiated a complying presentation 2. forwarded the documents to the issuing bank 3. Reimbursement under a credit available by acceptance or deferred payment is due at maturity. 23 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Issuing Bank’s Undertaking to the nominated bank(s)  An issuing bank undertakes to reimburse a nominated bank that has acted on its nomination.  An issuing bank's undertaking to the nominated bank is independent of the undertaking given to the beneficiary.  Even if the nominated bank has paid in advance under a credit available by acceptance or deferred payment, the issuing bank has no obligation to pay before maturity. 24 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Both (two fold undertaking) are Independent from each other…. An issuing bank’s two fold irrevocable undertaking through issuing the credit. Independent from:  Undertaking to Beneficiary for Honour  Undertaking to Nominated Bank for reimbursement 25 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Beneficiary simultaneously sent one set of compliant documents to the issuing bank and another set to the nominated bank. bank. Q1: Is the issuing bank liable to pay? Q2: If nominated bank has already released payment against the same drawing, is the issuing bank liable to reimburse the nominated bank? Q3: If nominated bank and issuing bank both already released payment to beneficiary against the same drawing, is the issuing bank still liable to reimburse the nominated bank again? 26 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Beneficiary simultaneously sent one set of compliant documents to the issuing bank and another set to the nominated bank. bank. What will be the measures to address the problem? problem? 27 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Does a nominated bank have the right of recourse from the beneficiary under a sight payment/deferred payment/acceptance credit? When a nominated bank has paid, accepted a draft or incurred a deferred payment undertaking it is without recourse to the beneficiary. Exceptions may be where the bank and beneficiary have entered into specific agreements regarding recourse. 28 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Case: -LC is available with ABC Bank by acceptance - Drafts are to be drawn on ABC Bank - Documents presented and ABC Bank acts upon its nomination and accepts the draft drawn on it - Issuing bank fails to pay on maturity date due to country risk Q1: Is the nominated bank bound to pay the beneficiary? Q2: Will the nominated bank have recourse to the beneficiary if it has prepaid under the draft? 29 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] By reference to the nominated bank acting on its nomination, it is inferred that the nominated bank did not confirm the credit. On this basis, the nominated bank, at the time of presentation of documents was able to decide whether or not they would accept the draft. Having chosen to accept the draft the nominated bank has created an undertaking to honor on the due date. In answer to question 1, the answer is yes due to their accepting draft. The acceptance of the draft is without recourse to the extent that the acceptor cannot decline to honor on the due date and if it has discounted the proceeds earlier is not able to claim the funds back from the beneficiary. By accepting the draft, the nominated bank took the bank, country and documentary risk of the transaction. 30 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Case: Case: The acceptance advice we receive under deferred payment LC’s sometimes show that documents have been accepted by the applicant “ to mature on dd/mm/yyyy”. What is the difference between the acceptance under a deferred payment LC and the acceptance under an acceptance/negotiation LC? Is the acceptance under a deferred payment LC a bank’s acceptance? Firstly, a bank should not accept an advice that states “ accepted by the applicant”. The taking up of documents should be an act of the issuing bank either through their determining that the documents comply or by them accepting a waiver issued by the applicant in respect of discrepancies in the documents. An advice of taking up documents should be no different if it is under a deferred payment, acceptance, negotiation or payment credit. 31 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] 32 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] If a credit stipulated “available with issuing bank by negotiation” may another bank or banks negotiate the documents under the credit? Suggested Answer: Answer: A credit can only be made available with an issuing bank by honor i.e. payment, deferred payment or acceptance. Under the definition of negotiation, a negotiation credit is a credit that is available with a nominated bank either with a draft drawn on a party other than the nominated bank i.e., the issuing bank or reimbursing bank, or no draft. For another bank to negotiate, it would require the credit to indicate that it was available with that bank or available with any bank. 33 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] If a confirming bank determines a presentation is complying and forwards the documents to the issuing bank, does the issuing bank have the right to hold an opposite view on the documents and refuse to pay the confirming bank? Suggested answer: answer: The issuing bank undertaking is to honor documents that constitute a complying presentation. If the issuing bank determines that the documents do no comply, then they are under no obligation to honor no matter whether a confirming bank or nominated bank determined that in their opinion, they did comply. 34 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Regarding sub-article 7(b) and reference to “as of the time it issues the credit”. In case the SWIFT or TELEX message is garbled or the mailed credit is missing, is the credit still valid and the issuing bank still bound? Suggested answer: The issuing bank is bound as of the time it issues the credit. The fact that the credit is garbled or lost in transit does not change the position that the credit was issued and the issuing bank was bound as of that time. 35 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Under a deferred payment credit, may the issuing bank refuse to pay (reimburse) if a court injunction has been issued? Suggested answer: Clearly, an issuing bank cannot ignore a court injunction. 36 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] Can a draft drawn on a confirming bank if a credit is available with it by negotiation? What if the credit is available with it by sight payment, deferred payment or acceptance? Suggested answer: If a draft drawn on the confirming bank, it can only be available with them by payment (sight draft) or acceptance (usance draft). Under a credit available by negotiation the draft must be drawn on a bank other than the nominated (confirming) bank. Under a deferred payment credit no draft should be requested. 37 CDCS MENTOR, MENTOR Md. Mohiuddin; Cell: 01716308384; e-mail: [email protected] ...
View Full Document

  • Winter '20
  • mohammad

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture