Name: Shoury morgan

Dear Sirs,

I'm a trader working in the field of textile

I received unconfirmed LC from one country to export garments for $100000

I prepared documents required and sent to my bank to check it carefully and if there is discrepancies ask the issuing bank to obtain applicant approval first before submitting the original documents.

My bank advised that credit is unconfirmed and they sent documents without checking i.e. for collection.

Am I right to check documents first not to let applicant to refuse same.

How I could protect my goods from refusal and returning.

Please advice

Thank you in advance 

Dear Shoury Morgan,

Thanks for using the single window.

It is a good question.

First of all I would like to quote UCP 600 sub-article 12(a) for you:

Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

What this sub-article says is that a non-confirming bank has no obligation under the LC – unless agreed to. Therefore your banker is “allowed” to merely forward the document without examining them.

Note however that practice differ much here. In the region where I work it is common that the advising banks (regardless if being a confirming bank) examine the documents – in order to cure any discrepancies before they reach the issuing bank.

If the documents are not examined at your end – they may be refused by the issuing bank if they contain discrepancies – and if those are not waived by the applicant – they may return the documents to you (and you will need to figure out what to do with the goods).

My best advice to you, is to check if there is another bank in your country that would be willing (subject to a fee) to examine the documents. Check also your LC for the availability:

1. Is it (only) available with the issuing bank, or

2. Is there nominated a named bank, or

3. Is it available with any bank?

Often banks would be more comfortable examining documents if they are nominated under the LC.

In you query you mentioned that they would send the documents “for collection”. I would also advise you to check what they mean by that exactly. If they are sending them under the ICC Rules for Collections (URC 522) – then you should consider carefully whether or not to accept it.

It is important that the documents are forwarded to the issuing bank under the LC – regardless if they contain discrepancies or not. For example the issuing bank is precluded from claiming that the documents are not complying with LC terms if they have not provide a notice of refusal after a maximum of five banking days following the day of presentation.

Such rule would not apply if they are clearly sent as a collection.

I hope this helps you.

Best regards

Kim Christensen