TFFE 99th Banking Professional Exam: Case Study

Question 9: As an official of the International Trade Division of your bank, how would you deal with the following situations under UCPDC-600?

(a) Your customer has presented export documents for negotiation under an irrevocable Letter of Credit, but you have found that the commercial invoice is not issued by the beneficiary.

I would treat this as a discrepancy because the commercial invoice should be issued by the beneficiary unless the LC provides otherwise.

• I would inform the exporter about the discrepancy and explain that the documents cannot be treated as a complying presentation.
• I would first check whether the LC is a transferred credit or contains any provision allowing the invoice to be issued by another party.
• If it is a genuine discrepancy, I would seek the applicant’s/issuing bank’s waiver before negotiating.
• If the discrepancy is not waived, the documents may be sent on collection basis or handled under reserve/indemnity, subject to the bank’s policy.

(b) Your foreign correspondent bank has negotiated export documents and debited your Nostro account. But the importer asks you to hold up the payment because the goods that have already reached the Bangladeshi port are inferior in quality to the quality specified in the sales contract.

I would not hold up the LC payment merely because of the importer’s complaint about the quality of the goods. Under UCP 600, banks deal with documents, not with goods.

• I would explain to the importer that the quality dispute is a matter between the importer and exporter under their sales contract.
• If the documents were complying, the bank’s payment obligation is not affected by the physical quality of the goods.
• I would, however, verify that the documents presented to the correspondent bank were complying and that there was no issue of fraudulent documents.
• I would advise the importer to settle the quality claim separately with the exporter through negotiation, inspection, insurance claim where applicable, or legal action under the sales contract.

(c) Your exporter has submitted shipping documents for negotiation after the last date of presentation of documents stipulated in the LC.

A presentation made after the stipulated date is a discrepant presentation under UCP 600. Therefore, I would not treat the documents as complying under the original LC terms.

• I would inform the exporter that the documents were presented late.
• I would seek the applicant’s/issuing bank’s waiver of the late-presentation discrepancy.
• If the waiver is not obtained, I would decline to negotiate the documents under the LC.
• If appropriate, the documents may be sent on collection basis or handled under reserve/indemnity according to the bank’s policy.

(d) Your foreign correspondent bank has asked you to advise a credit to your exporter. The exporter wants you to add your confirmation although the opening bank has not asked you to do so.

I would advise the LC without adding confirmation, because the issuing bank has not requested or authorised our bank to add confirmation.

• I would advise the credit to the exporter according to the correspondent bank’s instruction.
• I would clearly inform the exporter that the LC is being advised without confirmation.
• I would explain that confirmation can be added only when the issuing bank specifically requests or authorises it.
• If the issuing bank later requests confirmation, I would first assess the issuing bank’s creditworthiness and the related risks before deciding whether to add our confirmation.