TFFE 5th Banking Professional Exam: Case Study

Question 4: As a Head of the International Trade Division of your bank, how would you deal with the following situations under UCPDC-600?

(a) An amendment reduces the LC amount from USD 50,000 to USD 30,000, and the beneficiary fails to notify the advising bank whether they accept or reject the amendment. The beneficiary presents documents for USD 50,000 to the advising bank for negotiation.

Under UCP 600 Article 10(c), the beneficiary’s conduct through presentation of documents can indicate acceptance or rejection of an amendment.

• Here, the beneficiary presents documents for USD 50,000, which is the original LC amount, not the amended amount of USD 30,000.
• Therefore, the presentation indicates rejection of the amendment.
• I would process the documents against the original USD 50,000 LC, provided the documents are otherwise compliant.
• I would also keep a proper record and, where practical, confirm the beneficiary’s intention in writing.

(b) LC requires a certificate of origin in triplicate. If the beneficiary presents a certificate of origin issued in ‘Original’, ‘Triplicate’ and a ‘Copy’ only, the marked duplicate is missing. Is this acceptable?

Yes, it would generally be acceptable, provided the required three copies have been presented and at least one is an original.

• The requirement of “in triplicate” generally means that three copies of the document are required, with at least one being an original.
• The documents do not necessarily have to be specifically labelled “Original”, “Duplicate” and “Triplicate”.
• Therefore, one Original, one Triplicate and one Copy would satisfy the requirement of three documents.
• I would accept the documents if their contents are complete and consistent, because the missing “Duplicate” label alone would not be treated as a discrepancy.

(c) LC states in SWIFT MT 700 field 45A—clothes (80% cotton, 20% polyester) and the commercial invoice shows only clothes.

Under UCP 600 Article 18(c), the description of goods in the commercial invoice must correspond with the description in the LC.

• Here, the LC specifically mentions “clothes (80% cotton, 20% polyester)”, while the invoice only states “clothes”.
• Since the invoice does not mention the specific fibre composition required by the LC, I would treat it as a discrepancy.
• I would inform the exporter about the discrepancy and ask them to amend or reissue the invoice with the required fibre composition.
• Alternatively, I would seek the applicant’s waiver before negotiating the documents.

(d) The exporter has requested you to add your confirmation to an LC.

The exporter alone cannot authorise our bank to add confirmation. Under UCP 600, confirmation requires authorisation or a request from the issuing bank.

• I would inform the exporter that confirmation cannot be added merely on the exporter’s request.
• I would assess the issuing bank’s creditworthiness and our available credit line before accepting any confirmation request.
• If the issuing bank specifically requests or authorises confirmation and the risk assessment is satisfactory, I would consider adding confirmation.
• Until then, I would advise the LC without confirmation and suggest that the exporter request the buyer to arrange the required confirmation through the issuing bank.