TFFE 97th Banking Professional Exam: Case Study

Question 9 (a) An LC is confirmed and is available with the confirming bank. The beneficiary presents the documents to the confirming bank within the validity of the LC. The issuing bank wrongly dishonours the documents after the LC has expired. Should the confirming bank honour the presentation? Explain.

Yes. The confirming bank should honour the presentation if the documents were presented within the LC validity period and comply with the LC terms.

• Under UCP 600 Article 8, the confirming bank has an independent undertaking to honour a complying presentation.
• The issuing bank’s wrongful dishonour does not cancel the confirming bank’s obligation.
• Since the documents were presented before the LC expired, expiry after presentation does not affect the beneficiary’s rights.
• The confirming bank should make payment to the beneficiary.
• It may later claim reimbursement from the issuing bank.

(b) An LC requires a “Certificate of Origin issued by a competent party.” The beneficiary issues the Certificate of Origin. Should you accept it? Explain.

Yes. The Certificate of Origin should be accepted if it complies with the LC terms.

• The LC does not mention any specific issuing authority.
• Under ISBP 745, the beneficiary may issue the certificate unless the LC requires a third party.
• The beneficiary can be treated as a competent party.
• The certificate must be signed, dated and consistent with other documents.
• Therefore, it should not be treated as a discrepancy.

(c) A Bangladeshi exporter receives advance payment from a foreign buyer but fails to export the goods. Bangladesh Bank asks the local bank to arrange shipment or refund the advance. The bank replies that export performance is not its responsibility. Do you agree? Explain.

No. I do not agree with the bank’s reply.

• An Authorized Dealer (AD) bank is responsible for monitoring export transactions.
• The bank must ensure that goods are exported or the advance payment is refunded.
• It must report and follow up through the EXP and Bangladesh Bank reporting system.
• Simply denying responsibility is not acceptable under Bangladesh Bank regulations.
• The bank should work with the exporter to complete the shipment or refund the advance.

(d) An export bill is negotiated after shipment. The insurance policy is dated two days after shipment but clearly states that insurance coverage started on the shipment date. The issuing bank refuses the documents. Is the refusal justified? Explain.

No. The issuing bank’s refusal is not justified.

• Under UCP 600 Article 28(e), an insurance document may be issued after the shipment date.
• The important requirement is that the insurance cover must be effective on or before the shipment date.
• In this case, the policy confirms that coverage started on the shipment date.
• Therefore, the insurance document complies with UCP 600.

The issuing bank should accept the documents and honour the presentation