Case Studies on

Documentary Credit

President

Abdul Monem
Vice
Dutch-Bangla Bank Ltd.

Case Studies on
Documentary Credit
Case-1
Applicant, in his application to issue a
Letter of Credit, did not mention the
name of an Advising Bank. Issuing Bank
issued a LC and chose its Correspondent
Bank on its own to advise the credit. The
Correspondent Bank neither advised the
Credit to the beneficiary nor informed the
Issuing Bank the LC . Which of the
following statement is true?

Case Studies on
Documentary Credit
A)
B)
C)

Issuing Bank is responsible

Advising Bank is responsible
Applicant is responsible

Which of the following answer is true?

1. A
2. B
3. C

Case Studies on
Documentary Credit

Answer

2. B

Case Studies on
Documentary Credit
Case-2

ABC Bank Dhaka opened a LC for USD

100,000/- in favour of supplier in China for
import of Capital Machinery . On scrutiny
of shipping documents ABC Bank detected
some discrepancies (late shipment, late
presentation etc). The applicant of LC
agrees to accept the documents and pay
despite the discrepancies. ABC Bank can
release payment against the discrepant
documents?

Case Studies on
Documentary Credit
Answer
ABC Bank Dhaka shall inform the
beneficiarys bank stating that The
documents are acceptable despite the
discrepancies, but our central bank s
exchange control regulation prohibits us
to release payment until the goods are
cleared from the port. Therefore, we shall
release payment to you after clearence of
the goods.

Case Studies on
Documentary Credit
Case-3

Red Bank opened a LC for USD 10,000/- in favor of

supplier in Japan for import of 10 M. Tons fish
meal. The expiry date of the LC was Sunday,22nd
July but no latest date of shipment was stipulated.
Red Bank received documents mentioning goods as
10.30 M. Tons fish meal. Red Bank also detected
that presentation of documents was made on
Monday, 23rd July. Red Bank refused to accept
documents stating that documents were discrepant
( goods shipped excess and late presentation). The
negotiating bank protested and insisted that
documents were presented as per LC terms. What
is the position of Red Bank?

Case Studies on
Documentary Credit

Answer
A tolerance of 5% more or 5% less than
the quantity allowed unless The LC
stipulates the quantity of the goods must
not exceed or reduced provided that
amount of drawings does not exceed the
LC amount.
When the expiry date of LC or the last day
of presentation falls on a non business
day, the documents can be presented on
the next business day.
There is no scope to reject the documents.

Case Studies on
Documentary Credit
Case-4

Green Bank opened a LC for USD

100,000/- in favor of supplier in

Indonesia for import of cement. Green
Bank received the shipping documents
and it was detected that the bill of
lading is dated five days prior to the
date of opening of LC. The applicant
refused to accept the documents. Will
Green Bank settle the transaction?

Case Studies on
Documentary Credit

Answer
As per Article 14(i) of UCP 600 :
Unless otherwise stipulated in the LC,
bank will accept a document may be
dated prior to the issuance date of
the credit, but must not be dated
later than its date of presentation.
The applicant can not refuse to pay.

Case Studies on
Documentary Credit

Case-5
An L/C calls for a certificate of
origin from a local chamber of
commerce. The product is of foreign
origin. Does local chamber of
commerce mean local where the
beneficiary is or local where the
product originates?

Case Studies on
Documentary Credit
Answer

The answer to this question lies in the

content of an interpretation provided in
article 3 of UCP 600. Therein it is stated
"Terms such as 'first class', 'well known',
'qualified', 'independent', 'official',
'competent' or 'local' used to describe the
issuer of a document allow any issuer except
the beneficiary to issue that document."
Applying this interpretation in the context of
this query, any chamber of commerce may
issue the certificate of origin.

Case Studies on
Documentary Credit
Case-6
Irrevocable confirmed, deferred payment letter of
credit ("L/C") available by 90 days deferred payment
at the counters of Confirming Bank (CB), subject to:
UCP 600.
CB purchased the deferred payment undertaking
resulting from documents presented in full conformity
with the terms and conditions of the L/C and effected
payment to the beneficiary on a without recourse
basis.
The Issuing Bank (IB) confirmed, by authenticated
SWIFT, the acceptance of documents and the
remittance of funds with a value maturity date. One
day before the maturity date, IB informed the CB in
subsequent authenticated SWIFT message as :
"Please be informed that as per court order payment
of this credit has been stopped."

Case Studies on
Documentary Credit
Answer
The general principle, as stated in the
conclusion to ICC Opinion R 519, is that
local law will prevail over the transaction.
However, the issuing bank should seek to
resist such an injunction in order to
preserve the integrity of its credit and the
UCP. It must be expected that the issuing
bank will seek to have the injunction
removed by referring the court to the
appropriate articles of UCP 600 and the
terms and conditions of the credit.

Case Studies on
Documentary Credit

Case-7
An applicant informed the LC issuing
bank that the goods were rubbish
and asked the issuing bank to freeze
payment under a DC subject to UCP
600 due to trade frauds although the
documents presented were all
compliant.
Should the issuing bank follow the
instruction from the applicant?

Case Studies on
Documentary Credit

Answer

The issuing bank should not follow

the instruction from the applicant.

As per Article 5 of UCP 600:

Banks deal with documents and not

with goods, services or performance
to which the documents may relate.

Case Studies on
Documentary Credit
Case-8
An irrevocable confirmed documentary
credit can not be amended or cancelled
without the agreement of the:
A) Beneficiary and applicant only.
B) Confirming bank and issuing bank.
C) Applicant, confirming bank and issuing
bank.
D) Beneficiary, confirming bank and
issuing bank.

Case Studies on
Documentary Credit
Answer

D) Beneficiary, confirming bank and

issuing bank.

Case Studies on
Documentary Credit
Case-9

Which of the following documents

MUST be signed?
A) Packing list.
B) Certificate of origin.
C) Commercial invoice.
D) Weight specification.

Case Studies on
Documentary Credit
Answer

B) Certificate of origin.

Case Studies on
Documentary Credit
Case-10

A credit requires an 'invoice' without further

definition. Which of the following MUST be
considered a discrepancy? An invoice:
A. which is not signed.
B. identified as a tax invoice.
C. made out in a different currency to the
credit.
D. issued for an amount in excess of that
permitted by the credit.

Case Studies on
Documentary Credit

Answer

C. made out in a different currency to

the credit.

Case Studies on
Documentary Credit
Case-11
A documentary credit advised to a beneficiary and
payable at sight calls for documents to include an
invoice made out in the name of the applicant.
Documents presented to the negotiating bank by the
beneficiary include a customs invoice but no
commercial invoice. All other terms and conditions have
been met. What action should the negotiating bank
take?
A. Reject the documents as non-complying.
B. Refer to the issuing bank for authority to pay.
C. Return the documents for amendment by the
beneficiary.
D. Pay the documents as fully complying with the
terms of the credit.

Case Studies on
Documentary Credit

Answer
D. Pay the documents as fully complying
with the terms of the credit.

Case Studies on
Documentary Credit
Case-12
A documentary credit for USD 150,000 calls for a full
set of bills of lading and an insurance certificate to
cover all risks. The bill of lading presented indicates an
on board date of 15 December. Which of the following
insurance documents are acceptable?
1. Policy for USD 185,000.
2. Certificate dated 17 December.
3. Declaration signed by a broker.
4. Certificate subject to a franchise.
A) 1 and 2 only.
B) 1 and 4 only.
C) 2 and 3 only.
D) 3 and 4 only.

Case Studies on
Documentary Credit
Answer

B) 1 and 4 only.

Case Studies on
Documentary Credit
Case-13

1.
2.
3.
4.

Which of the following statements relating to the insurance

requirements, as specified, are correct?
An insurance certificate would be acceptable in lieu of an
insurance policy.
An insurance document stating that certain risks had been
excluded may be acceptable.
The insurance document will need to show claims, if any,
payable in Brazilian currency.
Insurance cover to a minimum of 110% of the invoice value
would be acceptable.
A.
1 and 3 only.
B.
1 and 4 only.
C.
2 and 3 only.
D.
2 and 4 only.

Case Studies on
Documentary Credit

Answer
D.

2 and 4 only.

Case Studies on
Documentary Credit
Case-14

A seller has entered into a contract with

an overseas buyer to ship goods on CPT
basis. Shipment will be made from the
sellers warehouse to port by trucks and
from the port to buyers country by sea.
Seller will use two different carriers (one
for road and another for sea) to effect the
shipment. Which of the following
statements is correct?

Case Studies on
Documentary Credit
a)
b)
c)

d)

Seller must pay the freight charges of

the first carrier only.
Seller must pay the freight charges of
both carriers.
Risk of loss / damage during voyage is
transferred to the buyer when seller
delivers the goods to the first carrier.
Risk of loss / damage during voyage is
transferred to the buyer when the goods
are delivered to the second carrier by
the first carrier.

Case Studies on
Documentary Credit
Which of the following answer is correct:
1.
2.
3.
4.

A
B
A
B

and
and
and
and

C
C
D
D

Case Studies on
Documentary Credit

Answer
2. B and C

Case Studies on
Documentary Credit
Case-15

Moon Bank, Dhaka issued a LC for USD 90,000/in favor of a beneficiary. Beneficiary presented the
documents to LC Issuing Bank through Star Bank.
Upon receipt of documents, Moon Bank examined
the documents and detected a discrepancy Late
Presentation. Discrepancy referred to applicant
but the applicant did not waive the discrepancy
and rejected the documents. Moon bank informed
Star Bank the rejection of documents due to Late
Presentation and indicating that Moon Bank is
holding the documents at the risk and disposal of
Star Bank. Subsequently the applicant requested
Moon Bank that in view of the relationship with
supplier they want to accept the documents.

Case Studies on
Documentary Credit
The applicant also instructed Moon Bank to release
payment. Moon Bank released the payment under
intimation to Star Bank and delivered the
documents to applicant with due endorsement.
Upon receipt of intimation, Star Bank informed
Moon Bank that the beneficiary re-sold the goods
to another buyer in Moon Banks country at higher
price i.e USD100,000/-. Star Bank also informed
Moon Bank that the documents were kept under
disposal of Star Bank till further instruction and
Moon Banks act in releasing documents was
unauthorized. Star Bank demanded USD 100,000/for final settlement. Meanwhile, the applicant
cleared the goods from the port.
What is the position of Moon Bank?

Case Studies on
Documentary Credit

Answer
Since the documents were being held
at the disposal of Star Bank, Moon
Bank was responsible for releasing
the documents to the applicant
without the consent of Star Bank.
Moon Bank has to make payment of
USD 100,000/- as demanded by Star
Bank for settlement.

Case Studies on
Documentary Credit
Case - 16
A documentary credit issued subject to UCP 600 calls for
"Beneficiary's certificate along with relevant courier receipt
certifying that one set of non-negotiable documents have
been sent to the applicant within 3 working days after
shipment date".
After presenting the documents to the issuing bank, the
nominated bank received a notice of refusal from the
issuing bank indicating the following discrepancy: "The
presented courier receipt was not signed."
The courier receipt was not signed. It did, however,
include a bar code, and there was no signature space
included on the document. Is the refusal of the issuing
bank correct?

Case Studies on
Documentary Credit
Answer
By requiring a courier receipt and not a copy of a
courier receipt, an original courier receipt was required
according to sub-article 17 (a). As mentioned in ICC
Opinion TA 654rev, which was approved at the April
2008 Banking Commission meeting, an original courier
receipt should be signed. However, the document in
question has no signature space. The structure of a
courier receipt is not governed by the UCP; this is for
each courier company to determine. The ICC Banking
Commission cannot dictate that a signature is required
when the courier company's document does not require
such evidence.
The courier receipt is acceptable.

Case Studies on
Documentary Credit
Case-17
LC states Beneficiary's certificate along
with relevant original/copy/photocopy of
courier receipt certifying that one set of
non-negotiable documents have been sent
to the applicant within three working days
after shipment date.
Documents presented and DHL receipt
does not bear the date of pick-up and the
initial/signature of the courier company.
Is above-mentioned discrepancy justified?

Case Studies on
Documentary Credit
Answer
UCP 600 sub-articles 18 (c) and 14 (d),
The credit required one set of non-negotiable copies of the
documents to be sent to the applicant within three days after the
date of shipment. Whilst this information was to be inserted onto
the beneficiary certificate, proof of compliance would be
evidenced by the date of pick up shown on the courier receipt.
The date of pick up was not evidenced. The credit required the
presentation of a courier receipt (original, copy or photocopy). If
the courier receipt included a space for signature of the courier
company, then this should have been signed. The comments in
relation to signing of the courier receipt apply on the basis that
the presented receipt was an original and not a copy. If a copy
courier receipt is required or allowed, it need not be signed.
The discrepancy is valid.

Case Studies on
Documentary Credit

1.
2.

3.

4.

Case - 18
A documentary credit for USD 1.6 million and subject to UCP 600
was honoured by one Bank in its capacity as nominated bank, but
the documents were rejected by the issuing bank as below:
The address of the applicant quoted in the credit was:
14, ROBINSON ROAD, PORT OF SPAIN, TRINIDAD, W.I."
The credit required that the bills of lading be marked:
"NOTIFY [applicant name] 14, ROBINSON ROAD, PORT OF SPAIN,
TRINIDAD, W.I." ."
The bills of lading presented showed the notify party as:
"[applicant name], 14, ROBINSON ROAD, NEWTOWN, PORT OF
SPAIN, TRINIDAD, W.I."
The issuing bank refused the presentation for the following
reason:
"B/L NOTIFY PARTY ADDRESS NOT EXACTLY AS PER L/C
INCLUDES 'NEWTOWN'.

Case Studies on
Documentary Credit

As per Article of UCP under sub-article 14 (j) allows some

latitude when the address of the [beneficiary and/or]
applicant appear on documents, i.e., that it may be the
same address as that which is stated in the credit or a
different address but within the same country.

From the address shown in the query, there can be no

doubt that the address, whilst not exactly that which is
stated in the credit, is the same. The addition of the
place "Newtown" does not create a different address,
merely an expansion of the address stated in the
credit. Additionally, there would be no conflict under
sub-article 14 (d).
There is no discrepancy.

Case Studies on
Documentary Credit
Case-19
Is a description of the goods required to appear on
the bill of lading? [Company C] Container Shipping
Lines issue bills of lading with a pre-printed clause in
the "Received for Shipment" area with the following
statement regarding the description of the goods:
"Which description the carrier has no reasonable
means of checking and is not part of the BL".
As this states that the description of the goods is not
part of the bill of lading, is this document acceptable:
1. if there is no description contained in this area?
2. if the description appears to be in conflict with the
description in other stipulated documents?

Case Studies on
Documentary Credit
It is general shipping practice that the carrier will
not take responsibility for the description of goods
shown on the bill of lading. Wording such as "said to
contain", "shippers load and count", "particulars
furnished by the shipper, carrier not responsible" or
similar, are common features of bills of lading. The
term and condition, "Which description the carrier
has no reasonable means of checking and is not part
of the BL", is a similar form of wording.
Although sub-article 20 (a) (ii) includes the wording:
"indicate that the goods have been shipped on board
... ", this does not imply that a description of goods
is to appear.

Case Studies on
Documentary Credit
Conclusion
The UCP does not require a goods description to
appear on any document other than the invoice
(sub-article 14 (e) refers). However, it is transport
industry practice that a form of description will
appear, and that description should not conflict with
the description in the credit.
The wording quoted on the bill of lading i.e., "and is
not part of the BL" is similar to terms quoted in
article 26, i.e., 'shipper's load and count' and "said
by shipper to contain".

Case Studies on
Documentary Credit
Case-20
1. LC shows following information:
Place of Taking : South Korea
Port of Loading : Any port in Korea
Port Discharge : Peru Callao
Final Destination
: Lima
Required transport document: Clean on board ocean B/L
2. Presented transport document was an ocean B/L containing following information:
Place of Receipt
: Blank
Port of Loading : Ulsan, Korea
Port of Discharge
: Peru Callao Port
Final Destination
: Lima
1. It seems that the LC meant multimodal transport document. This is because Lima (non-port
place) was shown as the final destination. The LC, however, required ocean B/L as the
transport document.
2. Presented transport document was an ocean B/L covering shipment through to Lima (non-port
place).
Questions:
1. Under the LC terms, what transport document would be presented, multimodal transport
document or ocean bill of lading?
2. Which article of UCP 600 shall be applied in the examination of the B/L, article 19 or article 20?
3. If the required transport document in the LC were a multimodal transport document, would the
presented ocean B/L containing the above information be acceptable?

Case Studies on
Documentary Credit
Given the routing for the shipment as shown in fields 44A,
E, F and B, the credit should have requested the
presentation of a multimodal or combined transport
document (which is designed for use when there are at least
two modes of transport involved) and not a bill of lading
(which is designed for use in port to port shipments).
Although the beneficiary presented a document titled
Ocean Bill of Lading it covered shipment from a South
Korean port (Ulsan) to Lima . The transport document must
be examined under the article that is applicable to the
conditions stated in the credit i.e., article 20. As shipment
was effected from a South Korean port, the absence of any
data in the field titled place of receipt would not be a
reason for refusal.
A document, however named, would be acceptable that
met the conditions stated in the credit.

Case Studies on
Documentary Credit
Case-21
Whether a mistype of the L/C number in a bill of lading is a
discrepancy justifying refusal of payment by an issuing bank and
whether the action by the negotiating bank in sending a revised
document to the issuing bank after receiving the discrepancy notice is
deemed as having accepted the discrepancy notice on the part of the
negotiating bank.
We received the following discrepancy notice from the issuing bank.
The discrepancy notice states: "B/L marked L/C No.7XXXX1/0165/AN
instead of 7XXXX1/0165/4A." [The correct L/C no. in the credit was
stated as 7XXXX1/0165/4N]. The L/C no. in the B/L was mistyped as
AN instead of the correct 4N stated in the credit.
The issuing bank also mistyped the L/C no. as 4A instead of 4N in its
discrepancy notice to the negotiating bank. This shows the issuing
bank how easy it is to mistype one letter in a long L/C number.
All other documents are in order in terms of the L/C number. Is this is
a discrepancy which would justify the issuing bank from refusing
payment? When a nominated bank sends a revised document after
receiving a discrepancy notice, is this action considered as having
accepted the discrepancy notice as valid?

Case Studies on
Documentary Credit
Analysis
As referred to in ICC Opinion R 289, a requirement for
the insertion of a credit number on a document is only to
assist in tracing the documents. Since the documents were
received by the issuing bank and the issuing bank is
applying the presented bill of lading under the correct
credit number, it would seem to be an irrelevance and not
valid grounds for refusal. The fact that the issuing bank
misquoted the credit number would not detract from the
intent of the discrepancy they were intending to highlight.
Conclusion
The misquoting of the credit number on the bill of lading
does not create a reason for refusal.
The fact that a refusal is sent to a nominated bank or a
beneficiary and that it provides a replacement or corrected
document does not, in itself, signify the nominated bank's
or beneficiary's acceptance of the discrepancy.

Case Studies on
Documentary Credit
Case-22

A DC subject to UCP 600 has the

following stipulation: "Purchase
Contract No. 123456 dated 24 July
2007 attached herewith forms an
integral part of this documentary
credit."
Is this stipulation acceptable ?

Case Studies on
Documentary Credit

As per Article 4 of UCP 600

A credit by its nature is a separate
transaction from the sale or other
contract on which it may be based.
Banks are in no way concerned with
or bound by such contract, even if
any reference whatsoever to it is
included in the credit.

Case Studies on
Documentary Credit

Case No. 23
Bank C confirmed an LC issued by Bank I.
The credit was available by drafts drawn
on the confirming bank at "30 days sight"
The beneficiary presented credit compliant
documents to Bank C for negotiation.
Which of the following actions by Bank C
is as per UCP?

Case Studies on
Documentary Credit

A. Send documents to issuing bank and pay the

beneficiary once the issuing bank pays on maturity
date

B. Send documents to issuing bank and request them

to advice the maturity date as only the issuing bank
can determine the maturity date.

C. Pay the beneficiary and send documents to the

issuing bank informing them the maturity date.

D. Inform the beneficiary that you will pay once the

issuing bank accepts the drafts drawn on them

Case Studies on
Documentary Credit

Answer : C

Case Studies on
Documentary Credit

Case No. 24
Your beneficiary client presented
documents under an LC available with any
bank by negotiation. The documents were
found compliant but the beneficiary did
not require negotiation of documents.
Documents were lost in transit (on the
way to the issuing bank.)
Which of the following is TRUE.

Case Studies on
Documentary Credit
A) The issuing bank is liable to pay as the
documents were credit compliant.
B) The issuing bank is not liable to pay
since the documents did not reach their
country.
C) The issuing bank is not liable to pay as
the documents were not negotiated by
your bank.
D) The beneficiary must recreate and
resend all original documents in order to be
paid.

Case Studies on
Documentary Credit

Answer : A

Case Studies on
Documentary Credit
Case No. 25

Documents under a documentary credit, tendered

at the counters of confirming bank are mistakenly
found compliant. The confirming paid to the
beneficiary and forwarded the docs to the issuing
bank. The discrepant documents were also found
to comply with credit terms mistakenly by the
issuing bank too. But the applicant refused to
accept the discrepant documents. In this case,
which of the following statement is correct?

Case Studies on
Documentary Credit

A. The confirming bank is entitled

to receive funds from the issuing
bank.
B. The confirming bank is entitled to
recover funds from the beneficiary.
C. The issuing bank is entitled to
receive funds from the applicant.
D. The issuing bank must not pay to
the confirming bank.

Case Studies on
Documentary Credit

Answer: A

Case Studies on
Documentary Credit

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