Missing Packing List, Late Presentation and an Applicant Waiver
An Indian exporter of cotton yarn presents documents under an irrevocable credit issued by a Dhaka bank and advised through its Mumbai correspondent. The credit is available with any bank by negotiation, expires 21 May, allows partial shipment but requires a packing list, and stipulates presentation within 21 days of shipment. The exporter ships on 25 April and presents to the nominated bank on 20 May. The bill of lading shows freight prepaid and an on-board date of 25 April; the invoice describes the goods as '100% combed cotton yarn, 20s count' while the credit says '100% cotton yarn, 20s combed'; the insurance certificate is dated 27 April for 110% of invoice value; no packing list is presented. The nominated bank negotiates and forwards the documents. The issuing bank receives them on 2 June and sends a refusal on 9 June citing only the missing packing list and the invoice description. The applicant has told the issuing bank it will waive the packing list.
1. Identify which cited items are valid discrepancies, whether the issuing bank's refusal is effective, and what consequence follows from the discrepancies it did not cite.
Read the worked answer
The presentation was made on 20 May against a shipment dated 25 April, which is 25 calendar days later. Since the credit requires presentation within 21 days of shipment, late presentation is a discrepancy. However, the refusal of 9 June cites only the missing packing list and the invoice description.
The missing packing list is a valid discrepancy because the credit expressly requires that document. The invoice description is not a valid discrepancy: UCP 600 sub-article 14(e) requires the goods description in the invoice to correspond with the credit, not to be identical. '100% combed cotton yarn, 20s count' and '100% cotton yarn, 20s combed' describe the same goods and do not conflict.
On timing, the issuing bank received the documents on 2 June and refused on 9 June. Assuming no intervening bank holiday, 9 June is the fifth banking day after presentation, so the refusal is within the maximum period in sub-article 14(b). The refusal must nevertheless state each discrepancy and dispose of the documents in accordance with sub-article 16(c).
The key consequence is preclusion. Because the issuing bank did not cite late presentation in its refusal, it is precluded by sub-article 16(c) from later relying on that discrepancy. It can still rely on the valid packing-list discrepancy. The invalid invoice-description point does not by itself destroy the refusal, but the bank should not treat it as a ground for rejection.
2. Can the applicant's waiver of the packing-list discrepancy compel the issuing bank to pay the nominated bank? Explain the position of the nominated bank and the beneficiary.
Read the worked answer
An applicant waiver does not convert a discrepant presentation into a complying one. Under UCP 600 sub-article 16(b), the issuing bank may, in its sole judgement, approach the applicant for a waiver of discrepancies, but it must still decide within the five banking-day period whether to refuse or release the documents. A waiver is therefore permissive, not mandatory. The bank may accept the waiver and release the documents to the applicant, but it is not obliged to do so merely because the applicant has agreed.
The nominated bank is in a weaker position because it negotiated without confirmation. If the issuing bank validly refuses, the nominated bank has recourse to the beneficiary and can recover the advance with interest. The applicant's waiver does not bind the nominated bank and does not create an obligation on the issuing bank to reimburse it. The beneficiary cannot rely on the applicant's commercial willingness to waive in order to force payment from the issuing bank.
If the issuing bank does decide to act on the waiver, it should obtain the waiver in writing, release the documents only in accordance with the applicant's instructions, and record its decision. If it refuses, it must return the documents or hold them at the presenter's disposal and give notice to that effect. The beneficiary's practical remedy is to correct and re-present if the credit is still available, or to rely on the applicant's separate undertaking outside the credit.
3. What should the exporter change in its document-preparation and presentation process to avoid a repeat of this outcome?
Read the worked answer
The exporter should introduce a pre-presentation compliance check against the credit terms rather than relying on the nominated bank to find errors after negotiation. The checklist should cover the credit's document list, latest shipment date, presentation period, goods description, insurance percentage and any special conditions.
Specifically, the invoice should use a description that mirrors the credit's wording closely enough to avoid argument, even though exact identity is not required. The packing list must be produced whenever the credit calls for it. The presentation date must be diarised from the bill of lading on-board date, not from the invoice date, so that the 21-day period is met. Here, presentation on 20 May was already late and could not be cured by the applicant's waiver.
The exporter should also consider requesting an amendment before shipment if it cannot meet the presentation period, and should ask whether the credit can be confirmed if it wants payment certainty from a bank in its own country. Finally, it should retain a complete copy of the presented set and the courier or transmission record, so that it can respond quickly if the issuing bank raises discrepancies.