Skip to main content

Navigating Non-Compliant Demands: A Guide to Corrections Under Demand Guarantees

Demand guarantees are crucial instruments in international trade, providing security and assurance to beneficiaries. However, the intricacies of these instruments can sometimes lead to discrepancies and non-compliant demands, causing delays and potential disputes. Fortunately, the International Standard Demand Guarantee Practice (ISDGP) provides clear guidelines on how to rectify such situations. Understanding Non-Compliance A demand is deemed non-compliant when it fails to adhere to the specific terms and conditions outlined in the guarantee. This could range from simple errors in documentation to more substantial deviations from the agreed requirements. When a guarantor identifies a non-compliant demand, they must reject it, triggering a process for potential correction. The Beneficiary's Right to Correct Crucially, the ISDGP acknowledges the beneficiary's right to rectify non-compliance. Even if the guarantee explicitly excludes Article 17(b), the beneficiary is still permit...
Post a Comment

What Beneficiaries Should Do When the Issuing Bank Defaults on L/C Payment

A Letter of Credit (L/C) is a widely used financial instrument in international trade, providing security and assurance to both buyers and sellers. However, there are instances when the issuing bank fails to fulfill its payment obligations, leaving the beneficiary in a challenging situation. In such cases, it is crucial for beneficiaries to be aware of their rights and take appropriate actions to protect their interests. This article aims to guide beneficiaries on what steps they should take when faced with an issuing bank defaulting on L/C payment.

1. Review the L/C Terms:

The first step for beneficiaries is to thoroughly review the terms and conditions of the L/C agreement. Pay close attention to any clauses related to default or non-payment by the issuing bank. Understanding these provisions will help you determine your rights and obligations in case of default.

2. Seek Legal Advice:

Engaging legal counsel experienced in international trade law is essential when dealing with an issuing bank defaulting on L/C payment. They can provide expert guidance on your legal options, rights, and potential remedies available under applicable laws or international conventions.

3. Document Everything:

Maintain a comprehensive record of all relevant documents related to the L/C transaction, including correspondence with the issuing bank, shipping documents, invoices, and any other supporting evidence. These records will be crucial in building your case against the defaulting bank.

4. Notify All Parties Involved:

Inform all relevant parties about the issuing bank's default promptly. This includes notifying your own bank (the advising or confirming bank), as well as any other parties involved in the transaction such as insurers or freight forwarders. Prompt communication ensures that everyone is aware of the situation and can take necessary actions accordingly.

5. Invoke Alternative Dispute Resolution Mechanisms:

Consider utilizing alternative dispute resolution mechanisms such as negotiation, mediation, or arbitration before resorting to litigation. These methods can often lead to faster and more cost-effective resolutions, allowing you to recover your funds without unnecessary delays.

6. File a Claim:

If all attempts at resolution fail, beneficiaries may need to file a claim against the issuing bank. This typically involves initiating legal proceedings in the jurisdiction where the bank is located or where the L/C agreement stipulates. Your legal counsel will guide you through this process and help you present a strong case.

7. Explore Insurance Coverage:

Check if your trade credit insurance policy covers non-payment by an issuing bank. If so, notify your insurer immediately and initiate the claims process. Insurance coverage can provide financial protection and help mitigate losses resulting from the default.

Conclusion:

While an issuing bank defaulting on L/C payment can be a challenging situation for beneficiaries, it is crucial to remain proactive and take appropriate actions promptly. By understanding their rights, seeking legal advice, documenting everything meticulously, notifying relevant parties, exploring alternative dispute resolution mechanisms, filing claims if necessary, and leveraging insurance coverage, beneficiaries can maximize their chances of recovering their funds and protecting their interests in international trade transactions.

exportreview claim against issuing bank under LC


Labels:

Comments

Post a Comment

Popular posts from this blog

The Principle of Independence in Demand Guarantees

Demand guarantees are a common tool used in international trade to provide assurance to the beneficiary that they will receive payment for goods or services rendered. These guarantees are often issued by banks and serve as a form of security for the beneficiary in the event that the applicant fails to fulfill their obligations. One of the key principles governing demand guarantees is the principle of independence. This principle dictates that a demand guarantee is separate and independent from the underlying transaction between the applicant and the beneficiary. In other words, the issuer's obligation to pay under the guarantee is not contingent upon the performance or non-performance of the underlying contract. This principle is enshrined in international standards such as the ICC Uniform Rules for Demand Guarantees (URDG 758), which explicitly state that a demand guarantee is subject only to its terms, whether expressly stipulated in the guarantee itself or incorporated by refere...
Post a Comment
Read more

Mitigating Risks in Transferring Banks under Letters of Credit

 Introduction: When engaging in international trade, letters of credit (LCs) play a crucial role in ensuring secure and efficient transactions. However, the process of transferring the L/C can expose both the transferring bank and the parties involved to certain risks. Mishandling or errors during the transfer can lead to claims and defenses against the transferring bank. In this article, we will explore the potential risks associated with transferring banks under letters of credit and discuss effective strategies to mitigate these risks. Understanding the Risks: 1. Documentation Errors: Incorrect or incomplete documentation can result in discrepancies that may trigger claims against the transferring bank. These errors can include discrepancies in quantity, quality, pricing, or even incorrect shipping dates. 2. Non-compliance with Terms: Failure to comply with specific terms and conditions outlined in the LC can lead to disputes between parties involved. This could arise from non-c...
Post a Comment
Read more

Protesting a bill due to non-payment in D/A collection

Protesting a bill due to non-payment in documentary collection can be a necessary step to mitigate the risk of non-payment by the Importer. Under the terms of documentary collection with delivery document against acceptance, there is always a possibility that the transaction may not work out as expected if the Importer fails to pay on the maturity date. In such cases, the Exporter's Bank, also known as the Remitting Bank, can instruct the Importer's Bank, or Collecting Bank, to protest the bill for non-payment or non-acceptance. However, it is important to note that the Collecting Bank is not obligated to follow these instructions. If the Collecting Bank decides to handle the protest instruction, they may issue a bill note. It is crucial to understand that the specifics of this note may vary depending on different jurisdictions. To note a bill, the Collecting Bank typically sends it to a public notary who will then re-present it to the Drawee (Importer) on the same day it was r...
Post a Comment
Read more

Understanding the Differences between Licenses Issued by OFAC and the Bureau of Industry and Security (BIS)

When it comes to international trade and commerce, various government agencies play a crucial role in regulating and overseeing transactions involving sensitive goods or countries. The Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) are two such agencies within the United States government. This article aims to shed light on the key differences between licenses issued by OFAC and BIS, providing a comprehensive understanding of their respective roles in facilitating lawful trade. 1. Purpose and Scope: The primary distinction between OFAC and BIS lies in their areas of focus. OFAC primarily administers economic sanctions programs, while BIS focuses on export controls. OFAC licenses are typically issued to authorize transactions involving sanctioned countries or individuals, whereas BIS licenses pertain to exports of controlled goods, technologies, or services. 2. Jurisdiction: OFAC operates under the U.S. Department of Treasury, while BIS falls under...
Post a Comment
Read more

Detention in International Trade: Understanding the Holding or Delay of Goods/Cargo at Ports, Terminals, or Customs Facilities

In the realm of international trade, the smooth flow of goods and cargo is crucial for businesses to meet customer demands and maintain profitability. However, delays and detentions at ports, terminals, or customs facilities can disrupt supply chains, leading to financial losses and strained relationships between trading partners. This article aims to shed light on the concept of detention in international trade and explore its causes, impacts, and potential solutions. Understanding Detention in International Trade Detention refers to the holding or delay of goods or cargo beyond the agreed-upon timeframes at ports, terminals, or customs facilities. It occurs when shipments are unable to proceed due to various reasons such as administrative issues, documentation discrepancies, inspections, security concerns, congestion, labor disputes, or even natural disasters. Causes of Detention 1. Administrative Issues: Delays can occur due to administrative inefficiencies such as incomplete paperw...
Post a Comment
Read more

Bank Guarantees: Understanding the Charges and Key Considerations

Introduction A bank guarantee is a financial instrument issued by a bank on behalf of a customer (applicant) to a third party (beneficiary). It assures the beneficiary that the applicant will fulfill a specific contractual obligation. If the applicant fails to meet their obligation, the beneficiary can claim payment directly from the issuing bank.   Types of Bank Guarantees Bank guarantees are issued for various purposes and can take different forms, including: Performance Guarantees: Ensure the fulfillment of contractual obligations, such as construction contracts or supply agreements.     Bid Guarantees: Assure that the applicant will enter into a contract after winning a bid.     Advance Payment Guarantees: Protect the beneficiary in case the applicant fails to deliver goods or services after receiving an advance payment.     Payment Guarantees: Guarantee the payment of a specific sum to the beneficiary under certain conditions.   ...
Post a Comment
Read more

The Electronic Trade Documents Act 2023: Revolutionizing Key Documents in the UK

Introduction In an era where digitalization is transforming every aspect of our lives, it comes as no surprise that the world of trade and commerce is also undergoing a significant shift. The United Kingdom has taken a bold step towards embracing this change by introducing the Electronic Trade Documents Act 2023. This groundbreaking legislation aims to revolutionize key documents used in trade transactions, such as bills of exchange, promissory notes, bills of lading, ship's delivery orders, warehouse receipts, mate's receipts, marine insurance policies, and certain cargo insurance certificates. In this article, we will delve into the implications and benefits of this act for businesses and the wider economy. 1. Bills of Exchange Traditionally used as a means of payment in international trade transactions, bills of exchange are negotiable instruments that allow for deferred payment. The Electronic Trade Documents Act 2023 enables these documents to be created, signed, transferr...
Post a Comment
Read more
Verification: 1d2ab820366ee419