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How to do with fraud of Irrevocable LC?

Posted by: Jenny | 2016-08-26 16:21:06

Modifying the letter of credit is is no need to agree with exporter, but there are some key terms that cannot be modified, such as whether the credit can be revoked or not.


Even if the irrevocable LC get exporter's consent, it is still not revoked.


Do remember that there is no exact match documents. So if you want to refuse to pay, try to find the substantive discrepancies. But some picky points can not be the dishonor reason, such as misusing a comma.

      

In credit trade,bank is only responsible to check the correctness of the documents theoretically. As long as documents are in conformity with the credit,the bank will pay. 


The negotiated payment refers to that the exporter submitts the full documents to negotiating bank and pass the checking. Then the negotiating bank pays the exporter in advance according to the amount of the credit, and submitts the set of documents to the issuing bank. If there is the claim terms, it can claim after issuing bank claims to the exporter. What the domestic banks mostly do for exporters is not negotiable in the true sense, but the collection, which means to pay after the issuing bank paying the amount of the credit, rather than paid in advance.


If you sign a contract and determine the letter of credit as the payment terms, then the issuing bank can not refuse to pay if the exporter submitted the full set documents to the issuing bank with no discrepancies in the documents and conform to all requirement. The issuing bank can not refuse to pay.


When the issuing banks check, if they found the submitted documents with the discrepancies, they can refuse to pay.


When you open a LC to the exporters, you would carry out an important task - audit the LC. You both should inspect the contract terms and carefully review each final terms. Both sides should reach a final agreement on each term. 


Once you completed the trial, it means that your LC is valid, and you can not revise or revoke the LC within the validity period.


However, if an importer suspect the exporters as malicious fraud, according to the case, the importer can apply the host country's court for an emergency freeze, and require the issuing bank refuse to pay, avoiding the financial losses. And the importer should hand out valid evidence within a certain period, or the it will be thawed. You can consult the specific legal persons.


There are two methods:


1 Inform customers to change the LC and change the notifying bank to your designated bank;


2 Not change the letter of credit and surrender documents to the local ICBC.


Tags: L/C, Bank, Customer, Trade Skills

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