Righting an Irregular Presentation … with a Twist

During a meeting of bankers this month, a recurring scenario was discussed involving the following relevant details and questions:

1. Beneficiary presented export documents under an LC. The commercial invoice did not indicate any penalty deduction for late shipment as per the credit’s terms and conditions (field 47A). The latest date of shipment was 31 May 2024. On review of presented documents, shipment had occurred 13 June 2024 and documents were sent to the issuing bank on approval basis under the protection of the credit for payment.
2. Document examiner cited discrepancy of “Late shipment”, despite the credit’s clause No. 47A-9 (which states does not make a document discrepant). Instead, should the correct discrepancy be quoted as “Invoice does not show deduction of penalty @ 2.5% as required under clause 47A-9 of the LC”?
3. Is clause 47A-9 adequate to mean that the invoice should show deduction of penalty?
4. Payment was received with a deduction of $X,XXX.00 (Issuing Bank Discrepancy fee $XX.00, Issuing Bank Swift charges $XX.00, Penalty for 13 days (Shipment effected 13 June instead of 31 May 2024 being the last date of shipment) @ 2.50% on $ XXX,XXX.00 = $ X,XXX.00).
5. Is the issuing bank not required to send a refusal notice? Especially, where their LC also stated clause No.47A-7:

“if docs presented under this L/C are found to be discrepant, we shall give our notice of refusal and shall hold docs at the presenter's disposal subject to the following condition: if we have not received the presenter's disposal instructions for the discrepant documents prior to receipt of the applicant's waiver of discrepancies, we shall release the documents to the applicant without notice to the presenter.”