Article 16

Discrepant Documents, Waiver and Notice

a. When a nominated bank acting on its

nomination, a confirming bank, if any, or the
issuing bank determines that a presentation does
not comply, it may refuse to honour or negotiate.

b. When an issuing bank determines that a

presentation does not comply, it may in its sole
judgement approach the applicant for a waiver of
the discrepancies. This does not, however, extend
the period mentioned in sub-article 14 (b).
K. M. Lutfor Rahman CDCS Presentation
 Article 16
Discrepant Documents, Waiver and Notice

c. When a nominated bank acting on its nomination, a confirming

bank, if any, or the issuing bank decides to refuse to honour or
negotiate, it must give a single notice to that effect to the presenter. The
notice must state:
i. that the bank is refusing to honour or negotiate; and
ii. each discrepancy in respect of which the bank refuses to honour or
negotiate; and
iii. a) that the bank is holding the documents pending further
instructions from the presenter; or
b) that the issuing bank is holding the documents until it receives
a waiver from the applicant and agrees to accept it, or receives further
instructions from the presenter prior to agreeing to accept a waiver; or
c) that the bank is returning the documents; or
d) that the bank is acting in accordance with instructions
previously received from the presenter.
K. M. Lutfor Rahman CDCS Presentation
 Article 16
Discrepant Documents, Waiver and Notice

d. The notice required in sub-article 16 (c) must be

given by telecommunication or, if that is not
possible, by other expeditious means no later than
the close of the fifth banking day following the day
of presentation.
e. A nominated bank acting on its nomination, a
confirming bank, if any, or the issuing bank may,
after providing notice required by sub-article 16 (c)
(iii) (a) or (b), return the documents to the
presenter at any time.

K. M. Lutfor Rahman CDCS Presentation

 Article 16
Discrepant Documents, Waiver and Notice

f. If an issuing bank or a confirming bank fails to

act in accordance with the provisions of this article,
it shall be precluded from claiming that the
documents do not constitute a complying
presentation.

g. When an issuing bank refuses to honour or a

confirming bank refuses to honour or negotiate
and has given notice to that effect in accordance
with this article, it shall then be entitled to claim a
refund, with interest, of any reimbursement made.
K. M. Lutfor Rahman CDCS Presentation
 Article
16(a) When a nominated bank
acting on its nomination, a
confirming bank, if any, or
the issuing bank determines
that a presentation does not
comply, it may refuse to
honour or negotiate.

K. M. Lutfor Rahman CDCS Presentation

 Article
16 (b)
When an issuing bank
determines that a presentation
does not comply, it may in its
sole judgment approach the
applicant for a waiver of the
discrepancies. This does not,
however, extend the period
mentioned in sub-article 14 (b).

K. M. Lutfor Rahman CDCS Presentation

 Waiver of
Discrepancies
‘The rule [16(b)] only applies
Why only issuing to the issuing bank, because
bank to approach it is only the issuing bank
the applicant??
having a direct relation with
applicant of the credit.’
UCP600 Drafting Group

K. M. Lutfor Rahman CDCS Presentation

 Waiver of
Discrepancies
‘A request from a
Is the issuing beneficiary, confirming bank
bank obligated to or nominated bank for the
approach the
applicant?? issuing bank to approach the
applicant for a waiver does
not place an obligation on
the issuing bank to do so. ’
UCP600 Drafting Group

K. M. Lutfor Rahman CDCS Presentation

 Waiver of
Discrepancies
Even if the issuing bank
approaches the applicant for a
Non-extension of
time period waiver, this does not extend the
mentioned in maximum of five banking days
Article 14(b) period following the day of
presentation to determine
compliance of a presentation as
well as for giving notice of
refusal to the presenter.

K. M. Lutfor Rahman CDCS Presentation

 Article 16
Discrepant Documents, Waiver and Notice

c. When a nominated bank acting on its nomination, a confirming

bank, if any, or the issuing bank decides to refuse to honour or
negotiate, it must give a single notice to that effect to the presenter.
The notice must state:
i. that the bank is refusing to honour or negotiate; and
ii. each discrepancy in respect of which the bank refuses to honour or
negotiate; and
iii. a) that the bank is holding the documents pending further
instructions from the presenter; or
b) that the issuing bank is holding the documents until it receives
a waiver from the applicant and agrees to accept it, or receives further
instructions from the presenter prior to agreeing to accept a waiver; or
c) that the bank is returning the documents; or
d) that the bank is acting in accordance with instructions
previously received from the presenter.
K. M. Lutfor Rahman CDCS Presentation
 Explanation
[16(c)]
Sub-article 16(c) details the
specific steps to be taken by a
nominated bank acting on its
nomination, a confirming bank
or an issuing bank when
providing a notice of refusal.

K. M. Lutfor Rahman CDCS Presentation

 NOTICE OF A single notice stating:
REFUSAL i. that the bank is refusing
to honour or negotiate; and
ii. each discrepancy ; and
iii. disposal information of
the document [one of the four
options listed in sub-article 16 c
(iii)]

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R739 [TA 676rev]
Query:
A credit was issued on 08-Jul-2008 by a bank in country ‘A’ in
favour of a customer in country ‘I’ for an original amount of
USD700,000.00 (reduced with a subsequent amendment to
USD350,000.00) with an expiry date of 31-Aug-2008
(rescheduled with a subsequent amendment to 10-Sep-2008).
The nominated bank negotiated and forwarded the following documents:
i. USD81,819.50 on 03-Sep-2012 (1st availment)
ii. USD152,985.00 on 03-Sep-2012 (2nd availment)
iii. USD40,334.00 on 03-Sep-2012 (3rd availment)
iv. USD107,303.00 on 05-Sep-2012 (4th availment)
The nominated bank states in its forwarding schedule:
‘We enclose documents complying L/C terms and conditions.’
K. M. Lutfor Rahman CDCS Presentation
 ICC Banking Commission Opinion
R739 [TA 676rev] (cont’d)
Query (cont’d):
On the same day, the nominated bank sent MT754 messages
specifying “documents received within L/C validity and
terms”.
On 11.09.2008, the nominated bank received separate MT734
messages (advice of refusal) from issuing bank against the four
presentations which referred ‘LATE PRESENTATION’ as
discrepancy. The fourth availment contained an additional
discrepancy- ‘CREDIT OVERDRAWN BY USD32,441.50’.

The nominated bank rejected the discrepancies and asked for

payments again and again.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R739 [TA 676rev] (cont’d)
Query (cont’d):
In the mean time, the applicant and beneficiary agreed on a
separate settlement of the fourth availment, and therefore the
nominated continued to claim for the first three availments
leaving the fourth one.
On 06-Oct-2008, the issuing bank raised additional
discrepancies never mentioned before, vide MT799 messages,
in addition to the previous one.

ICC official opinion is sought regarding the

case.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R739 [TA 676rev] (cont’d)
Opinion:
Based on the facts provided, the issuing bank has no reason to
doubt the statement appearing on the schedule or the wording
in the MT754 and would not be entitled to refuse due to ‘late
presentation’.
The sending of a further notice of refusal has no effect
under Article 16 and will be disregarded.

The issuing bank is required to reimburse the

nominated bank for the full value of the three
drawings covered by this query.

K. M. Lutfor Rahman CDCS Presentation

 NOTICE OF
REFUSAL
‘It is not sufficient to list one
‘Each discrepancy or to give a partial list if
more than one discrepancy is found.
discrepancy’
The list must be complete and be
What does it specific as to the reason each is
mean?? considered to be a discrepancy.
Discrepancies such as ‘Invoice not
as per LC’ or ‘conflicting data
between documents’ would not be
considered to be specific reasons for
refusal.’
UCP600 Drafting Group
K. M. Lutfor Rahman CDCS Presentation
 Sub-article
16(c) (iii)
Sub article 16 (c) (iii) lists
four options, one of which
Disposal
must be contained in a
information of
bank’s notice of refusal.
a discrepant
document

K. M. Lutfor Rahman CDCS Presentation

 DISPOSAL OF
THE
DOCUMENTS AS a) that the bank is holding the
PER 16 (C) (iii)
documents pending further instructions
from the presenter; or
b) that the issuing bank is holding
CAN BE
COMMUNICATED the documents until it receives a waiver
BY STATING: from the applicant and agrees to accept it,
or receives further instructions from the
presenter prior to agreeing to accept a
waiver; or
c) that the bank is returning the
documents; or
d) that the bank is acting in
accordance with instructions previously
received from the presenter.
K. M. Lutfor Rahman CDCS Presentation
 UCP600 VS UCP500

UCP600 [(Article 16(c) (iii)] UCP500 [Article 14(d) (ii)]

a) that the bank is holding the

documents pending further instructions
Such notice must state all
from the presenter; or discrepancies in respect
b) that the issuing bank is of which the bank refuses
holding the documents until it receives
a waiver from the applicant and agrees the documents and must
to accept it, or receives further
instructions from the presenter prior to
also state whether it is
agreeing to accept a waiver; or holding the documents at
c) that the bank is returning the the disposal of, or is
documents; or
d) that the bank is acting in returning them to, the
accordance with instructions previously presenter.
received from the presenter.
K. M. Lutfor Rahman CDCS Presentation
 Article 16(d)
The notice required in sub-
article 16 (c) must be given
by telecommunication or, if
that is not possible, by other
expeditious means no later
than the close of the fifth
banking day following the
day of presentation.

K. M. Lutfor Rahman CDCS Presentation

 Article 16 (e)
A nominated bank acting on
its nomination, a confirming
bank, if any, or the issuing
bank may, after providing
notice required by sub-
article 16 (c) (iii) (a) or (b),
return the documents to the
presenter at any time.

K. M. Lutfor Rahman CDCS Presentation

 ‘The expectation, although
not obligatory, is that banks
Returning the
will give prior notice of the
documents
date they will return the
documents rather than
taking arbitrary action.’
UCP600 Drafting Group

K. M. Lutfor Rahman CDCS Presentation

Article 16(f)

‘If an issuing bank or a

confirming bank fails to act
in accordance with the
provisions of this article, it
shall be precluded from
claiming that the documents
do not constitute a
complying presentation.’

K. M. Lutfor Rahman CDCS Presentation

 Article 16 (g)

‘When an issuing bank

refuses to honour or a
confirming bank refuses to
honour or negotiate and has
given notice to that effect in
accordance with this article,
it shall then be entitled to
claim a refund, with interest,
of any reimbursement
made.’
K. M. Lutfor Rahman CDCS Presentation
 ICC Banking Commission Opinion
R738 [TA 719rev]
Query:
A bank issued a sight letter of credit in favour of a
beneficiary in country P. Subsequently, documents
were received from the beneficiary’s bank and
various discrepancies were noted.
A refusal notice was sent to the bank in accordance
with UCP600 article 16. Thereafter, the
discrepancies were accepted by the applicant, but it
requested a reduction of 90% of the drawing
amount. (i.e. the applicant agreed to pay only 10%
of the drawing amount).
K. M. Lutfor Rahman CDCS Presentation
 ICC Banking Commission Opinion
R738 [TA 719rev]
Query:
Unfortunately, the issuing bank wrongly
interpreted the applicant’s instructions and sent a
SWIFT message to the beneficiary’s bank for the
acceptance of a reduction in the drawing amount of
only 10%.
Upon receipt of beneficiary’s bank acceptance, by
return SWIFT message, the issuing bank paid 90%
of the drawing amount in settlement.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R738 [TA 719rev]
Questions:
01. Does the issuing bank have the right to recall
the overpaid amount from the beneficiary and/or
beneficiary’s bank?

02. Do the beneficiary and/or beneficiary’s bank

have any responsibility to return the overpaid
amount to the issuing bank?

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R738 [TA 719rev]
Opinion:
Analysis:
Under the UCP, a payment made by the
issuing bank is final and considered to be
without recourse to the party to whom
payment was made. A refund of the amount
wrongly advanced may be possible through
mediation of the parties and/or the
applicable law in relation to a payment
being made by a ‘mistake of fact’.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R738 [TA 719rev]
Answers:
01. Any bank has the right to request a refund of an
amount overpaid. However, under the UCP the
receiver of those funds may consider the payment
to have been made on a without recourse basis.
02. This is a legal question, outside the UCP, that
will depend upon the knowledge and
understanding of the beneficiary and/or their
bankers at the time payment was made and how
the applicable law deals with overpayments and
payments made by mistake.
K. M. Lutfor Rahman CDCS Presentation
 ICC Banking Commission Opinion
R741 [TA 700rev]
Query: (Situation A)
A Documentary Credit issued subject to UCP600 stated
merely ‘All charges outside country X (issuing bank’s
country) are for account of the beneficiary’ without
reference to any other charges for the account of the
beneficiary. We forwarded the documents with
discrepancies to the issuing bank and received a timely
notice of refusal. The drawing amount was then paid by the
issuing bank, subject to deduction of a discrepancy fee. We
objected the deduction.
The issuing bank replied, referring to its ‘standard terms
and conditions for correspondent banks’.
Is the issuing bank correct?
K. M. Lutfor Rahman CDCS Presentation
 ICC Banking Commission Opinion
R741 [TA 700rev]
Opinion:

No.
Although it is common for banks to deduct a
discrepancy fee, it is not an international standard
banking practice to do so.
If an issuing bank wishes to deduct a discrepancy
fee, then details of its intent to deduct fee and the
amount thereof should be stated in the credit.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R741 [TA 700rev]
Query: (Another situation)
A Documentary Credit issued subject to UCP600 stated
merely ‘All charges outside country X (issuing bank’s country)
are for account of the beneficiary’. It also stated ‘for
documents presented with discrepancies, issuing bank
discrepancy fee of USD50 shall be deducted from remittance’.
We forwarded the documents to the issuing bank (no
discrepancies were expressly stated in our covering letter) and
received remittance subject to deduction of USD50,
discrepancy fee. We received no refusal advice. We did receive
the issuing bank’s payment advice showing deduction of its
‘discrepancy fee’ without mentioning discrepancies.

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R741 [TA 700rev]
Query:

We objected the deduction.

The issuing bank replied that it was not its intention to
refuse documents in the first place and that it paid in due
time based upon the applicant’s waiver of discrepancies.

Is the issuing bank correct?

K. M. Lutfor Rahman CDCS Presentation

 ICC Banking Commission Opinion
R741 [TA 700rev]
Opinion:

No.

The issuing bank is entitled to a discrepancy fee as

outlined in the credit, but it should inform the
presenter of the discrepancies that were found,
either in the advice of payment or in a separate
communication.

K. M. Lutfor Rahman CDCS Presentation