11th September 2015
TO ALL THE MEMBERS
FIEO’s Help Desk on 14th & 28th September 2015
The Federation of Indian Export Organisations (FIEO) has a Help Desk on every 2nd and 4th Mondays between 3.00 P.M. to 5.00 P.M. which helps resolve problems of members related to banking law / discrepant L/C’s and predominantly relates to non-payment of export bills.
On the basis of the several cases being processed / advised some inferences drawn include the fact that the exporter needs to look into the following before formalizing a contract particularly due to :
More possibilities of International frauds due to Internet : As far as Letter of Credit are concerned and fraud related thereto, today, due to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) standard messages, that are low cost, highly reliable and very secured (so far not yet broken by any hacker), nearly all L/Cs are issued by SWIFT standard messages could be considered as an alternative to make transactions secure.
Further only the senior management of banks are authorized to send of SWIFT messages, therefore L/Cs issued or otherwise advised by SWIFT messages are genuine.
In occasional cases, where a "fake" L/C was issued was done by bank itself, due to one or other reasons, and hence was considered still valid by local law because they were issued by authorised persons in the banks. The issuing banks were asked to take up the legal responsibility. L/Cs issued by SWIFT are most safe and if are holding an L/C issued by an issuing bank, "signed" by an authorised manager (in fact we do not see any signature on the L/C advised by a SWIFT message but the internal documents in the issuing bank should show the signature of the senior manager who authorizes issuance of the same).
To avoid a fake L/C one must insist on SWIFT advised L/C; one may check with the advising bank to verify "whether the original L/C is in fact transmitted by a SWIFT message from the issuing bank to the advising bank", although the L/C from the advising bank to a beneficiary is not by a SWIFT message (as SWIFT is not available to importers and exporters) Most fake L/Cs are issued either by airmail, fax or telex.
As there is no provision in either in the UNICTRAL, the UCP 600, or any banking legislations and regulations, to restrict an L/C to be issued only by SWIFT messages, it follows that L/C can be issued by any method.
Due to the popularity of SWIFT messages, L/Cs issued otherwise should be treated with cautiously to avoid frauds. Under UCP 500 Article 7 (a) the advising bank has a duty to check for the "apparent" authenticity of the L/C. Otherwise the advising bank has an obligation under Article 7 (b) to notify the beneficiary without delay its inability to obtain apparent authenticity of the L/C so advised. But the level of authenticity is only up to the so-called "apparent" level. It does not mean "real" or "factual" authenticity. The advising bank is also protected by Article 15 not to be liable or responsible for the genuineness, or legal effect of the L/C so advised.
In order to check for the authenticity of L/C advised by airmail, fax or telex, it is suggested for a beneficiary to obtain confirmation in writing from the advising bank for the authenticity of the L/C, sometimes by payment of additional amount, if the advising bank considers that it has already exercised reasonable care as required under Article 7 (b) and refuses to do anything else.
To sum up, we may state that the meticulous care which may often be exercised in other areas in exporting is so often lacking when it comes to details relating to documentation which can be absolutely vital to the securing of prompt and assured payment.
Members who wish to consult the Help Desk may visit the FIEO Office in New Delhi on 14th and 28th September’15 or forward case/documents at akshaydeep@fieo.org
This is for your information.
V. ANIL KUMAR
EXECUTIVE DIRECTOR
