Letter of Credit Risk Management
In this case, the contract stipulated that the payment shall be made according to the irrevocable sight letter of credit. In accordance with the provisions of the Uniform Customs and Practice for Documentary Credits “, in the letter of credit business , the bank processes only documents , not related goods and documents. Therefore, so as long as the documents are consistent, the bank should make payment according to vouchers.
In this case, when the seller submitting the documents to the bank, there is no discrepancy at all, therefore, the banks have no reason to refuse to pay the purchase price. According to general practice, when the documents are inconsistent with each other, the bank should notify the customer as soon as possible. According to the Singapore jurisprudenc, the bank should reject the documents in 3-4 days notice to customers. In this case, the bank refused to accept the documents and pay the purchase price 11 days after it received the documents, which is clearly inconsistent with the general practice and local precedents..
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