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change to the provisions of UCP It is difficult to discern the reasoning behind the practice of, on one hand, providing a beneficiary with an unlimited opportunity to take required documents back and forth in order, finally, for the beneficiary to represent conforming documents and on the other hand, allowing the bank only one bite of the cherry with no further opportunity to even correct its mistake if it finds further discrepancies after having been given the first notice of discrepancies. In such circumstances, a bank will have to payout even though it knows that there are other discrepancies of which it could not notify the beneficiary. This practice seems to contradict the principle in the UCP that banks should only pay against conforming documents. Would a bank breach its duty to the applicant to make payment despite the discrepancies If so, this may mean that the applicant has to bear the consequences of the bank’s legitimate acceptance of the nonconforming documents. The bank’s right of reimbursement from the applicant could conceivably be put into question if the bank pays out over discrepant documents. It does not exist without reason that under Anglo-Australian common law, discrepancies not realised upon the rejection of the documents may not later be introduced as grounds for that rejection unless the failure to raise the discrepancies in a timely fashion denies the beneficiary the opportunity to cure the defects in the documents”.
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Therefore, the certainty of the beneficiary’s receipt of payment has
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Buckley, op.cit., at 271.
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See discussion of multiple tender of documents further below in this section
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Buckley, op. cit, at 269.

been enhanced by the change in UCP 500 at the expense of the increase in uncertainty in respect of the degree of conformity of the documents. Even though it is the bank’s duty to check all documents, applicants should be aware that the employees of a bank who deal with letters of credit on a day-to-day basis are normally not armed with the knowledge of specific industries The only responsibility they are capable of carrying out is to check whether the conditions described in the letter of credit are met by the documents provided by the seller. The decision whether or not the documents are compliant is based on their commonsense, not any special knowledge of law or industries. Reflecting this, normally a letter of credit checker has little time to check and approve an outgoing letter of creditor examine a set of documents. The reason for this is efficiency. The shorter the turnaround time of transactions, the higher the rating for operational efficiency. It is submitted that the time needed by the bank to exercise reasonable care should be the standard upon which the time required for examination is determined. Banks normally desire, and clerks are compelled, to examine documents in an expedient
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Where document checkers do have knowledge and experience in respect of the specific industry in which the transaction is taking place, they are able to spot red flags far more easily. For example, where a government trading organization was involved in the purchase of 20,000 metric tones of sugar, which was to be financed through a letter of credit negotiated by a bank in Jordan, the bank staff had rich experience in dealing with shipments of sugar and knew how the letterheads and signatures on the documents should look. The letter of credit misspelled the name of the surveyors who were to attest to the quality and quantity of the sugar loaded on board. The fraudsters knew that in order to get paid, they needed to produce documents which exactly complied with the terms of the letter of credit. When the documents with misspelled names of the surveying company were produced, the staff was immediately alerted. It was discovered that the goods were not loaded on the vessel at all. The bank therefore refused payment - Trade Finance Fraud - Understanding the Threats and

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