Delay in LCs’ retirement may lead to controversies involving forged documents

LAHORE: Undue delay in the retirement of Letters of Credit (LCs) documents by banks may lead to further controversies related to forged documents submitted by the international suppliers for the clearance of credit documents against fraudulent deliveries, said reliable sources in the clearing agents’ community.

Already, said the sources, issues related to submission of forged documents have started emerging, leading to litigations between Pakistani buyers and their banks. In most of fraudulent transactions, said importers, the sellers/suppliers ship substandard, below weight and worthless materials, forge their credit documents in accordance with the contractual terms and conditions. In some cases, they added, unscrupulous elements among the agents community also connive with suppliers to design a fraud.

According to them, buyers are denied access to the consignment by the customs authorities unless their banks pay the import duty and taxes in order to release the imported goods from the port at Karachi.

They said the LC was considered to be an unconditional bank guarantee to the supplier on presentation of requisite documents irrespective of any pending dispute relating to the terms of contract. Banks are bound to make payment to the international sellers on the tendering of relevant documents to the nominated bank in a foreign country, they said.

The sources said the law favours banks on payment of credit to sellers subject to examination of the requisite documents ‘with reasonable care’, as whether they were complying with the terms and conditions of the terms and conditions of credit.

The only exception to this favour is relevant where the paying bank had received notice of a clear fraud by the buyer before the payment is made to the seller and the evidence of fraud is clear and convincing.

They said “undue delay in clearance of ported goods makes the buyers unable to examine the quality and quantity of imported goods, which leads to disputes with suppliers, who have had already got cleared their payments under the LC arrangements.”

Copyright Business Recorder, 2023