| Although it was difficult to confirm the authenticity of the credit because of the Test Key, the credit was notified to the seller without such indication of clauses. The seller shipped the products and purchased required documents to a "S" bank and sent the shipping documents to the opening bank. However, the opening bank rejected to meet payment and sent back the shipping documents declaring that they never issued such credit. As of a result, the seller instituted a lawsuit against the "S" bank for the liability in making mistakes of wrong notification.
Case study
1. Authenticity confirmation duty of a advising bank
According to the No. 7 of U.C.P. 500, a credit advising bank is responsible to confirm the apparent authenticity of a credit when it is received. When notifying the credit upon the request of a beneficiary, the advising bank must indicate that the authenticity can not be confirmed and that the bank will not hold liability for the matter absolutely.(The Sub-Article 7(a&b) of U.C.P. 500).
2. Responsibility of a Seller
When a seller received a credit not confirmed its authenticity, it is necessary to inquiry about the status and change the advising bank to a bank that has a exchange transaction with the opening bank for a credit authenticity and further exporting process.
3. Responsibility of a negotiating bank
If there is a clause saying "The negotiating bank can not confirm the authenticity of a credit", no purchase is encouraging before collection. Except if there is request from a seller, it is safe to process a payment after collection.
4. Conclusion
The advising bank was unable to meet the obligation in making notification to the seller therefore, the advising bank has to take liability for the seller's damage.
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