Bills of exchange in a letter of credit

Application of bills of exchange in documentary credits (letters of credit, LC) has been confronting with many disputes given different opinions and interpretations of bills of exchange ordinance under various legal jurisdictions, which has resulted in a controversy to abolish bills of exchange in LC transactions. To combinate functions and legal aspects of bills of exchange into the practice of documentary credits, this article emphasizes the importance of bills of exchange in LC practice, articulates the functions of bills of exchange in the procedure of LC business from the perspectives of qualified payment prompter as well as the verification of payment amount and the determination of maturity date & payee, and concludes that bills of exchange plays a critical settlement role by means of prompt payment in documentary credits. As suggested by the Opinions of International Chamber of Commerce (ICC) Banking Committee and the practice of blank bills of exchange this article explains further the right to examine the bills of exchange and to dishonor discrepant bills of exchange by an issuing bank or a confirming bank or a nominated bank, however, the beneficiary has the right to correct or alter discrepant bills of exchange due to the payment undertaking by the issuing bank or the confirming bank. Since bills of exchange is a financial instrument instead of a commercial document, this correction or alteration by the beneficiary to the bills of exchange should not be subject to the limitations by presentation period and expiry date stipulated by the terms and conditions in the documentary credits. This essay suggests conclusively that the Paragraph B14 for amounts and Paragraph B16 for correction and alteration in ISBP745 should be revised to provide consistent examination standards to solve the problems of conflicting opinions of the bills of exchange under various jurisdictions.