Monday, April 25, 2016

What’s draft got to do with it?[1]

Introduction
The bill of exchange (draft) has always been an integral part of documentary credits since inception. That situation could change in the near future. Voices opposed to this long partnership are getting stronger. Even though there is no official word about the next revision of the UCP, there is a rising demand for the next version to rid itself of its reliance on drafts. A sharp dividing line has developed between those who believe in the dictum “If it ain’t broke, don’t fix it”, and those who find drafts totally irrelevant – rather, more of a big nuisance – as far as documentary credits are concerned.

In two separate articles[3]  published earlier this year, experienced trade specialists Peter Sproston and Bob Ronai called on the LC community to “stop following the tradition of using drafts dating back to the 19th Century and eliminate drafts from the next revision of the rules.” In his blog post of February 2015, Kim Sindberg echoed similar sentiments, “…references to drafts and negotiation should be got rid of once and for all.”

Dependence on drafts
Documentary credits rely heavily (contd...)


[This article is continued in the book 'Beyond Trade Finance', published on 13-Apr-2021 by Notion Press, and available at https://notionpress.com/read/beyond-trade-finance or at https://www.amazon.in/dp/1638508666]





[1] First published in LCM-TSU, Jan-March 2016.
[2]The author is trainer, faculty and author of books and articles on international trade. Home page: http://www.rnbose.com.
[3] Drafts: In or out of UCP 700? Documentary Credit World, Page 1, Vol.19, Number 1, issue of January 2015
[4] Drafts: in or out of ucp700? Documentary Credit World, Page 1, Vol.19, No 1, January 2015
[5] Refer to Newman Industries Ltd v Indo-British Industries, [1956] 2 Lloyd’s rep 219; see also W.J. Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 Q.B. 189, 209-212, 221. (Peter Sproston, DCW, Jan ‘15)
[6] Documentary Credit World, Page 20, Vol.19, No 1, January 2015,
[7] Documentary Credit World, Page 1, Vol.19, No 1, January 2015.
[8] Bills of Exchange Act, UK, Section 45(2): Where the bill is payable on demand, then, subject to the provisions of this Act, presentment must be made within a reasonable time after its issue in order to render the drawer liable, and within a reasonable time after its indorsement, in order to render the indorser liable.
[9] See Negotiation and the law of contracts, Rupnarayan Bose, DC Insight, Vol. 16, No. 2, April-June 2010; and Re-defining Negotiation, Rupnarayan Bose, LC Monitor-Trade Services Update, Vol. 11, Issue 4, July–August 2009.

Sunday, April 17, 2016

Life in the day of a banker

For three years till May 1992 I worked on deputation as the branch manager of State Bank of Hyderabad, Sion branch in Bombay. We were given our residential quarters at a housing complex called ‘Gokuldham’, at Goregaon East, a suburb of Bombay (now Mumbai). The nearest railway station was called Goregaon, on the Western Railway network, a little more than two kilometres away from where we lived.
My office was quite a distance away on the Central Railway of the Bombay suburban railway network. My daily routine was to ride my two-wheeler (a 1974 Royal Enfield Bullet) to Goregaon rail station, find a parking space in an extremely crowded roadside next to the station, rush up the steps along the over-bridge to the platform where the train was due to arrive, then dive into the first-class compartment even before the train could come to a stop or the people could get off. It was a skill that anyone commuting by train had to acquire, or be left behind. The compartments were always overcrowded – even at 7.15 a.m. Hence, even a second’s delay meant missing that small window of opportunity to get into the compartment.
I had to change trains at Bandra, rush with my briefcase to another platform for another train – this time to King’s Circle on the Harbour Line of the Central Railway. The last lap was a walk for about three-quarter of a kilometre to my branch. By 8.15 a.m. I used to be in my chair. After the day’s work was done the direction of my travel was reversed, though the route remained the same. That was my daily routine. It rarely varied.
It changed a bit on the day I received a call from a chartered accountant about an hour after I had reached office. As the branch manager, it was my job to develop business. He was one of the several that I had been in touch with, with a request to direct some of the firms that he dealt with to my branch. The phone call from him was to say that he’d like me to visit a unit somewhere in Worli (central Bombay) that afternoon. Could I come? I said, “Yes, of course!”. Since I did not know the exact location, it was arranged that he’d pick me up just after 2 pm.
He arrived at 2, on his scooter! He apologised for the transport arrangement, explaining that he planned not to return to his office later, but to go home after the visit was over. Therefore, he did not want to go back all the way once again, just to pick up his scooter. Would I mind? Under the circumstances I had hardly any option. I rode pillion, hanging on to the vehicle for dear life from Sion to Worli – a good 5-kilometer journey on an uneven, bumpy, extremely crowded roadway.
The industrial unit was a cooperative venture of cobblers. The area was large, several people were engaged in a variety of activities; the production was meant for local markets and also for export. I was introduced to the main promoter and the key man behind this venture. I asked some standard, routine questions, collected some papers, had the mandatory bottle of soda, and was ready to leave.
The promoter enquired where I lived, and offered to provide a lift all the way back to Goregaon. I excused myself, saying that I had to lock up my desk, close the branch and collect my briefcase before I could return home for the day. We walked down to the ground floor to the reception area and the exit.
The car that was waiting for me took my breath away. It was a Mercedes, one of those larger-sized ones, with tinted glasses. The cap was doffed, the rear door was opened for me by the uniformed chauffer. I seated myself all alone on the rear seat of that car, pretending to be as casual as possible – as if I did that (nearly) every day. The big boss gave appropriate instructions to the driver (oops, chauffer!), said ‘bye’ to me, and we drove off.
As the car (sorry, the Merc.) drove along, I looked out, trying to make eye-contact with people who had no option but to use their feet to go from place A to place B. I tried to do the same at the traffic lights – just to see if anyone noticed me in ‘my’ car. None did, nor did they care to. Worst still, the tinted glass stood in the way. I could look out, they could not look in. I had no option but to ignore me being ignored. By the time I made it back to my branch, everyone (except the watchman) had left. So, none witnessed my arrival either.
I thanked the driver, collected my briefcase, trudged back to the King’s Circle station, pushed myself into a crowded railway compartment, changed trains at Bandra station for Goregaon, retrieved my motorbike after getting off at Goregaon, and rode it home just as I did everyday.