Foreign supplier accepts liquidated damage clause in PO but not Letter of Credit. Is it permissible under ucp, fema,rbi rules to deal with LD issue outside LC.
Pl guide
Jayanta Bandyopadhyay
5.9.21
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Decoupling Credit/Debit note from LC
Replies (1)
It is fully permissible to deal with Liquidated Damages outside the LC. UCP 600 explicitly states that LCs are separate from underlying contracts, and banks only deal with documents. FEMA and RBI rules allow commercial disputes and adjustments (like LDs) to be settled independently via credit notes or direct remittances, provided they are supported by the underlying Purchase Order.
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