OLLYER | Consulting Frequently Asked Questions under UCP 600 Volume VIII March 2011| Introduction Welcome to this eighth volume of "Frequently Asked Questions under UCP 600” provided by Collyer Consulting LLP. The questions and, in some cases, the answers continue to be more detailed. In this publication, we continue to cover the type of questions that are being asked on a global basis. Similar to previous volumes, this volume contains a number of questions in relation to UCP 600 artices 8, 14, 20, 28, 30, 35 and 38 together with questions under the headings of General and ISBP. Tt should be recognised that the referenced UCP articles provide rules covering some of the more common types of issues that are faced by banks and beneficiaries today. Altogether, there are 145 questions on a wide variety of topics and issues covered in 48 pages, bringing the total in the 8 volumes to 1380 questions. All of these questions have been submitted as a result of email requests to the author. We hope that the previous volumes continue to assist in your day-to-day activities and with this ‘and our future publications they will continue to do so; thereby providing a better insight into the correct interpretation and application of UCP 600 and documentary credits in general. ‘You will note that for each section of questions the numbering commences with the respective article number (or Gen/ISBP/URR) followed by the question number. The ‘numbering in this volume continues from the last number under the respective article/section Of volume VII. As with other volumes, we are separately making available an index for the ‘questions covered in all the volumes (scheduled for end March 2011). Should you wish to receive a copy of the index please send a request by email to gary@icollyerconsulting.com In June 2009 we launched our website ~ www.collyerconsulting.com Please visit this site and ‘see what offerings are being made available. We hope that you or your organisation will see the benefits of joining this new, exciting and informative website. Look out for our next publication in September 2011! Col y Cofisditing LLP 2011 Wit every effort has been made to ensure thatthe answers glven under “Suggested Answer” are completely accurate, the details o a credit and the cumstances under which an issue may arse can affect the application of ‘that response. The authors cannot accapt any legal responsibilty whatsoever for consequences Hat ray arse from _ny ets or aissions or any opinion or advice given. should be ported out that ermal positions can ery be Provided through ICC opinions. {© No part ofthis publication may be reproduced, stored or ransnited without the express agreement of Colyer CConsutng LL (© Copyright Colyer Consuing 2011Contents Article 1 Application of UCP 2 Definitions 3 Interpretations 4 Credits v. Contracts 5 Documents v. Goods, Services or Performance & —_Avallablity, Expiry Date and Place for Presentation 7 Issuing Bank Undertaking 8 Confirming Bank Undertaking 9 Advising of Credits and Amendments 10 Amendments 11 Teletransmitted and Pre-Advised Credits and ‘Amendments, 12 Nomination’ 13° Bank-to-Bank Reimbursement Arrangements 14 Standard for Examination of Documents 15 Complying Presentation 16 _Discrepant Documents, Waiver and Notice 17 Original Documents and Copies 18 Commercial Invoice 19 Transport Document Covering at Least Two Different Modes of Transport 20 Bill of Lading 21 —_Norr-Negotiable Sea Waybill, 22 Charter Party Bill of Lading 23 Air Transport Document 24 Road, Rall or Inland Waterway Transport Documents 25 Courier Receipt, Post Receipt or Certificate of Posting 26 “On Deck”, “Shipper’s Load and Count”, "Said by Shipper to Contain” and Charges Additional to Freight 27 Clean Transport Document: 28 Insurance Document and Coverage 29 Extension to Expiry Date or Last Day for Presentation 30 Tolerance in Credit Amount, Quantity and Unit Prices 31 Partial Drawings or Shipments 32 _Instalment Drawings or Shipments 33 Hours of Presentation 34 Disclaimer on Effectiveness of Documents 35 Disclaimer on Transmission and Translation 36 Force Majeure 37 Disclaimer for Acts of an Instructed Party 38 Transferable Credits 39 Assignment of Proceeds Gen General Queries ISBP International Standard Banking Practice Questions URR Uniform Rules for Bank to Bank Reimbursements Page Number No new queries No new queries No new queries No new queries No new queries 3 5 6 No new queries. 8 No new queries 10 No new queries st No new queries 15 7 7 No new queries 18 No new queries Na new queries 20 21 No new queries No new queries 25 28 'No new queries No new queries No new queries 29 No new queries © Copyright Colyer Consulting 2011, c- am © aorbo tu Lo tu tee ee we a its is wi Article 1 — Application of UCP (No new queries) Article 2 — Definitions (No new queries) Article 3 — Interpretations (No new queries) Article 4 — Credits v. Contracts (No new queries) Article 5 — Documents v. Goods, Services or Performance (No new queries) Date and Place for Presentation 6.59 Field 41A in the /C stated ‘available with Bank A by NEGO/PAYMENT’. ~ also, L/C expressty excluded sub-artice 6 (a). {If we, as negotiating bank (we are not Bank A) send the presented documents to the Issuing bank, can they deny to honour the draft? In case they agree to honour our draft, do they need any confirmation from Bank A that they have not already negotiated? ‘Suggested Answer: Excluding sub-article 6 (a) does not exclude sub-article 7 (a) that states "provided that the stipulated documents are presented to the nominated bank or the issuing bank.....". Sub-artide 7 (a) refers to a presentation made to the issuing bank. If a nominated bank is stated, excluding sub-artide 6 (a) has no effect on the place or places for presentation. Your status is not recognised in UCP. {As the LC was restricted to another bank, the issuing bank will be entitled to withhold payment until they have received confirmation from that bank that no other drawing has been made. A presentation that by passes the nominated bank will, invariably, create a delay in payment for the beneficiary. 6.60 U/C stated “Available with Bank A by negotiation”, (1) Is Bank B allowed to negotiate the documents presented under this L/C? (2) In this case, if Bank B decided to negotiate they will not have 5 banking days to ‘examine the documents and must send the documents to Bank A or to Issuing Bank Immediately within the period of presentation stipulated in the L/C. Is this right? (3) And if the documents are lost on the way to Bank A or the Issuing Bank, whether Bank B will be responsible for this? (© copyright Colyer Constung 20116.61 6.62 6.63 6.64 ‘Suggested Answer: (1) Any bank may negotiate, but only Bank A is recognised under UCP and the credit. (2) Bank B may choose to examine the documents but they must be received by Bank A or the Issuing Bank within the expiry date and the latest presentation period, (3) Bank B are not covered by article 35. We, as issuing bank, insert the following under field 47A “If documents presented to Us directly from beneficiary or through another presenting bank, other than the ‘nominated bank, we will withhold payment until we receive advice from the nominated bank that no other presentation has been made through them and that their outstanding charges have been paid by beneficiary and that they have marked thelr record for the presentation that has been made through us”. We would like to know is this a correct practice under UCP 600? Suggested Answer: This clause stil requires you to examine documents within 5 banking days following the day of presentation to determine compliance. The position that you have stated is inline with an ICC Opinion that states that the issuing bank will be entitled to ‘contact the nominated bank (where the credit is restricted to that bank) to determine ‘whether any other drawing has been made under the LC, prior to honour. In case L/C is available at our counters, can we insert the same clause under field 447A (as shown in question 6.61 - with the exception of the word nominated bank) to ‘avoid payment of advising bank charges in case of a presentation made to us directly ‘and we remitted funds to benefidary and then the advising bank could not collect their charges? ‘Suggested Answer: ‘You cannot put a similar clause where the LC Is available at your counters. You are. ‘authorising the beneficiary to send the documents directly rather than through the advising bank. ‘Should the latest shipment date + presentation period = expiry date? Suggested Answer: In an ideal world, the answer would be yes. But, the shipment and expiry dates could be the same date (as is often the case). If the latest shipment date is 5 February and the presentation period 21 days, it does not make much sense to have an expiry date of, say, 5 March. The beneficiary can only present a compliant presentation on or before 26 February. ‘When issuing documentary credits available with any bank, some banks have started to insert clauses such as: “At each presentation negotiating bank must check the validity of the drawing and availability of the credit with the issuing bank before or in the course of the ‘egotiation to avoid any possible duplication, re-negotiation, unauthorised handling, ‘excess in credit amount or similar inconveniences. In any event Issuing bank will not be obliged and liable for any further presentations or negotiation other than the aggregate of the credit amount within the validity. Each negotiation must be ‘endorsed on the reverse of original of the credit by the negotiating bank.” or “It is a condition of this L/C that the negotiating bank must check with the issuing bank the available balance of the L/C before honouring / negotiating any presentation.” (© Copyright Colyer Consuting 2011 " Dee) es eee ee LW LIL LJ iW LJ ww LJ se eee[el eed ed ee ee My questions ar 1) Do the above clauses interfere with the irevocability or operativeness of the documentary credit? 2) Do the above clauses conflict with UCP? 3) Do the above clauses reduce the possibilty of fraud or duplication under freely available credits? ‘Suggested Answer: Al that should be required is a statement "each negotiation must be endorsed on the reverse of the original advice of this credit” (not the original of the credit as stated below). ‘The issuing bank is clearly trying to avoid the situation where a beneficiary may seek to defraud the issuing bank by presenting documents (covering the same shipment/drawing) to more than one nominated bank. However, the defence of any 'ssuing bank, to an attempt to daim more than once, is that if a bank negotiates without endorsing the advice of the credit, their negotiation may be called into {Question if multiple Gaims are received from other banks who have endorsed the 2dvice of the credit. My view would be that the lenathy clause you quote does Undermine the LC process and other remedies exist that should be followed by a ‘nominated bank. For example, a nominated bank should only negotiate under a freely available credit for beneficiaries that are known to them. For beneficiaries that are not known to them they should either decline or they may, actually, invoke part Of the process that is included in the wording above as a form of self-protection against fraud, prior to agreeing to act. If an issuing bank Is experiencing problems sch as that which are contemplated by the clauses, they should desist from making credits avaliable with any bank and restrict to one bank. “The clauses could reduce the amount of fraud under a freely available credit, but I would come back to my earlier point that banks should not bindly negotiate for an unknown beneficiary and that other remedies exist for an issuing bank to secure their position. Article 7 — Issuing Bank Undertaking 727 ‘Some banks send correction SWIFT messages to an outward letter of credit, which include the following wording or similar “This correction message Is to be considered as an integral part of our original SWIFT message MT (700), please advise beneficiary marking your records accordingly.” Is this correction message enforceable on the beneficiary i.e., must he comply with ie ‘Suggested Answer: Tt will depend on the content of the message. UCP 600 sub-article 7 (b) states that an Issuing bank is irrevocably bound to honour as of the time it issues the credit ‘Therefore, the MT700 as issued is a representation of the undertaking of the issuing bbank and any subsequent message would be considered as an amendment subject to the consent of the beneficiary. However, ifthe follow up message contains data that Is critical to the workability of the credit or the undertaking of the issuing bank, then the MT700 is not a workable credit without the follow up message being considered as an integral part of the LC. (© Copyright Colyer Consuting 20117.28 7.29 We have opened a Back-to-Back LC available with any Bank by negotiation and restricting the expiry place to our counter (Issuing Bank ‘s counter). Please provide your views as to: (2) Whether the expiry place and availabilty being different will be in ‘contradiction with article 6 of UCP. (b) Whether as an Issuing Bank, we will lose protection under article 35 in case documents are lost in transi. Please suggest the right way of structuring the Back-to-Back LC with respect to availablity and expiry place. ‘Suggested Answer: 1. This construction is not contemplated by the UCP. The UCP is based on expiry and availabilty being at the same place. 2. The structure places you, as issuing bank, at risk. Although the credit expires at your counters and therefore documents should be received by yourselves, by that date, you have nominated a bank to negotiate. Therefore, if a nominated bank receives documents and determines compliance and they are lost in transit to ‘yourselves - despite the fact that the credit expires at your counters - you bear the risk. T would have thought under a back-to-back credit that you would want expiry and availabilty with you, given the content of article 35. Ifa LC is available with the issuing bank by acceptance or deferred payment, and the issuing bank prepays a complying presentation, what are the remedies available for the issuing bank if the applicant obtains an injunction for fraudulent documents? ‘Suggested Answer: Under an accepted draft, the issuing bank will be protected under bill of exchange law. Sub-article 12 (b) offers an authorisation to prepay or purchase to a nominated bank. An issuing bank is not a nominated bank. An issuing bank would be advised to incorporate wording into the counter indemnity or agreement, signed by the applicant for the issuance of the credit, authorising the issuing bank to prepay under a deferred payment undertaking. I would expect most courts to protect an ‘innocent’ Issuing bank that discounted prior to receipt of knowledge of fraud, but the inclusion in the counter indemnity or agreement of a specific authorisation will strengthen that position. Article 8 — Confirming Bank Undertaking 8.36 ‘We need your expert view for the following queryAn L/C has been advised to our bank by a first advising bank via MT 710 adding their confirmation. Our customer (the beneficiary) requested us to add our confirmation and accordingly to act as the ‘second confirming bank-We are the nominated bank and L/C contains following instructions of the first advising / confirming banktWE HAVE ADDED OUR. CONFIRMATION TO THIS LETTER OF CREDIT:-+PROVIDED THE TERMS AND CONDITIONS OF THIS CREDIT HAVE BEENCOMPLIED WITH IN FULL, WE SHALL HONOUR YOUR DRAWING(S) UP TOTHE MAXIMUM AMOUNT INDICATED. OUR CONFIRMATION IS EFFECTIVEONLY, IF THE DOCUMENTS ARE PRESENTED TO US WITHIN TIME LIMIT(S)VALID FOR THIS CREDIT=In order for us to add our confirmation is it necessary to clarify with the first confirming bank that their Confirmation is also valid for our bank as well as for the beneficiary? Or, is the above wording sufficient, in line with the sub-article 8 (c) of UCP 600, since we are the © Copyright Colyer Consttng 2011RS LS ed ee ww uw 837 8.38 8.39 nominated bankACould you please also provide us with comments whether your answer to the above questions will be different if-(a) documents will be sent directly to the issuing bank and payment requested from the confirming bank, OR) documents will be sent directly to the issuing bank and payment requested directly from the issuing bank ‘Suggested Answer: Its assumed that the credit contains a specific request for you to add your ‘confirmation, or an amendment has been, or will be, secured to enable this to occur. ‘The wording of the confirmation, by the advising bank, reflects the wording that you would expect where there is only one bank adding their confirmation i.e., a confirmation that is directed to the beneficiary. This wording would, however, also apply to a second confirming bank who sent documents to the first confirming bank, but as a second confirming bank you need to take note that the confirmation wording refers to a presentation being made to that confirming bank within the time limits for the credit. By the wording of the confirmation, the confirming bank is modifying the effect of sub-articles 8 (a) (I) (b-e) to the extent that whilst documents may be presented to another nominated bank, they must be presented to that confirming bank within the expiry and presentation periods stated in the credit for the ‘confirmation to be effective. This answer does not change no matter what the ‘Grcumstances, given the text of the confirmation wording. Where there is more than one confirming bank, the normal arrangement would be that the second confirming bank would be the one that would determine compliance Of the documents and forward them to the issuing bank. The first confirming bank would then act as a reimbursing bank or guarantor of the issuing bank's obligation to honour. In this case, the issuing bank would need to clearly spell out the responsibilities of each confirming bank and each bank's confirmation wording should reflect the role that each one is taking. It would not be usual for documents to be presented to a second confirming bank who would then send them to the first ‘confirming bank. Confirmation ~ suppose no limits exist against the issuing bank. Can the confirming ‘bank add confirmation against an IRU from a reimbursing bank? In case of any dispute, is the confirming bank covered? ‘Suggested Answer: Yes, this happens all the time. In case of dispute, this is like any other credit - itis resolved between the confirming bank and the issuing bank. Is there any latest date for a bank which is asked to confirm to convey their agreement to confirm? ‘Suggested Answer: There is no latest date, but sub-article 8 (d) requires the bank to inform the issuing bank without delay if they are not prepared to add confirmation. although not defined, I would consider ‘without delay’ to be no more than 48/72 hours. ‘We have issued an LC for CHF8258800/- (to be confirmed). We have received a ‘message from the confirming bank in which they are informing us that they have ‘confirmed the first portion amounting to CHF2477640/- only. My question is whether itis possible to add confirmation partially? Suggested Answer: Whilst an issuing bank may request or authorise a bank to add their confirmation, the terms and conditions under which such confirmation may be issued are subject to the 7 (© copyright Colyer Consuting 2011‘agreement of that bank, This may include confirming for a lesser amount or a reduced expiry period. If a bank does not add confirmation at all or adds Confirmation for an amount or period less than those stated in the credit, they should inform the issuing bank and make this dear to the beneficiary on their advice of the credit. 8.40 The beneficiary has presented documents to us for negotiation. Upon checking the documents we found a number of discrepancies. ‘As such, we were unable to negotiate the bills. We sent the documents on collection basis to the issuing bank. “The issuing bank also identified the same discrepancies. The issuing bank has notified and approached the applicant for a waiver of the discrepancies. The applicant has accepted the discrepancies. “The issuing bank has now notified us, via SWIFT, of the payment maturity i.e., 60 days after sight. Question: Can we proceed with the LC negotiation upon receiving the payment undertaking of the issuing bank? Does it contradict with UCP 600 article 8 or any article in UCP 600? ‘We have been advised that if we add confirmation to a LC, we are prohibited from negotiating discrepant documents even though the issuing bank has given their payment undertaking to pay on the maturity date. ‘Suggested Answer: Xf the documents are discrepant, a confirming bank may decide to withdraw their confirmation in respect of that drawing. Even if the bank withdraws their confirmation, they may decide to reinstate it at a later date e.g,, after receiving the ‘Scceptance advice of the issuing bank. You may, therefore, agree to negotiate after the receipt of the issuing bank's advice of acceptance on a with or without recourse basis. In the case of without recourse, this will be where you elther agreed to ‘maintain your confirmation or reinstated it. Article 9 — Advising of Credits and Amendments (No new queries) Article 10 — Amendments 10.28 Case: LC opened for USD3,300,000.00 by Bank X on 10 Jan 2008. [As beneficiary's bankers, we recelved a presentation from the beneficiary for USD 45,000.00 on 05 March 2008. We received payment from issuing bank on 19 March We received an amendment from the issuing bank on 25 November 2010 stating field 34B: New amount after amendment - USD1,300,000.00 ‘Also we received a presentation from the beneficiary for USD1,300,000.00. Now we are having a conflict of opinion under this LC: Opinion No 1: LC amount Is overdrawn as the amendment does not state that the © Copyright Colyer Consting 2011 aaa 7 rT rT Teal at ieee ela eoeS aS oS el ay a ow 10.29 10.30 10.31 ‘amount is neither an increase or decrease of the LC value, itis considered as a new LC value of USD1,300,000.00 We treat the overall LC value as USD1,300,000.00 and the total value drawn is USD 41,795,000.00. Hence LC amount overdrawn. Opinion No 2:-As per SWIFT handbook the definition of field 348 Is "This field ‘contains the currency code and total amount of the documentary credit after the ‘amendment, disregarding any drawings". Hence, we treat this drawing as belonging to the amendment and we disregard the first drawing for amount of USD495,000.00. So, documents strictly comply with LC. ‘Suggested Answer: {As the issuing bank has chosen to advise the amendment by use of field 34B, the definition that applies to that field (as quoted by you above) reflects the course of action that you and the issuing bank must take and adhere to i.e, that the amount stated Is the new LC amount and subsequent drawings may be made up to this amount. ‘After confirming a deferred payment documentary credit we received an amendment from the issuing bank regarding the extension of the maturity date. IF we advise this, ‘amendment to the beneficiary without extending our confirmation, does our Undertaking to the beneficiary still exist? Please be informed that the beneficiary ives his consent in terms of extension of the maturity date. ‘Suggested Answer: ‘As the amendment affects the timing for the settlement of your obligation, you must either: agree to the amendment (and confirm accordingly); of refuse the amendment before advising to the beneficiary (and the terms of the original confirmation will remain applicable); or advise the amendment to the beneficiary stating if they agree to the amendment that your confirmation no longer applies to the credit (for which they either accept ‘and have the issuing bank's undertaking only, or they reject and you are back to refusing the amendment). UCP 600 sub-article 10 (c) states “A bank that advises an amendment should inform the bank from which it received the amendment of any notification of acceptance or rejection". 1s it mandatory for an advising bank to send a notification in respect of acceptance or rejection of an amendment and should the issuing bank follow up with the advising bank in respect of the same? ‘Suggested Answer: T would not go so far as to say that itis mandatory but if the beneficiary informs the advising bank that they have accepted or rejected an amendment, this information should be passed to the issuing bank. After all, itis the Issuing bank's amendment that we are talking about - not the advising bank's. If an issuing bank follows up for ‘acceptance or rejection, there is no requirement that the beneficiary provide an Immediate response. They may still wait until the time of presentation of documents, For an amendment to the L/C reducing the value, as per my understanding it is the ‘same as all other amendments. The beneficiary does not need to present a written ‘acceptance to the advising bank accepting the amendment and at the time of document presentation for the reduced value, the amendment is considered as ‘accepted by the Beneficiary. Am I correct? Or maybe incase the bank has to release 9 © Copyright Collyer Consuting 2013,the credit line to issue a new LC, the written acceptance of the benefidary is required to reduce the present LC value. ‘Please advise. ‘Suggested Answer: ‘There is no requirement for a beneficiary to provide any notification of acceptance or rejection of an amendment prior to the date of presentation of documents. Banks may seek prior notification and it is for the beneficiary to determine whether or not they are in agreement. As you say, an applicant may often ask for the issuing bank to obtain an agreement to a reduction in the LC value in order to free up the credit facility for other transactions. Article 11 — Teletransmitted and Pre Advised Credits and Amendments (No new queries) Article 12 — Nomination 12.32 12.33, Bank X has issued a LC available with them by deferred payment (Banks in UAE always issue LCs in this way if local delivery is involved). Beneficiary has presented documents to Bank Y and requested them to carry out discounting of documents, after acceptance from issuing bank. Can Bank Y carry out discounting of these documents even though they are not the nominated bank? If Bank ¥ carries out the discounting of documents is it covered under UCP 600 in the event of fraud or injunction order by a court? How can Bank Y carry out discounting of documents and protect Itself? ‘Suggested Answer: ‘Any discounting by Bank Y will be outside the credit and the UCP. The choice for Bank ¥ (assuming that the credit cannot be amended to be available with them) is either (a) enter into a separate financing agreement with the beneficiary and rely on the proceeds to liquidate the advance; or to rely on the terms of the financing agreement, in the event that the issuing bank does not honour on the due date, in order to seek recourse from the beneficiary; OR, (b) to request authorisation from ‘the issuing bank to discount. In the case of the latter, the issuing bank could decline or state that they will discount the proceeds. although any discount in the latter case, if authorised, is not under the UCP, the issuing bank is providing a separate instruction referencing the credit and the discounting thereunder. have noted from your FAQ 12.15 and some other Q&A's that a nominated bank is riot protected by sub-article 12 (b) If they forward the documents to the issuing bank without incurring their DPU, but discount the DPU received from the issuing bank. I also understand that the same position applies to acceptance credits. My question concerns usance negotiation LCs. An example is given below: UC is available with any bank by negotiation of drafts drawn at 180 days after BL date on issuing bank. When the documents are presented to the beneficiary's bank, ‘who becomes the nominated bank, they did not negotiate the documents, but simply forwarded them to the issuing bank on an approval basis. At that time, the ‘nominated bank committed to the beneficiary that they are wiling to negotiate if ang ‘when the issuing bank’s advice of acceptance is received. 10 (© Copyright Cote Consuting 2011 r i L [L ] ] ] J io ws wd (Qi: In this case, whether the beneficiary's bank has acted on its nomination or not? (Q2: If the beneficiary's bank negotiates the accepted usance draft and pays the beneficiary prior to the due date, is the issuing bank liable to reimburse the nominated bank on the due date, in any event, due to the protection under sub- atticle 12 (b) and article 7? [wish to have your clarification taking into consideration the definition of “negotiation” that includes the purchase, by the nominated bank, of a draft ... by agreeing to advance funds to the beneficiary... before the banking day on which reimbursement is due to the nominated bank. ‘Suggested Answer: Each of the settlement types that you refer to has their own characteristics and requirements under UCP for a bank to advance (prepay) and thereby have the "protection" of UCP. I think protection is too strong a word; that their actions are covered and recognised by the content of UCP is more appropriate. Deferred payment - the nominated bank must have first incurred their own deferred payment undertaking; ‘Acceptance - the nominated bank must have first accepted the draft drawn on it; and "Negotiation - the nominated bank must have advanced or agreed to advance funds. ‘bank only becomes a nominated bank when they act according to the above and this can occur at the time of presentation or at any time thereafter but prior to the due date, You should note that in the event of a negotiation credit, sub-article 12 (b) is not applicable. This sub-artide only covers deferred payment and acceptance credits. If a bbank negotiates, they rely on the definition of negotiation in artice 2. Article 13 — Bank-to-Bank Reimbursement Arrangements (No new queries) Article 14 — Standard for Examination of Documents 14.110 1.B/L shows 12 BALES P/L: 12 CARTONS 2.B/L shows 12PKGS —_P/L: 12 CARTONS 3.lnv shows 12PCS—_P/L: 12 SETS ‘Are these documents discrepant with each other? ‘Suggested Answer: T would not consider them discrepant. However, you would expect a beneficiary that issues an invoice and packing list to describe the packaging in the same manner. 14,111 There is a credit where in Field 46 itis required: Certificate of quality in 01 original, and this certificate also may be sent directly to the applicant. However, in Field 78, the issuing bank instructed the presenting bank to certify “the certificate of quality has been sent to the applicant directly” if this happened. Gan you give the issuing bank your advice in this case? The certificate of quality was not included in the presented documents that were 1 © copyright Cyr Consuiting 201114.412 Cotherwise compliant, and the presenting bank did not certify the sending of the certificate directly to the applicant, as required. What is the issuing bank's recommended action? (@) Send a SWIFT message to the presenting bank within 5 banking days ater the day of receiving the presentation indicating that presented documents are compliant, however the payment will only be effected as soon as they are informed, by the presenting banks thet the ceticate of quality has been sent crecty tothe applicant. addition, they won't bear any penalties due to delay payment, or (b) Send a SWIFT meszage to the presenting bank, without delay, to inform them thatthe process of checkang only begins as soon as the presenting bank confirms the requirement stated in Field 78 of the credit, oF (©) Send a SWIFT message tothe presenting bank within 5 banking days after the Gay ofrecehing the presentation withthe cscrepancy "absence of cerca of quality’ Suggested Answer: First of all, a credit should never be issued in this manner. How can the presenting bank make such a statement unless they physically send the document to the applicant and are thereby certain that it was sent. The credit should require that the beneficiary send the document and the beneficiary provide a certificate to this effect, cr that the document be presented with al the other stipulated documents. No matter whether the document was sent with the others or was sent direct, the issuing bank must examine the documents following their presentation. Recommendation (b) is not an option. The bank must examine and conclude their ‘examination by the lose of the Sth banking day following the day of presentation. Due to the wording in the credit, the documents should be refused for ‘absence of certificate of quality or evidence from [name of bank] that the certificate was sent directly to the applicant’. If the presenter reverts stating that the document was sent, then the issuing bank must honour. But, again, I would emphasise that a credit should not require such a certification from a presenting bank. ‘Summary of the case: -LC expired on 27th July 2010 in beneficiary's country. The ‘documents reached the presenting bank on 3rd November 2010. Issuing Bank received the documents on Sth December 2010. Issuing bank sent a refusal notice after 5 banking days. In respect of the above issue, ICC opinion no. R 331 applies and an extract is given below, The query indicates that the credit expired on 20 February, presumably at the ‘counters of the issuing bank. Therefore, at the point when the documents were sent by the beneficiary's bank, the credit had already expired. On this basis, the issuing bank had no obligation to check the documents under the requirements of UCP, as its liability and undertaking had ceased as of 20 February.” Request your opinion on the following: 1. Is the issuing bank stil obligated to check the documents and refuse them as per UCP, despite the credit having already expired. 2. If the refusal omitted the disposal instructions for the documents, would it have an impact on the issuing bank. ‘Suggested Answer: ‘As stated in R331, “at the point the documents were sent ..... the credit had already expired. ..... the issuing bank had no obligation to check the documents ..... 2S its 2 © Copyright Colyer Consulting 2013wi a www wt L i! 14.113 14.114 liability and undertaking had ceased as of .......". The point here is that at the time Of presentation (as in your case) there was no credit in existence and therefore no UCP that could be stated to apply. The fact that the issuing bank sent a refusal message (I am not sure why one would need to be sent) rather than an indication that as there was no credit in existence documents would be handled on a collection basis, does not change the fact that the credit had expired and the UCP can only be applied to credits that are valid at the time of presentation to the nominated or Issuing bank. We are seeking your opinion relating to the meaning of sub-article 14 (f) of UCP 600. The scenario: YC requires Certificate of Quality issued by manufacturer. LC does not indicate the name of the manufacturer. ‘The beneficiary presented a Certificate of Quality issued by ABC Co. There is no Information in this certificate itsef or in other documents within the same presentation identifying that ABC Co Is the manufacturer. The Issuing Bank refused documents with the discrepancy "Certificate of Quality Issued by ABC Co without identifying this company as the manufacturer". Question: Is the Issuing bank justified when they refused documents? In our view, once IC does not require a named issuer for a document other than invoice, transport document, and insurance, then subject to sub-articie 14 (f) of UCP 600, the bank will accept the document as presented provided that its content complies with the L/C and with other documents under the same presentation. ‘Suggested Answer: If the LC requirement was "Certificate of Quality issued by manufacturer" then there ‘must be evidence within the presentation (not necessarily in the certificate of quality) of the name of the manufacturer and that manufacturer must be the company that issued the certificate. Alternatively, ABC Co, could have indicated in the certificate that they were the manufacturer. U/C states covering shipment of Oil with a latest shipment date of 30 October 2010. ‘Among the documents required are: a) Anchorage clearance Certificate, b) Bil of Lacing, ¢) Time Sheet, and d) Shore tank measurement before and after loading. Can we consider the three under-mentioned scenarios are discrepant as per UCP 600 sub-article 14 (d) Le., a conflict of data? 1. Anchorage clearance Certificate shows date of sailing 27/09/10 whereas Bill of lading shows shipped in apparent good order and condition 28/09/10. Q: Can we raise a discrepancy stating "vessel sailing date earlier than bill of lading date"? 2. "Time Sheet” document indicates completion of loading time 28/09/10 Time:01.30 whereas Anchorage Clearance Certificate shows Date of Sailing 27/09/10, Q: Can we raise a discrepancy stating "Vessel sailing time earlier than completion of loading time? 3. LC stipulates presentation of shore tank measurement to be taken before loading and after completion of loading. -Shore tank measurement shows tank number 80 "Close 28/09/10 = 01:20 Time Sheet” shows completion of loading 28/09/10 ~ 01:30. 2B (© Copyright Colyer Consulting 201114.415 14.116 14.417 Q: Can we raise a discrepancy stating “Shore tank measurement shows close time as 01:20 whereas "Time sheet” shows completed loading at 01:30 (ten minutes difference). ‘Suggested Answer: T would say that the first two show a conflict but not the last one. It will never be to the minute that both will be completed. The discrepancy for 1 is what you have in ‘the explanation of the fssue and not what is in the question. I would merge discrepancy 2 into one discrepancy covering 1 and 2. Inan L/C, under field 48, it stipulates that documents are to be presented within 21 days after date of shipment, but within L/C validity. a) IF BL presented with documents shows more than one on board notation i.e., ‘g00ds shipped from more than one port of loading which is permissible under the U/C, which date of shipment (on board notation) must be considered to determine whether documents are presented within the presentation period? ) Same question but a different case: if more than one set of Bills of Lading are presented showing different on board notations with goods shipped on the same ‘aarrying vessel, from different ports of loading, which date of shipment must be ‘considered under such case? ‘Suggested Answer: (2) You would apply ISBP paragraph 10S if partial shipments were not allowed. If they were allowed, you would treat each on board date separately in relation to the period for presentation. (b) Same answer as above. Request your guidance to understand sub-article 14 (a) of UCP 600 which reads as follows: A Nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a ‘complying presentation". Question: Since the words ‘must examine’ are used in this sub-article, does it mean that the confirming bank must examine the documents. Irrespective of instructions from the presenter? Suppose the presenter states not to ‘examine the documents, on their instructions to the confirming bank, and asked for the documents to be sent to the issuing bank without scrutiny. Is the confirming bank still required to examine the documents? ‘Suggested Answer: ‘The UCP can only cater for what is expected to represent standard requirements and cone of these is that a confirming bank must examine the documents otherwise they risk preclusion under sub-atticle 16 (f). The UCP cannot take account of situations where a confirming bank may be requested to do something that is not expected of them ie., to not examine. Whilst it is possible for a beneficiary to request that the ‘confirming bank not examine the documents, and merely forward them to the issuing bank for settiement, I would suggest that you should also seek agreement from the beneficiary that your confirmation no longer exists in respect of that presentation. “The fact that you may have forwarded documents to the issuing bank under the specific request of the beneficiary may not, under the UCP or local law, remove your ‘obligation to honour or negotiate ifthe issuing bank failed to honour. ‘According to sub-article 14 (I), a transport document may be issued by any party other than the carrier, owner, master or charterer provided that .... . How to ‘overcome this potential risk?’ “ © Copyright Collyer Consulting 2011 e fal ms mm mmm mmwow 14.118 Suggested Answer: ‘The question is what risk are you referring to? The wording that is in sub-article 14 ())is largely for clarity rather than creating a rule or a new rule. No UCP revision has ‘ever referred to the issuer of a transport document and who it should be. The UCP has concentrated on issues such as naming the carrier and the correct form of signing. The wording in sub-article 14 (I) reflects the position that existed in UCP 500, 400, 290, 222, etc. We have received a LC in which one of the documents required Is stated to be “Warehouse Receipt in one original and 2 copies”. The beneficiary presented their documents to us and we found them to comply. The issuing bank sent a MT734 refusal message stating a discrepancy of "Warehouse receipt issued by beneficiary”. ‘We objected to the refusal citing sub-article 14 (F) but the issuing bank has argued that a warehouse receipt issued by a beneficiary does not fulfil the function of the document. Please advise your views. ‘Suggested Answer: ‘Absent the name of an issuer of the warehouse receipt, the document may be issued by any party, including the beneficiary. The beneficiary is as capable as any other organisation of having a secure facility or warehouse in which to store the goods. “The issuing bank cannot use sub-article 14 (f) as a justification for their credit not indicating the issuer or type of issuer that was acceptable or required. Article 15 — Complying Presentation (No new queries) 16.79 Article 16 — Discrepant Documents, Waiver and Notice ‘An issuing bank issued an LC with the following clause: “PAYMENT WILL BE EFFECTED AFTER 60 DAYS FROM DELIVERY DATE OF GOODS WHICH WILL BE ADVISED TO YOU BY AUTHENTICATED SWIFT UPON, RECEIVING APPLICANT'S NOTIFICATION IN THIS REGARD". Documents were submitted & no discrepancies observed. Issuing bank released the documents to the applicant, who had cleared the goods. However, the acceptance notice was never received, ll our tracers were replied with the same answer as follows, “Trying to contact applicant. Shall revert back to you.” In the meantime the due date has passed. Again, we received the same reply for our query! Can the issuing bank maintain the same stance forever, that they are unable to trace the applicant or not yet received applicant’s notification, and avoid payment under the LC? Suggested Answer: Based on the wording of the credit, the payment was not conditioned on the Presentation of complying documents but the relaying of the applicant's notification that goods had been delivered. On this basis, and if the applicant never notifies the date of delivery, no message will be sent by the issuing bank, resulting in no payment. ‘Whilst an issuing bank has an obligation to make payment under a credit, this was ‘modified by the wording of the credit. You can apportion blame on the Issuing bank 15 (© Copyright Cotyer Consting 201116.80 16.81 16.82 for the wording of the credit, but the shipment by the beneficiary was tantamount to {an acceptance of that condition by them. Upon receipt of documents presented under a usance negotiation LC, an issuing bank gave their acceptance advice by authenticated M799 message to the nominated bank stating “Please be advised that the bill has been accepted by the issuing bank to mature on 20000 (due date)’ ‘Subsequently, (one or two days later, but still within the 5 banking day period), the issuing bank sent an M734 advising refusal of the documents due to a discrepancy. Can an issuing bank send a notice of refusal AFTER giving an acceptance advice, ‘even if both messages were sent within 5 banking days? If the answer is no, where can we find an official answer to support our position? Suggested Answer: You should not expect to see any applicable rule or opinion as itis so obvious that if an issuing bank sends a message to say that the documents comply then that is final. However, there was an opinion Issued in 2010 (TA719) that referred to an issuing ‘bank paying the wrong amount and whether they had the right to seek a repayment. The analysis stated: Under the UCP, a payment made by the Issuing bank is final and considered to be without recourse to the party to whom payment was made. A refund of the amount ‘wrongly advanced may be possible through mediation of the parties and/or the applicable law in relation to a payment being made by a ‘mistake of fact’. ‘Although the opinion was in respect of a payment, the criteria would equally apply under a credit that was available by acceptance and where the issuing bank provided a notice of acceptance. Issuing bank refuses documents due to discrepancies. Refusal message states that documents are held pending disposal instructions. Applicant provides acceptance for stated discrepancies, but the issuing bank refuses to accept the waiver. Issuing bank notifies the presenter that the documents are unaccepted and are being returned after 3 months following presentation. Can the issuing bank be held responsible for the delay, by the beneficiary and/or the applicant? Suggested Answer: Provided the issuing bank has given their refusal notice within the time allowed in UCP 600 and have indicated that the documents are held pending disposal Instructions, they are not responsible for any delay in receiving instructions from the applicant to accept the discrepancies or from the presenter in respect of any further action that is required. However, if the issuing bank advises that they are returning the documents then they must do so within a reasonable time. Failure to do so will make them liable. ‘When a negotiating bank specifically instructs us to hold documents if discrepant, how long do we hold, even if repeated tracers remain unanswered? Applicant has ‘accepted the documents and is pressurizing us to release them as the goods are incurring demurrage. Suggested Answer: You should try a different means of contact to get an answer i.e., by phone. Otherwise, you should tell the bank that you have an acceptable waiver and if no response is received within X days you will return them. You should also request that your client contact the beneficiary so that they instruct the nominated bank to give you instructions. 6 (© Copyright Collyer Consating 2011 -— oO16.83 When playing the role of a nominated bank / confirming bank, is it appropriate to apply sub-artice 16 (c) (il) (b) when sending our refusal message or should it be 16 ©) iid @) assuming the other options are not applicable to the scenario? ‘Suggested Answer: ‘A nominated bank or confirming bank cannot seek waiver from the applicant, therefore sub-article 16 (c) (il) (b) only applies to an issuing bank. This sub-article also commences “that the issuing bank ..". Article 17 — Original Documents and Copies 17.23 We are receiving many Middle East & Bangladesh LC’s with the following dause “Reproduced documents by means of reprographic, automated, computerised systems, carbon copies or photocopy machine are not acceptable, unless such documents bear the original signature and stamp of the issuer". Some of the certificates of origin and insurance documents presented are ‘electronically generated & signed. ‘We received a refusal message due to certificate of origin / insurance document rot manually signed, Query signature? lust these documents have a manual signature - as LC calls for original Query 2: If the answer to the above question is yes, neither UCP nor ISBP have any provision for an original signature. Hence document signed by electronic means or chop is also acceptable? ‘Suggested Answer: 1. Based on what you have stated, yes. 2. The issue here is that the document is produced by electronic means and therefore an original signature is required. The requirement is one created by the term in the credit and not by any article or paragraph of UCP or ISBP. 17.24 Recently, we received a refusal notice MT734 from the issuing bank stating discrepancy as “certificate of origin in one original and one photocopy i/o certificate Of origin in one original and one copy”. Is it a valid discrepancy? (L{C calls for certificate of origin in one original and one copy) ‘Suggested Answer: ‘Where a credit states ‘copy’, absent any condition that photocopies are not acceptable, a photocopy will be acceptable. This position can be attained through Paragraph 31 of ISBP. This paragraph states “where an original would not be accepted in lieu of a Copy, the credit must prohibit an original e.g., "photocopy of invoice - original document not acceptable in lieu of photocopy", or the like". This paragraph uses ‘copy’ and ‘photocopy’ in the same context. Article 18 — Commercial Invoice + 18.40 Invoice shows additional shipping marks than those shown on the BL. Whether this Is discrepant or not, treating this as additional detail ‘Suggested Answer: 4 Not discrepant. This Is covered by ISBP paragraph 35. ” = {© Copyright Collyer Consulting 2011 4 = ww!18.41 _ In field 45A, goods description, it states “Stee! per proforma invoice (sent separately forming an integral part of the LC)". Invoice shows "steel per proforma invoice". Is this discrepant as invoice must show full details as on the proforma invoice? ‘Suggested Answer: ‘This type of credit should be refused. There should not be a proforma invoice that Is considered to be an integral part of the credit see sub-article 4 (b). If a nominated bank or confirming bank accepts such a credit, then they will be bound to examine the conditions. But, this is bad practice. Article 19 — Transport Document Covering at Least two different modes of Transport (No new queries) Article 20 — Bill of Lading 20.81 IF LC states the port of loading as a dry port and the bill of lading shows the piace of receipt as the dry port and port of loading as a sea port, would it be considered as a discrepancy as the bill of lading cannot show the port of loading as a dry port, for ‘obvious reasons. Suggested Answer: Clearly the credit was Issued incorrectly if the port of loading was stated to be a dry dock. The presentation of a document that shows the place of receipt as the dry dock will be acceptable, even with a different port of loading. The date of receipt at the ‘dry dock will be considered to be the date of shipment. 20.82 Ifa bill of lading makes a reference to another source containing the terms and ‘condition of carriage, according to UCP we need not examine same, but should a ‘document examiner check that reference to verify whether it really contains the ‘terms and condition of carriage (to merely verify whether terms and conditions really ‘exist and not examine same)? Suggested Answer: “There Is no requirement for a document examiner to ascertain that the terms and conditions of carriage actually exist at the source that is mentioned. Sub-article 14 (2) requires that a bank examine documents ‘on the basis of the documents alone’ to determine whether or not they constitute a complying presentation. To carry out the determination that you state, would go beyond an examination on the basis of the documents alone. 20.83 Regarding the ICC approval of the paper "Recommendations of the Banking ‘Commission in respect of the requirements for an On Board Notation” does it ‘conclude that If the B/L shows a place of receipt different from the port of loading ‘and also shows a pre-carriage vessel and ocean vessel (2 different vessels), then the ‘on board notation has to be "shipped on board the date by pre-carriage vessel at the ‘place of receipt” OR "Shipped on board the date by ocean vessel at the port of "2 If the B/L does not show place of receipt and shows only pre-carriage vessel, port of loading and ocean vessel, then does the on board notation have to be: “shipped on board the date by ocean vessel at the port of loading”? ‘Suggested Answer: In respect of your first comment, the on board notation must be in respect of the 8 (© Copyright Colyer Consuting 2011a ee oJ mw wi 20.84 vessel that is leaving the port of loading stated in the credit .e., the port appearing in the place of receipt field or the port of loading field. If both ports are within a range ‘or geographical area stated in the credit, as the port of loading, then the on board notation may be in respect of either vessel. If the bill of lading shows a means of pre-carrlage (another vessel, truck, rail) then there must be an on board notation showing the name of the vessel and the port of loading that is stated in the credit. Where no means of pre-carriage Is given, but a place of receipt is shown (whether the same or different to the stated port of loading) only a dated on board notation is required. Beneficiary presents a B/L with detail as follows: Place of Receipt: Jakarta Pre Carriage: Vessel 1 ‘Ocean Vessel: Vessel 2 On board notation shows: ‘Shipped on board Vessel 1 at Jakarta on Aug 04, 2010 with Connecting vessel: Vessel 2 + Is this BL discrepant or not? = If there is a pre-carriage and ocean vessel in BL, the on board notation should indicate the pre-carriage or ocean vessel? Lam not able to pin down which UCP article or ISBP paragraph that can shed light on this issue, as UCP 600 sub-article 20 (a) (i) states: If the bill of lading contains the indication "Intended vessel" or similar qualification in relation to the name of the vessel, an on board notation indicating the date of shipment and the name of the actual vessel is required. But it does not say which vessel - the Pre-carriage Vessel or the Ocean Vessel -, and Issuing banks tend to spot it as a discrepancy, if the ocean vessel is not stated in the ‘on-board notation. ‘Suggested Answer: ‘The answer to this question lies in ICC Opinion R.352 ‘This opinion refers to an example where there is a pre-carriage vessel and place of receipt shown as Karachi port and an ocean vessel and port of loading, again, Karachi. The question was, for which vessel should the on board notation be Issued? “The answer was that the credit required shipment from Karachi and therefore the on board notation should, based on the structure of the BL, be in respect of the ocean vessel and not the pre-carriage vessel, which on its face was only operating within the confines of Karachi port. Following this opinion, the on board notation should be in respect of vessel 2 for your example. ‘The reality is that in the above example and that shown in your query, Vessel 2 will ‘not be sailing from the stated port of loading instead it will be the port where transhipment will occur. Unfortunately, a number of shipping companies and their ‘agents in these parts of the world read the part of the UCP that says that the port of loading must be that which is in the credit and they insert “Jakarta” whereas itis probably Singapore or Hong Kong. They do not read the remainder of the article that 19 (© Copyright Colyer Consulting 2011basically says if the port of loading Is not stated as the port of loading (\.e., its the place of receipt) then an on board notation is required showing the name of the Vessel and the port. If they followed the rules and inserted the actual port of loading for Vessel 2 then the document would have complied. But, by inserting Jakarta as the port of loading as well they have actually created an unnecessary discrepancy, as on its face the document is saying that Vessel 1 is not leaving Karachi, when in fact itis. Banks can only examine documents on their face. Article 21 — Non-Negotiable Sea Waybil (No new queries) Article 22 — Charter Party Bill of Lading (No new queries) Arti 23.15 23.16 23.17 je 23 — Air Transport Document “There is a document required under a documentary credit as follow COPY OF BENEFICIARY'S FAX TO APPLICANT INDICATING CARRYING AIRLINE, [AIRWAY BILL NUMBER AND DATE, AIRPORT OF DESTINATION, QUANTITY AND \VALUE OF CONSIGNMENT. ‘The AWB under this transaction was issued on 28/12/2010 and the date of dispatch (of goods is 03/01/2011. If the benefidary has presented the mentioned document indicating date of the AWB: ‘as 28/12/2010 and the documentary credit requires "AIRWAY BILL NUMBER AND DATE" Is this a discrepancy? Suggested Answer: For an air transport document, the date of shipment will depend on whether or not it ‘contains a flight stamp showing the flight number and date. Under article 23, the {date of shipment is considered to be the date of issuance unless there is @ flight Stamp shown (or required by the credit). Ifa flight stamp appears on the document, then the date in the stamp must be taken as the date of shipment. If there is no flight stamp on the document, then the date of issuance will be deemed to be the date of shipment and therefore, the ‘date’ of the document. Otherwise, the date in the fight stamp will apply. Tam a document examiner of a commercial bank in China. Recently, T saw an AWB from Germany that showed XXX as the contracting carrier. According to UCP, ant "AWB must evidence the carrier. However, can we regard the "contracting carrier” as the "carrier" mentioned in the UCP. In the contrary, we refuse the document, but we find no support for that. ‘Suggested Answer: ‘The UCP only refers to carrier and not the form of the carrier. A contracting carrier would be acceptable. ‘An air waybill has been presented to us which indicates the name of the carrier in the ‘issuing earrier’s name and address’ field. The signature at the bottom has no stamp cf additional text indicating the capacity of the signatory. However, the signature line {not like normal air waybills, It only shows ‘signature of issuing carrier’. Do you think that this document is acceptable? 0 (© Copyright Colyer Consutsng 201123.18 ‘Suggested Answer: In this situation, I think it is reasonable to accept the signature. The signature line reads “signature of issuing carrier" and the issulng carrier Is defined in the document. In most air waybills, the signature line states “signature of issuing carrier or their ‘agent” and therefore there is a need to determine who and in what capacity the person has signed. ‘An Air Waybill indicates date of issuance 01Sept.2010 and contains a separate notation as follows: FLIGHT NUMBER AND DATES EK108- 01.09.2010 EK382- 04.09.2010 ‘TG682- 08.09.2010 If the L/C stipulates latest shipment date 01Sept.2010, should a bank refuse documents stating, as a discrepancy, LATE SHIPMENT (FOR FLIGHT NO.EK382 AND 76682)? Suggested Answer: ‘The latest shipment date in a credit relates to the commencement of the journey from the port/airport of loading/departure as stated in the credit. Provided the flight (on 1 September Is from the airport of departure stated in the credit, the documents will comply. The remaining flight numbers will relate to the transhipment of the ‘goods up to final destination. Article 24 — Road, Rail or Inland Waterway Transport Documents 24.7 248 In CIS countries, no original rail waybills are available for negotiation. All originals go with the rail cars. Can a FCR be used in its place for negotiation or can we use a copy Of the rail waybill? Is there a document ‘ail consignment note’ mentioning the rail car ‘numbers shipped in that lot? Can we get It issued by the transporter? ‘Suggested Answer: ‘Article 24 makes some allowances for rail waybills~ a rail transport document ‘marked ‘duplicate’ will be accepted as an original and a rail transport document will be accepted as an original whether marked as an original or not. I do not see how a FCR will assist as this document is merely a receipt for the goods and not an evidence of carriage. There is no concept of a rail consignment note that I am aware Of, this is effectively the rail waybill We received the following CMR: in box described ‘Signature and stamp of the Carrier” there is a handwritten signature only and in the box described ‘Carrier’ there is the pre-printed name of the Carrier ~ is this OK? ‘Suggested Answer: ‘Although the form requires a signature AND stamp of the carrier. A signature alone will meet the requirements of article 24 if the carrier is identified elsewhere in the document, Article 25 — Courier Receipt, Post Receipt or Certificate of Posting (No new queries) a (© Copyright Cote Consulting 2011Article 26 — "On Deck”, “Shipper’s Load and Count”, “Said by Shipper to Contain” and Charges Additional to Freight l 26.7 Ocean Bill of lading with container number was shown together with “On deck at ‘shippers risk” and LC is silent for on deck shipment. We quoted a discrepancy for on deck shipment. “The nominated bank mentioned that as long as the goods are evidenced by the chipped on board notation the additional clause stating that the goods are on deck at shippers risk Is not to be construed as a discrepancy. The reason is that with this adaltional statement, the shipping company is providing a disclaimer clause to protect themselves as most containerized shipment is normally placed on deck, . We are disagreeing with the explanation since on board notation refers to shipment . date. Suggested Answer: Bones examine documents on their face and if the BL shows shipped on deck then It G Is discrepant under UCP. Article 26 draws no distinction between the method of packaging used or the type of shipment that Is made. However, itis highly unusual for a shipping line to refer to on deck shipment where containerised shipment is . ‘concerned, as most containers are technically shipped on (or above) deck. Article 27 — Clean Transport Documents 27.6 Our customers (applicants), especially from iron & stee! industry, request us to insert ‘dauses in documentary credits such as: Following remarks on B/L are acceptable: Wet before shipment, atmospheric rust oF partly stained cargo, loaded wet from open area during the rain and similar." or ™B/L containing the following remarks such as, outer surface rust stained, some straps loose and/or occasionally broken, outer inner laps occasionally slightly telescoped and locally bent along the edge, atmospheric rust cargo loaded from open area, wet before shipment (not sea water) or similar wording, is acceptable.” “The words "similar" and “similar wording" are ambiguous and allow a B/L to contain any remark other than those that are clearly specified. Therefore inclusion of these nods "similac” and "similar wording” to the above mentioned clauses may cause & ‘dispute regarding which remark makes the B/L discrepant, and which remark does - rot, between our bank, the applicant, beneficiary and nominated bank. ‘Suggested Answer: ‘The use of "similar" allows flexibility in case a carrier or agent inserts wording that is hot the same as that stated but has the same intent. Use of “or similar” does not refer to the wording but to the exceptions being stated. In this respect there is ‘greater scope for differences of opinion. In this respect the wording should be Specific (and as agreed with the beneficiary) or refer to the acceptance of similar : ‘wording in respect of the ‘wet’ nature of the product. . “The choices for the applicant are to give specific dauses that will be allowed (and only those clauses) or allow flexibility on the exact wording provided the intent is the 2 © Copyright Colyer Consulting 2011— ‘same as that expressed in the credit and therefore the situation where a banks view may not agree with that of the applicant. It is the applicant that will bear the risk of ‘ambiguity ifthe banks consider the wording to be similar in intent. Article 28 — Insurance Document and Coverage 28.57 28.58 28.59 UC condition: There must be no exclusion in the insurance documents with respect to the risks to be covered as per the credit. Insurance policy must cover “Institute argo Clauses A” including war, strikes, riots, civil commotions. In spite of L/C condition, insurance documents, generally from some Asian countries, Indude the following dause: “Warranted free of loss or damage a) Caused by strikers, locked-out workmen or persons taking part in labour disturbances riots or civil commotions; b) resulting from strikes, lock-outs, labour disturbances, riots or civil commotion...” LC condition: “There must be no exclusion in the insurance documents with respect to the risks to bbe covered as per the credit. Insurance policy must cover “Institute Cargo Clauses: a, In spite of L/C conditions, insurance document states Institute Cargo Clauses A but also states that some risks which are in"A clause’ are excluded. For example: document says: Institute Cargo Clauses A article 3 and 4 are excluded etc. ‘Are either or both of these discrepant? Suggested Answer: Both would seem to indicate an exclusion to the stated risks to be covered and are therefore discrepant. would like to ask you some questions relating to an insurance policy as in the L/C it ‘asks for "Marine insurance policy/certificate in duplicate drawn to order and blank ‘endorsed for not less than ten per cent over the invoice value covering all risks”. The beneficiary presented a Marine Cargo Policy without indicating drawn to order; they stated name of insured as the beneficiary and endorsed it. What is the meaning of ‘drawn to order? If itis missing, can we treat It as a discrepancy and how to issue the insurance policy in this case? ‘Suggested Answer: ‘The credit is wrong and the document is correct. Banks try and turn an insurance document into a form of negotiable document that is similar to a bill of lading. An Insurance document cannot be structured in this manner. An insurance document will have a space for the insertion of the name of the insured (or assured). This party may endorse the document to convey a right to another to make a daim under the insurance, if necessary. ‘The insurance requirement should be “insurance policy or certificate showing the ‘assured as the beneficiary and blank endorsed by them, [or the assured as the issuing bank (or applicant)}, a We received, under our L/C, an insurance document without a date of issue, but containing the following statement: "We, Insurance company, hereby declare to have insured on 30%2x.2000% (date)... ‘What is your opinion — does this document meet the requirements of paragraph 13 of ISBP and sub-article 28 (e) of UCP 600? 2 (© Copyright Colyer Consttng 201128.60 28.61 28.62 Suggested Answer: T think the wording will comply with sub-artide 28 (e) and ISBP paragraph 13. The intent is to declare the effective date of the insurance coverage. For insurance, what is meant by ‘negotiable’ and how do we ensure that this is complied with. Suggested Answer: “The term negotiable should never be used. Banks are trying to turn an insurance document into a form of bill of lading which is not possible. The insurance requirement should be something like "Insurance policy or certificate for 110% of the Invoice value showing the assured or daims payable to [name of party ~e.9, Issuing bank) “The credit requires the insurance docurnent to evidence that claims are payable at destination (Kota Kinabalu). The insurance document clearly indicates “Claims, if any, payable at/in Kota Kinabalu”. However, the company that will pay is actually located in another country (Singapore). Is Ita discrepancy? If we treat it literally, the insurance docurnent has complied with the LC condition. However, there is actually no insurance agent in Kota Kinabalu for the insured party to contact or file the claim, if applicable. So, it doesn't help the insured party even if the insurance document clearly shows that caims, if any, will be payable in Kota Kinabalu. ‘Suggested Answer: ‘Twould say that the document complies. As you say, it shows that clalms are payable atjin Kota Kinabalu and it also shows the name of a surveyor in that location. If the Spplicant required that insurance claims be made in Kota Kinabalu then the LC should have requested a claims settling agent to be named in that location. In any event, the fact that there is a surveyor would probably give rise to the fact that the Gaims will be settled via them. Is ita discrepancy if the insurance document shows the period of coverage (ending date) or last date of a claim? Suggested Answer: ‘The answer depends on the period and the shipment that Is being covered. For example, f the insurance states claims must be submitted no later than 23 August Ghd the insurance document is dated 20 August, the likelihood is that the goods will not have arrived and when they do the Insurance will be invalid. However, ifthe Insurance document stated claims must be made no later than 30 November, the ‘answer would be different. For period of coverage, you will need to take into account 1SBP paragraph 175. If the insurance document refers to the attaching of insurance within a certain period, then that is different to paragraph 175 in that the clause is ‘Saying that the insurance must be established within the stated period. ‘Sub-artide 28 (e) states: The date of the insurance document must be no later than the date of shipment, unless it appears from the insurance document that the cover is effective from a date not later than the date of shipment. 1S8P Paragraph 175 states: An insurance document that incorporates an expiry date must clearly indicate that such an expiry date relates to the latest date that loading fon board oF dispatch or taking in charge of the goods (as applicable) is to occur, as ‘Opposed to an expiry date for the presentation of any claims thereunder. Presented is an insurance document showing the following details: (© copyaght Colyer Consuiting 2011wi Period of Insurance 29 Aug 2009 - 28 Aug 2010. Date of Voyage / Transit 11 Aug 2010 Date of Issue 12 Aug 2010 (which is after the shipment date, but within the insured period). Lacking in any specific wording to the effect as required under ISBP Paragraph 175 ‘and as per sub-article 28 (¢) stated above, is the insurance document acceptable? ‘Am [ correct to interpret the period of insurance shown above as the effective date of ‘coverage i.e., 30 long as shipment is within the period, it does not matter whether the issue date Is after the shipment date? ‘Suggested Answer: 1 do not see the period of insurance as providing an effective date of coverage. This document would stil need to be dated on or before the date of shipment. The period only establishes the timeline for which the policy is in existence. Effectively, the document does not comply with paragraph 175 in that it contains an expiry date but does not specify the context in which itis stated le, Is the expiry date (28/8/2010) the last date that goods can be insured under this policy or is it the last day for a claim to be made? Article 29 — Extension to Expiry Date or Last Day for Presentation (No new queries) Article 30 — Tolerance in Credit Amount, Quantity and Unit Prices 30.18 This is with regard to application of sub-article 30 (c). We have a LC that permits partial shipments. Also, the goods description reads as 43 packets of vacuum cleaner parts total amount USD 42000. The incoterms are EXW seller's factory. There is no tolerance allowed in the LC with regard to quantity or amount. ‘The beneficiary presents an invoice evidencing full shipment of 43 packets total ‘amount = USD 40,000. Ts sub-article 30 (c) applicable here? “Even when partial shipments are not allowed, a tolerance not to exceed 5% less than the amount of the credit is allowed, provided that the quantity of the goods, if, ‘stated in the credit, is shipped in full and a unit price, if stated in the credit, is not reduced or that sub-article 30 (p) Is not applicable. This tolerance does not apply when the credit stipulates a specific tolerance or uses the expressions referred to in ‘sub-article 30 (a).” ‘Since the sub-artice states “even when partial shipments are not allowed...” though the LC allowed for partial shipment, the benefidary has shipped in full but drawn within the 5% of total amount of the credit. ‘The second half of the sub-article states "that sub-article 30 (b) is not applicable”, In this case, sub artide 30 (b) is not applicable since the goods are stipulated packing units .e., 43 packets & also there is no specific tolerance provided in the credit Hence kindly confirm if my interpretation of the above is correct and we can consider the document as compliant. Can we apply sub-article 30 (c) for partial shipment allowed cases as well? If the 2% (© Copyright Colyer Consulting 201130.19 30.20 beneficiary ships 30 packets for amount of USD 30,000 and stil adjust 5% towards 2 discount or deduction? Because this is EXW there cannot be deductions towards freight and insurance. Suggested Answer: The document would be compliant. ‘Where a first partial shipment has been made, It is impossible to apply the concent of, sub-article 30 (c) as there is no way of knowing f all the goods will be shipped. A deduction for a discount would be covered by ISBP paragraph 60. Sub-article 30 (c) would come into effect once the final shipment has been made, if any. 11am writing to seek your advice for my case as follows: Field 39A states: 10/10 Field 47A states: Both Quantity and credit amount 10pct more or less are allowed Field 43P: Partial shipments allowed Field 468; 90 pct of credit amount will be paid against draft and shipping documents. 10 pet of credit amount will be paid against: + Instruction for remaining balance signed by applicant + Signed invoice indicating amount to be drawn Field 45A shows goods as woodchips with the particular unit price and quantity ‘calculated as MT. ‘The presented invoice for the first drawing shows: + Total shipped value: USD44,295.003 + Total amount of 90pct of shipment value: USD39,865.53 (= USD44,295.003) “The presented invoice for the second drawing shows: USD 4,647.59 “The Instruction for remaining balance is signed by applicant and instructs the payment as USD 4,647.59 “The issuiing bank raised the discrepancy “overdrawn”, They said that 10pct of invoice ‘amount will be (USD44,295.003. - USD39,865.53.) = 4,429.473 and argue that tolerance will only apply for total credit amount and not for each involee. My colleague thinks that the tolerance should be applied to each invoice. By this, she means it will allow 10pct more on the total shipped value for each invoice, particularly (USD44,295.003 +10%) = USD48,724.50 and, as a result, the balance will be: ( USD48,724.50 - USD39,865.53 ) = USD8,803.278, so she does not agree with the issuing bank. Suggested Answer: The issuing bank is correct. “The tolerance in the credit allows the beneficiary to draw invoices up to the ‘maximum amount ~ LC amount + 10%. If the beneficiary presents an invoice for USD44,295,00 (you cannot have an invoice for USD44,295.003 — the US currency only goes to two decimal places), then this ‘should include any element of the tolerance that the beneficiary wishes to draw in ‘excess of the LC amount. The first drawing should be for USD39,865.50 and the final 10% payment for USD4429.50 We received an LC from Bank Tin Italy: U/C amount: USD14,479.90 Field 39A (tolerance): 10/10 % (© Copyright CatverConsuting 201130.21 Field 45A: types of pillows, total quantity: 4.170 pes FOB Quinhon port, Vietnam U/C does not state the total quantity is subject to a tolerance |.e., +/-10%. ‘Question: Can we understand that the L/C allows the quantity to be subject to a tolerance plus or minus 10%? ‘Suggested Answer: Subrarticle 30 (a) states that words "about" or "approximately" used in connection with the amount of the credit or the quantity or the unit price stated in the credit are to be construed as allowing a tolerance not to exceed 10% more or 10% less than the amount, the quantity or the unit price to which they refer.” You will note that the artide uses the word “or” and not “and” in relation to the criteria that may be subject toa tolerance. A reference to +/-10% in field 39A only applies to the amount of the Credit and not the quantity. In effect, although the credit was issued with a tolerance, the beneficiary can only ship 4,170 pieces. LC requirements: 1. Partial shipment not allowed 2. Quantity is in metric tonnes e.g., 1000 Metric Tonnes: 3. Unit price is not stated in the credit, 4. Total L/C value is GBP100000 U/C does not expressly state sub-article 30 (b) is NOT APPLICABLE. Beneficiary has presented four different sets of Invoice for a pre-check and will present the correct invoice for negotiation after all the four invoices have been examined. st invoice - 1st scenario Quantity 1000MT Amount GBP95000 2nd invoice ~ 2nd scenario Quantity 950MT Amount GBP100000 3rd invoice ~ 3rd scenario Quantity 950MT Amount GBP93000 4th invoice ~ 4th scenario Quantity 1020MT Amount GBP100000 Please advise me as to which invoice should be accepted and which ones should be rejected as a discrepant document. ‘Suggested Answer: Given that the invoices all cover different quantities, it should be quite worrying that a beneficiary is presenting various formats of the invoice in respect of goods that have or will be shipped. I am not sure how a bank can offer a pre-check service without the other documents being presented. 1. OK (30 (¢) applies) 2.0K 3.0K 4.0K If you follow sub-article 30 (b), and given that there is no unit price, each will be ‘acceptable - subject to any other data that may appear on the invoice, the credit and ‘other documents. 2 © Copyright Colyer Consulting 201130.22 LC issued for USD8,000 covering 5,000kg of rice, Partial shipment not allowed, No Gilat tolerance stated in the L/C, unit price nat stated, no deduction or discount SApulated to be shown in the invoice. Benefidary presented an invoice for USD? 200 stetthe invoice shows full shipment of 5,000kg of rice effected and 10% deduction as a discount. can the presentation be considered as a short drawing on the basis of UCP 600 sub- article 30 (€)? Suggested Answer: Seo rice 30 (c) refers to the amount drawn before deductions. The Invoice shows the full quantity shipped, forthe full value. Its the discount that is taking the mount below the threshold, Discounts are allowed as per ISBP. 30.23 LC stated: Lc amount: USD90,521.50; Quantity of goods: 234.00MT; Total amount of goods: [USD90,521.50 (LC did not stipulate a unit price) Partial shipment: Allowed 4/-\0pet in quantity and amount acceptable Invoice presented showing: Quantity of goods: 225.00 MT Unit price: 402.32 ‘Total amount: USD90,521.50 Questions: 4. Can we raise the discrepancy that the ratio between total amount of goods and the quantity is not as per LC? 2. How to solve the problem of lack of quantity but issuing bank must pay the full ‘amount? (In case of no discrepancy). Suggested Answer: aes no discrepancy. Based on the LC terms you cannot make the assumption Trot amount divided by quantity = 2 unit price. Other costs may be factored into the overall pricing for the goods. “The wording of the LC seems quite strange in that it refers to an amount (USD90,521,50) and says that i is subject to a tolerance of +/-109% but that ine eer arrount of goods is USD90, 521.50 which would seem to be contradicting the tolerance that has been allowed. Nevertheless the structure of the credit allows the beneficiary to ship a quantity of Joods that flis within the amount ofthe creit. This form of structure allows for 2 ‘moving unit price. Article 31 — Partial Drawings or Shipments 31.15 Aletter of credit contains the folowing condition or clause: shipment should De, a fected in one container and partial shipments under the D/C is ALLOWED. Is it ‘acceptable? Do you consider this as a contradiction? 2 © copyrght Colyer Consulting 2013 be Es a a a rnSuggested Answer “This is clearly a conflict of data and based on the shipment in one container condition, would restrict to one shipment only. ] Article 32 — Instalment Drawings or Shipments (No new queries) ] Article 33 — Hours of Presentation ] (No new queries) Article 34 — Disclaimer on Effectiveness of Documents ] (Wo new queries) Article 35 — Disclaimer on Transmission and Translation ] 35.32 Can you advise if it’s reasonable for the issuing bank to clause the below in thelr LC? “in case that document forwarded by nominated bank to us were lost in transit, we have the right to require copy/duplicate of the original documents, covering letter and relative courier receipt to be sent to our bank for checking and payment under ] Cwill be pended til copy/dupiicate of documents are found compliant. In this regard, the goods paragraph of art 35 of UCP600 is not applicable. Our bank shall not bear any charges and interest incurred. Suggested Answer: T presume that the reference to paragraph 35 should read "the second paragraph of atticle 35 of UCP 600 is not applicable". do not think that such a wording is unreasonable. If documents are lost in transit, an issuing bank cannot be expected to effect settlement based solely on the word of ‘another bank that the documents complied. Article 7 requires that the issuing bank honour a complying presentation and they must be able to determine that fact. The issuing bank cannot insist that replacement original documents are produced, but requiring copies of documents that will determine that the documents did comply, ‘when originally presented, Is justifiable. This position Opinion R651. with that given in ICC 35.33 Documents were to be sent in two lots, but the nominated bank forwards complying documents in one lot. The documents are lost in transit. Does the issuing bank have to honour? Suggested Answer: No. The nominated bank has not followed the instructions in the credit with regard to the disposal of documents. 35.34 If a nominated bank has acted on their nomination and sent the documents to the issuing bank by UPS courier service, whereas in field 78 itis stated that documents must be sent by DHL courier service, and the documents are lost in transit, what will be the status of the nominated bank? ‘Suggested Answer: In order for the nominated bank to invoke article 35, in the event of documents being lost in transit, they must send the documents in the form requested in the . credit and by any nominated postal or courier service. © copyright Colyer Consulting 201135.35 35.36 Bank I issued an L/C requiring presentation of 3/3 set of B/L. This L/C was avaitable wwith any bank by negotiation. The Beneficiary presented documents to Bank N within the time limit ag stipulated in the L/C. Bank N sent the documents to Bank I and listed documents including ‘3/3 original B/L' on their covering schedule. After Checking the document, Bank I found that only 2 original B/L received instead of 3/3 Set of B/L. Bank I refused the documents. But Bank N insisted that they have mailed 3/3 set of B/L and urged Bank I to make payment according to UCP 600 article 35. From Bank I's view, since only one original B/L instead of all documents was lost, there is more possibilty that Bank N was a liar. Bank N lost the B/L but stil listed 3/3 set of B/L on their covering schedule. My questions are: 1. Does UCP 600 article 35 apply to this case? 2. Does Bank I have to reimburse Bank N? 3. Does the number of documents listed on the covering schedule constitute ° prima facie evidence’? § How to deal with a dishonest bank in a L/C transaction? ‘Suggested Answer: 1.No. 2. One bank is not telling the truth. There is no clear answer to the question. This will become a banking relationship issue. 3. It should do. 4, 7727277? This is not a UCP issue. While artide 35 offers protection if documents are lost in transit between nominated bank and issuing bank, confirming bank and issuing bank or between issuing bank ‘and confirming bank, the same protection is not afforded for documents directly sent by beneficiary to the issuing bank. As you know there are occasions when an LC Is restricted to 2 particular bank and that bank declines to act on its nomination or handle the documents and the beneficiary has very litte time to correct the situation through an amendment. He necessarily has to send the documents directly to the jssuing bank. While we accept that the beneficiary himself cannot determine ‘compliance of documents with LC like a nominated bank, we seelot of situations Ginere nominated bank holds that the documents comply but issuing bank holds the ‘opposite view. The actual determination ofcorrectness of documents is determined only after issuing bank examines copies of documents presented "Why cannot the ‘Sbove mentioned situation be included in article 35 (protection afforded to beneficiary in case of direct dispatch of documents to issuing bank), Also, unlike an ‘applicant a beneficiary is very much part of the LC process. Beneficiary can submit Copies of documents to issuing bank for determining compliance. Suggested answer: ‘The wording in article 35 was added for only one reason. This was due to issuing bank's inserting a reimbursement clause Into their credit that would state something like "we undertake to reimburse the nominated bank upon receipt of compliant documents at our counters" and some of these banks taking the view that if the Gocuments were never received at their counters then they do not have to reimburse. This was despite the issuing bank naming a nominated bank in the credit (or any bank where the credit was available with any bank) and specifically Fequesting that the bank act by honouring or negotiating documents that comply, This was seen as being a totally unacceptable position and that a nominated bank 0 {© Copyright Collyer Consting 2013eee — i | | | ] J ] that acted on its nomination should be entitled to receive reimbursement, even where the documents are lost in transit and that this should also apply, as a protection for the beneficiary, if the nominated bank has examined them, determined ‘compliance but honour or negotiation is not effected. Where the documents do not comply or where the beneficiary presents documents directly to an issuing bank, the rule does not apply. The beneficiary has a responsibility to ensure delivery. If the beneficiary decides to send documents directly, they must be received by the issuing bank within the expiry date or latest date for presentation. If you applied article 35 for a beneficiary sending documents to 2an issuing bank, what difference is there for documents lost in transit where the beneficiary sends them to a nominated or confirming bank? Despite the documents being lost in transi, there can be no guarantee that the documents would have arrived at the bank, in normal circumstances, within the stated expiry or latest presentation date. ‘The fact that a nominated bank will not act on their nomination does not stop the bank from examining documents and determining compliance. Article 35 does not require that the nominated bank has actually honoured or negotiated, only that they have determined compliance. Article 36 — Force Majeure (No new queries) Article 37 — Disclaimer for Acts of an Instructed Party 37.9 ‘An Import D/C has been issued with an exclusion of sub-article 37 (c) as well as a ‘clause on the credit (additional condition) stating “in case L/C has expired unutilized, the beneficiary will bear all issuing bank’s commissions and charges”. “The issuing bank has received a SWIFT from the 1° advising bank relaying a SWIFT from the 2 advising bank stating "D/C has been refused by benefidary”. Moreover, the 1 advising bank is claiming their commission and charges stating “the exclusion Of sub-article 37 (c) is not applicable in this case since D/C has not been advised to the beneficiary neither by the 1* advising bank nor by the 2% advising bank”. “The issuing bank has requested the 1* advising bank to advise the fate of advising said D/C to the 2" advising bank and the beneficiary as well. Then, the issuing bank received an acknowledgement (MT 730) from the 1" advising bank stating “We have ‘advised subject D/C to the 2" advising bank. However, when and how this D/C was advised by the 2” advising bank to the beneficiary is not known to us” ‘Are we, as issuing bank, liable to bear the 1* advising bank's commission? Suggested Answer Firstly, a credit should not be issued excluding sub-article 37 (c). It is a basic premise that if'a bank provides a service that the instructing party remains ultimately lable to reimburse if their costs are not met. If the credit has been refused, then my view is that the issuing bank is lable to pay the fees of the advising bank and any second advising bank notwithstanding the exclusion made in the credit. The expectation of collection of the fees can only be ‘where the beneficiary has not intimated any refusal of the transaction. a © Copyright Colyer Consuting 201137.10 37.1 Under article 37, whether a second advising bank can insist on their advising charges before delivery of the credit. Suggested Answer: The basis for article 37 is that no bank should request their charges in advance, We have issued an L/C with instructions as to charges as: all charges outside (Country D) are for account of the beneficiary. ‘on 31 December the advising bank informs us that on behalf of the beneficiary the Lic is cancelled and they ask us to pay outstanding charges that we have done. In the beginning of February the advising bank charges us for an additional amount. ‘They inform us that applicant did present documents on 27.12.2010 - the documents were diserepant and as the documents could not be rectified the documents were returned but without payment of the advising bank's charges (examination ‘commission and discrepancy fee, among others). ‘Advising bank informs us that as per sub-article 37 (c) (i) we are to pay these charges. Is this correct considering that they have already charged us and we were not aware that discrepant documents were presented. ‘Suggested Answer: Sutrartice 37 (©) refers to situations where the advising bank is unable to collect thelr charges or deduct them from proceeds. If the documents were presented by the beneficiary and then withdrawn by them, the bank had an opportunity to collect their charges at the time of returning the documents. In any event, a discrepancy fee is one that Is exclusively due from the beneficiary. | do not see any grounds for the advising bank to diaim these charges under sub- article 37 (0) Article 38 — Transferable Credits 38.88 A transferable L/C, which is not confirmed and available by acceptance with drafts Grawn on the Issuing bank, maturing at 180 days from B/L date also provides the following information -The nominated bank, as per the 1% benefidary request, transferred the L/C to the 2” beneficiary, The 2" beneficiary presented compliant documents (documents value USD80000.00) The 1° beneficiary furnished the nominated bank with a compliant commercial invoice and draft (documents value USD100000.00). “The documents were dispatched and received by the issuing bank. The 1* beneficiary is aséng the nominated bank to contact the issuing bank requesting them to return the accepted draft to him. Does the 1% beneficiary have the right to make such a request? ‘Suggested Answer: ‘Athough the first beneficiary provided their draft In substitution for that of the Second beneficiary, they are not entitled to receive back the draft for the full amount. To release the draft to the first beneficiary would enable them to find a bank or financial institution that may be willing to discount the whole proceeds. If that bank 2 © Copyright Collyer Consting 201538.89 38.90 or financial institution presented the draft to the issuing bank at maturity then they will be entitled to receive the full proceeds, thereby denying the second beneficiary their portion of the funds. If the first beneficiary required a draft to be returned to them, they should have issued two drafts - one for the amount that is due to them and one for the amount that Is due to the second beneficiary. However, an issuing bank may then become aware that the amounts represent the funds that are due to each beneficiary. We issued a transferable L/C to be advised through one of our regional branches. The L/C was in local currency. Beneficiary requested the advising bank to transfer a portion of the L/C in EUR to a second beneficiary in Europe. In addition he insisted to Include a payment schedule and to indicate that payment will be made subject to the ‘exchange rate applicable on that day. Subsequently, he requested many amendments under the credit complicating the Issue further. As the advising bank has the right to accede or reject a request for transfer, they decided not to entertain this request. The beneficiary is now asking for ‘a written rejection notice. A couple of minutes ago, he requested us to send an irrevocable commitment (Letter Of Assignment) to the ultimate supplier (no transferable L/C is involved now) in line with UCP 600 artice 39. He also made us understand that he will be presenting the documents to us under the original letter of credit. Here too, we are not comfortable in the face of Money laundering etc. How best ‘could we word our refusal message to both requests whilst avoiding any issues? ‘Suggested Answer: For the transfer request, you are under no obligation to give any reason for refusing to transfer. If you want to give something, you could say: "We advise that we are not willing to transfer on the terms and conditions that you have requested. This stance sin accordance with UCP 600 sub-artidle 38 (a)." If an assignment of proceeds is being considered, you cannot give an Irrevocable ‘commitment to pay. The beneficiary and the supplier must enter into an assignment agreement ie., that out of the proceeds due under LC No. X amount Is to be payable to... in respect of supplying [goods as per LC]. The beneficiary then Provides you with a copy of the assignment and you contact the stated assignee and advise that you have received the instruction attached (attach a copy of the assignment agreement agreed between the beneficiary and the supplier) and that provided documents are presented to your 1000 branch and are found to be in compliance with the terms and conditions of the credit and no other legal impediment is in place, you will honour and effect payment to the assignee in the ‘amount stated. Tt will depend on what the local law states in relation to assignments as to whether ‘oF not you can disregard it. ‘We have received an irrevocable transferable letter of credit from Germany under which documents required are only three, as follows: Commercial invoice, Beneficiary Statement that they will send bill of lading and other documents relating to this shipment directly to the applicant and packing list. Beneficiary requested us to transfer said L/C to India, but he changed all documents required to be the following: (© Copyright Calver Consutng 2011,38.91 38.92 Commercial invoice, Bill of lading, Analysis certificate and Certificate of origin. Moreover, he presented all documents required which are fully complied with the original L/C. All of them prepared and presented by him, as a first beneficiary, according to L/C conditions. ‘We need your opinion if we are authorized to transfer said L/C with these conditions ‘or not, noting that we know this is contradicting with sub-article 38 (g) but logically we won't use any documents from transferred L/C to be presented under original uc. ‘Suggested Answer: Basically, you cannot transfer under these terms. Also, it does not make much sense to effect a transfer when all the shipping documents have already been issued and presented. Even if you agreed to transfer the credit, the transferee would not be in a position to provide the documents that would represent a complying presentation. An ‘assignment of proceeds between the beneficiary and the proposed transferee would be the more appropriate means of enabling settlement to occur to each party. ‘According to sub-artice 38 ()) is a transferring bank obliged to examine the documents of the first and second beneficiary, where they have not confirmed the original credit and the transferred credit does not indicate, to the second beneficiary, any provision as to the examination of the documents to be presented by them? Further, if the first beneficiary's Invoice and/or draft complies, is the transferring bank obliged to examine the presentation of the second beneficiary and, if so, what ‘must they do if the second beneficiary's presentation does not comply? Must they send a rejection notice to the second beneficiary or if not, must they approach the first beneficiary and obtain their consent before dispatching the documents to the issuing bank? ‘Suggested Answer: My view is that if a transferring bank, that has not confirmed the transfer, is not willing to examine the documents of the second beneficiary, then they should state this fact in the advice of transfer. In other words, state that upon receipt of the documents the bank will allow substitution to occur but the documents will be sent to the Issuing bank unchecked and that settlement will only be made upon receipt of funds from the issuing bank. Sub-artice 38 (1) refers to"... if the invoices presented by the first beneficiary create discrepancies that did not exist in the presentation made by the second beneficiary... Ifthe transferring bank has not examined the documents of the second beneficiary, how will they know that their documents ‘comply and the invoice of the first beneficiary creates discrepancies that were not ‘apparent in that presentation? Examination of only the first beneficiary's substituted ‘documents has no benefit in the determination of the compliance of the presentation ‘as a whole. In the event that discrepancies are determined in the presentation of the first andor second beneficiary, and the discrepancies in the second beneficiary's presentation cannot be cured by the first beneficiary, then refusal notices should be ‘Sent to both parties seeking instructions. Whatever instructions are given, they ‘should reflect those of both the first and second beneficiary. a. There are various situations where the master LC seeks beneficiary documents (it ‘can be a shipment advice to applicant, fax transmission report, benefidary certificate ttc.) and sometimes due to commercial reasons, the first beneficiary do not want the ‘details of price / applicant to be divulged to the second beneficiary. In such cases we seek clarification from the issuing bank and the master LC is amended to read as first beneficiary certificate... ist beneficiary copy of shipment advice ....., ete. and ™ © Copyright Colyer Consulting 2011 ted toed iad — iedce ool Bisse a 38.93 38.94 while transferring the LC we transfer the clause as itis viz. under documents required “First beneficiary certificate......, First beneficiary's copy of shipment advice... First beneficiary's fax advice to applicant... ec. If such Is the clause included in the transferred LC, is the second beneficiary expected to get these documents from first beneficiary and submit them along with the other documents or he can leave it to the first beneficiary to submit the documents upon substitution of their invoices and bills of exchange? b. In situation (a) above (where second beneficiary does not submit frst beneficiary certificates etc.) ifthe first beneficiary falls to substitute their documents, will the ‘documents of second beneficiary if forwarded to the issuing bank be a discrepant presentation as the master LC is calling for first beneficiary certificate, first beneficiary fax advice... etc.? Suggested Answer: 2. If the original credit is so amended and the conditions are part of the transferred credit, and the second beneficiary wishes to preserve their ability to present a ‘complying presentation then they must obtain and present those documents with the other required documents. Failure to do so will always render their presentation non- complying and will not enable the presentation of the second beneficiary to be utlised as envisaged by the content of sub-article 38 (I) - (where the first beneficiary fails to substitute or correct discrepant substitute documents). ._ Yes. The documents will dearly not comply with the terms and conditions of the ‘original credit. (a) When a LC is transferred in full in terms of quantity (may or may not by reducing the value of the goods), does it mean we have transferred the full rights? (b) No transferring bank seems to explicitly mention on the transferred LC with regard to if rights are partially transferred or fully transferred. What is the meaning of partial / full transfer of rights and how Is it expressed in the transferred LC? (©) Having transferred the LC in full either with regard to quantity / rights (subject to larity as requested above), If there is an amendment to the master LC increasing the quantity / amount, can we transfer the amended part to another second beneficiary at the request of the first beneficiary? ‘Suggested Answer: (@)_ You have transferred to the second beneficiaries) the right to draw up to the amount of the transferred credit(s) and the right of the first beneficiary to draw up to the amount of the original credit has been reduced by the amount that has been transferred. (b) Tam not sure why you are referring to the word "rights". The UCP does not use this terminology in the context of transfer. A transfer constitutes the act I have ‘outlined above. There is no requirement for a bank to indicate whether a transferred ‘credit represents a full or partial transfer (in monetary terms). (©) Any unutlised portion of the original credit amount, whether as a result of a previous transfer(s) or an amendment, will be available for transfer to another second beneficiary. Ina transferrable LC (the master LC) if the confirmation instruction is “MAY ADD". is it possible to mention “WITHOUT” in the transferred LC? Suggested Answer: ‘The offer to "may add” confirmation is addressed to the first beneficiary. If at the 35 (© Copyright Colyer Consuting 2011,38.95 38.96 38.97 38.98 time of transfer the credit has not been confirmed, the transferring bank must advise the transfer stating that the credit is without their confirmation. They could, additionally, add something like "we are authorised to add our confirmation upon the ‘specfic request of [name of first beneficiary] and is subject to our agreement at the time of our receipt of any such request’. If itis "MAY ADD” in the transferred LC to the second beneficiary, can the second beneficiary confirm the LC without the consent of the first beneficiary by a bank other than the transferring bank? In that case can the honour or negotiation take place at the counters of the confirming bank? Suggested Answer: ‘A bank other than the transferring bank can only add confirmation if itis specifically allowed in the original credit. Otherwise, a request or authorisation to add confirmation is directed solely at the bank that received the credit from the issuing bank (the advising bank). If the master LC shows under 47A: "Goods to be delivered at destination by 31- March-2011 and Commercial invoice to evidence the same", is it possible to mention in the transferred LC under 47A: "Goods to be delivered at destination by 15-March- 2011 and Commercial invoice to evidence the same”? Suggested Answer: T do not see an issue as the second date is prior to the first. However, such a change is subject to the agreement of the transferring bank and a bank may see this as ‘going beyond the requirements in sub-artice 38 (g). However, the counter argument is that the statement refers to a delivery (shipment) period which may be curtailed Under that sub-article. Ina transferable LC, and once itis transferred to two beneficiaries, if the transferring bank receives an amendment changing the proforma invoice number and the first beneficiary authorises the advice to both second beneficiaries, and one second beneficiary rejects the amendment and presents documents and the other accepts the amendment and presents documents accordingly, is the LC amended or not? ‘What will happen with the second beneficiary documents? ‘Suggested Answer: ‘This type of amendment must be consented to by both second beneficiaries. Otherwise, the first beneficiary can only present their invoice with one of the proforma numbers (in respect of both second beneficiary presentations). “The second benefidary documents are discrepant. The discrepancy being that the ‘country of origin is shown as India Instead of China (on the invoice). There is no certificate of origin required under the credit. Ifthe first beneficiary substitutes their invoice and rectifies the discrepancy by showing the origin as China, can the transferring bank accept this rectification? Suggested Answer: ‘Technically, the presentation of a complying invoice from the first beneficiary will create a compliant presentation. However, there are wider issues here. The second beneficiary, who is the supplier of the goods, is making a statement (correctly or not) that the goods are of a different origin. With this information, should the transferring bank allow the substitution of a document that the bank may believe to be incorrect ‘and, possibly, fraudulent in its statement of origin? I would suggest that the second beneficiary or their presenter be contacted to determine whether the stated origin ‘was correct or not. If not, I believe the transferring bank should decline to accept the substituted invoice with the origin shown as per the credit. 6 Copyright cotyer Consulting 201138.99 38.100 \With regard to insurance documents under a transfer LC, normally the percentage of insurance cover is inflated to suit the master LC requirement. However in certain situations, again due to commercial reasons, the first beneficiary requests us to retain the same percentage of coverage in the transferred LC and substitute the insurance document along with the invoice and draft. Is this permitted, as I see no atticle or provision prohibiting the substitution of the insurance document. Are we in deviation of the UCP in such a situation where the second beneficiary document is substituted by @ first beneficiary document, not necessarily the invoice and draft? Of ‘course, the transferring bank needs to ensure that the substituted document is not discrepant (assuming the second beneficiary documents were credit compliant) and if for any reason the substituted document is discrepant, we would seek the second beneficiary authority to forward the substituted documents with discrepancies to the issuing bank. Are we right in doing this, though itis jeopardizing the interest of the second beneficiary as his documents were compliant. ‘Suggested Answer: The issue here is that there will be two sets of insurance cover taken out for the same goods. This act, in itself, may invalidate each policy or certificate according to the terms under which the respective insurance companies may have agreed to insure. Although the UCP, in sub-article 38 (h), refers to substitution of invoices and drafts (if any), banks regularly allow the substitution of other documents. The respective banks carry the risk of such action, The UCP provides a protection point in respect of invoices and drafts, if any, should anything go wrong with the submission Cf documents. Such ‘protection’ does not extend to other documents and each bank must make thelr own decision as to whether or not they will permit further substitution. A transferring bank must remember that allowing substitution of documents beyond an invoice and draft creates a reliance on the first beneficiary providing those substitute documents and they must make their own risk assessment in this respect. Tam approaching you with regard to a darification on a transferable LC. It may be 2 very basic question, but thought it would not be appropriate if we do not seek your opinion. ‘Sub-article 38 (b) states “A transferable credit may be made available in whole or in part to another beneficiary (second benefidary) at the request of the beneficiary (first beneficiary)”. ‘Sub-article 38 (d) states “A credit may be transferred in part to more than one ‘second beneficiary provided partial drawings or shipments are allowed”. We require clarity on the following: ‘a. Whether the second beneficiary is to be informed if an LC is transferred in part or full? b. Whether part / full transfer relates to the transfer of partial / full rights under the Le? ‘c. Whether part / full transfer can be determined based on the quantity transferred ice. partial / full quantity of the original LC? For example, master LC value $100 and quantity is 10 Nos. First beneficiary has requested transfer of the LC to the second beneficiary for quantity 10 Nos. with a transfer LC value of $90. Will this be treated as a ful transfer or part transfer? a © Copyright Collyer Consulting 201138.101 ‘Suggested Answer: (2) There is no requirement to advise the 2nd beneficiary that the credit represents a ful or partial transfer. (b) Yes. (©) This will be a full transfer as there are no further goods to be shipped. ‘We are going to receive a transferable LC. Our bank is being nominated as the transferring bank. In field 47(A) the issuing bank is going to insert one condition THIS L/C WILL NOT COME INTO FORCE UNTIL RECEIPT BY OUR BANK OF THE BANK PERFORMANCE GUARANTEE, WHICH MUST BE AUTHENTICATED BY US, IN FAVOUR OF THE APPLICANT OF THIS L/C FOR THE AMOUNT OF USD»00. 300-30 WITH VALIDITY NOT EARLIER THAN 10/0/2010 . WE SHALL ADVISE THE SAME WITHIN TWO BANKING DAYS THEREAFTER’, ‘The Scenario: ‘The party who agrees to issue the Performance Bond (PB) is the 2nd Beneficiary. Our client ie, the 1st beneficiary is not going to issue the PB since it has been agreed between the three parties (end buyer, 1st beneficiary and end supplier). My questions: _ 1. Can the transferring bank transfer the LC to the 2nd beneficiary? 2. Does the above condition allow or prohibit the transferring bank to transfer the tc? 3. Could I refer to any specific article that allows or prohibits the transferring bank from doing the transfer? Suggested Answ« If all the parties are in agreement, I see no reason why you should not transfer. The issue becomes more difficult when the first beneficiary is issuing the guarantee. In that circumstance, you could not transfer until the guarantee had been issued, ‘accepted and the credit made operative. Under sub-atticle 38 (a) you have no obligation to transfer, so the choice is yours and you do not need to give any reason as to why you would not agree to transfer (if this was your chosen course of action). Article 39 — Assignment of Proceeds (No new queries) General Queries Gen225 An outward D/C issued by X Bank with the following details: Field 414: available with Bank Y by deferred payment Field 42P: Deferred Payment Details: Maturing at 180 days from date of presentation of documents ‘Another cause: “This D/C is discountable at our counter (i.e., X Bank) after four ‘working days of our receiving required complied documents, We shall pay you the value of complied documents as per your instructions, noting that all discounting ‘charges and interest are for applicant's account. Therefore, your covering letter must ‘dearly indicate your and beneficiary express authorization to us to discount the relative documents at our counter. 2 © Copyright Colyer Consting 2011,a dN ed seco Fleld 49: CONFIRM ‘As you can see the undertaking to the beneficiary will be settied at sight in spite of the tenor of D/C (Field 41A and Field 42P refers). But, still the undertaking of applicant wil fall due after (180) days. Does this case in any way, contradict with UCP 600 and/or International Banking Practices in Trade Operations transactions? Furthermore, is this discounting? ‘Suggested Answer: ‘This structure allows the applicant to obtain financing through the LC mechanism rather than via a separate loan or overdraft arrangement with the issuing bank. The likelIhood is that the beneficiary was looking for sight payment terms but the applicant would be unable to meet the reimbursement requirement. By Issulng a deferred payment (or, even an acceptance credit) that provides for an immediate discount of the proceeds, with the interest costs for the account of the applicant, the beneficiary obtains what they require (a sight payment) and the applicant does not need to pay the principle amount plus interest until the due date. UCP does not talk of financing structures, this Is left to the credit. This form of credit is often seen in parts of Asia, Gen226 If we established a revolving LC for USD10,000.00 for six months with partial shipment allowed, can the beneficiary make two times consolidated shipment of 1USD30000.00 each, instead of making shipments of USD10,000.00 each time. ‘Suggested Answer: In any revolving LC there are 3 components: 1, the basis under which the revolving will occur, 2. whether the revolving is automatic or not; and 3. whether the revolving is cumulative or not: Without these three pieces of information the credit is not workable. The answer to your question lies in whether the credit is automatically revolving and cumulative. Gen227 L/C calls for beneficiary certificate and courier receipt with the condition in field 47 as ‘all documents to show L/C no’. Beneficiary presented both the documents but the courier receipt does not comply the condition required in field 47A. Whereas the beneficiary certificate shows the courier receipt no. along with the L/C no. "Negotiating bank has pointed out the discrepancy as ‘courier receipt does not show L/C no." Is that a valid discrepancy? ‘My view Is that the discrepancy is invalid, as the beneficiary certificate evidences the corresponding courier number which is an Integral part of the document and hence the courier receipt need not show the LC number separately (under the auspices of ISBP paragraph 26). ‘Suggested Answer: ‘The answer lies in ICC opinion R696 which reads: We address to you the following query in order to obtain your opinion about the behaviour of the issuing bank of a documentary credit © Copyright Colyer Consulting 2011,We refer to a documentary credit available by negotiation at sight with “any bank” ‘alling for, in addition to other documents, a beneficiary's statement accompanied by the relevant copy of a courier receipt. The beneficiary's statement was required to ‘evidence that one set of documents (commercial invoice, packing list and AWB) had been sent. The credit also contained the additional condition “all documents must indicate the number of this credit.” “The documents were considered by the negotiating bank to be fully compliant with the credit terms and conditions. However, the issuing bank rejected said documents (holding them at the remitters’ disposal and risk), stating that the credit number was hot shown on the courier receipt. “The negotiating bank objected on the grounds that the required document was the beneficiany's statement, where the number of the credit was duly mentioned, while the copy of the courier receipt was only ancillary to the statement and, as such, ‘mentioning the credit number thereon was immaterial. After some messages in both Girections, without any further developments, the issuing bank returned the. documents to the negotiating bank. In our opinion, the requested document consisted of two parts: the beneficiary's statement and its enclosure (the courier receipt); since the first and more important fone duly bore the credit number, we believe that the whole document complied with the credit terms. We would be grateful for your opinion. ‘Analysis and conclusion “The requirement in the credit was for the beneficiary to send a copy of the invoice, packing list and air waybill to a named entity by courier. In confirmation of this ‘event, the beneficiary was to provide a statement confirming that the documents had been Sent, together with a copy of the courier receipt evidencing the sending thereof. In effect, the statement and the courier receipt form part of the same documentary requirement, and either the statement and the courier receipt or the statement alone may indicate the credit number. In the circumstances of this enquiry, the presentation would be acceptable. (Gen228 Infield 45A: Coal Specincations set out below: 1. Total moisture (arb) 25.0pct max 2. Inherent moisture (adb) 13.0pct approx 3. Size 0-50mm S0pct min In field 47A: Penalty clause: 1, Total moisture: total moisture in excess of 25pct will be deducted from the B/L weight for invoicing. 2. Size: USD0.01/MT deduction of invoice value for each 1 pct below 90pct. “The presented invoice showed: 1) Total moisture: 26pct 2) Inherent moisture: 9.5pct. 3) Size 0-50mm: 83pct My questions are: 1 What is the nature of the penalty clause In above L/C? Does it mean that the issuing bank cannot refuse the presentation against "discrepancies" of the goods description shown on the invoice? Does it mean that the floating range (max/min/approx) have no effect except beneficiary must accept the penalty cause? 2. How to understand the word "approx" in above L/C for a bank checker? 40 (© Copyright Colyer Consutsng 20113. In this case, the issuing bank can refuse or not? ‘Suggested Answer: 1. The penalty clause Is linked to a failure of the beneficiary to ship goods according to the required specifications. The wording you have referred to, requires that if, there are any differences to the requirements stated, then the Invoice must show ‘deduction in respect of that difference in requirements. Based on this wording, 2 bank cannot refuse for the quality indicators being shown differently on the invoice provided the beneficiary has made the correct deduction. The beneficiary is required to ship goods within the parameters that have been set otherwise they either agree. to the penalty dause and show the deduction, or they present an invoice without - deduction, in which event the bank will refuse due to the wrong standards being shown and no deduction being made. 2. It has no meaning. The use of ‘approx’ in this context cannot be applied to the interpretation given in sub-article 30 (a). The applicant must be more precise in what 7 is intended. 4 3. Covered in my answer under 1. } ‘Gen229 SBLC covers default in payment, but how is a bank covered if used for shipments, through sanctioned country etc. as no documents would be received as part of the 4 claim. "1 ‘Suggested Answer: ‘bank can only be held accountable if the documents presented indicate any sanctions violation, The bank may additionally be held liable if itis found that they should have known that their client makes shipments to sanctioned countries and that the underlying transaction could have been in respect of one of those shipments. ~ know your customer principles will be applied. J Gen230 What is the generally accepted practice to cover the automatic escalation clause under oll LC’s (120% liability?) ‘Suggested Answer: From the banks that I have spoken to 120% seems to be a reasonable figure for the liability entry. Gen231 LOI (Letter of Indemnity) ~ are banks obliged to check the documents presented to release the LOI? ‘Suggested Answer: ‘This will depend on the wording of the LOT. Some LOT's refer to cancellation upon presentation of the bills of lading others to the presentation of documents that ‘comply with the credit. ‘Gen232 B/l.— if not endorsed by shipper and applicant accepts discrepancies, what is the way ‘out to clear the goods (who will endorse)? Suggested Answer: ‘The Issuing bank should seek authorisation via the presenter for the Issuing bank to endorse as agents for & on behalf of the shipper. Gen233 Can a FCR be a negotiable document in case of FOB (named port) terms? FCR states ‘goods are received at the port storage and is stored to the irrevocable disposal of the Issuing bank, for further shipment to another destination. a (© Copyright Caller Consuting 2011‘Suggested Answer: ‘AFCR is not a negotiable document. Title to the goods cannot be passed by endorsement (which is a very basic definition of a negotiable document). (Gen234 What is the best practice for the issuing bank when issuing a LC incorporating Incoterms Ex-Works for international shipments - in respect of transport documents, since a beneficiary has no responsibility or control over such transport documents. ‘Suggested Answer: For an international shipment, the best option would be a forwarders certificate of receipt unless the applicant was providing their own means of transport to collect the ‘goods, in which event a delivery note would suffice, Gen235 If a LCs issued with the following conditions, has the Issuing bank the right to reject documents based on a discrepancy that the description of the goods does not comply with the LC and country regulations. ‘The condition in the LC: Al discrepancies acceptable; documents showing different party to the credit, ‘acceptable; and, documents showing different LC number acceptable. Description of goods in the LC was Soya Beans. Description of goods in the documents was, for example, drugs or arms. Suggested Answer: ‘The bank would have no right to refuse under the credit, but may be able to do so con the basis that acceptance of the documents would be a breach of local regulations or laws. Any bank that issues a credit with such clauses must have absolute trust in the applicant and the applicant must be beyond reproach that they will act according to the expectations of the bank. The allowance for "all discrepancies acceptable” should always be capped by (at least) reference to “all discrepancies in the stipulated documents are acceptable subject to the amount not been exceeded and each stipulated document being presented within the expiry date." Gen236 The LC states that costs additional to the freight are not to be shown on the bill of lading. Will it be a discrepancy if there is reference to demurrage and detention costs in respect of the containers? ‘Suggested Answer: ‘Costs such as demurrage or detention are only incurred in the event of delay in collecting the goods from the port of discharge or other storage facility. The beneficiary has no control over the imposition of these fees and whether or not they will be charged is completely in the hands of the consignee. I do not see reference to such charges being applicable as being a reason to refuse the documents. ‘Gen237 Import LC is opened for a partial amount and will be increased later. If there is a 10% prepayment, will that amount be reflected in full in the first invoice or can it be shown partially? Suggested Answer: If there Is a prepayment under any credit, the credit should indicate the manner in which itis to be shown in the documents e.g., as a deduction from the invoice value or the invoice being issued for the full 100% value with the draft drawn for the lesser ‘amount. Unless otherwise indicated, you would expect 10% to be deducted from the value of each invoice. 2 (© Copyright Colyer Consting 2011Gen238 If the LC states that the certificate of origin is to be issued /certfied by the Chamber of Commerce, but in fact the certificate of origin presented is issued and certified by the Ministry of Commerce and Industry, is it a discrepant document? {If we assume issuance/certification by the ministry of commerce has more Credibility and carries more weight than the Chamber of Commerce being just a unit in the Ministry of Commerce (using common sense rules) can we consider that the document is not discrepant? ‘Suggested Answer: Documents should not be looked at in the context of whether one has more credibility than the other. The only question to answer is whether the presented document meets the requirements of the credit. The basic requirement here is for the document to be issued or certified by a Government Body e.g., a Chamber of ‘Commerce. In a number of countries, the organisation is named slightly differently. For example, Chamber of Commerce and Industry. I would consider a document Issued or certified by a Ministry of Commerce and Industry as satisfying the requirement of a Chamber of Commerce to issue or certify the document. ‘Gen239 We have two different views with regard to a clause under field 48 in an MT700. I _am providing below the details of the issue. Could you please advise, in your opinion, ‘which of the below two views is correct? Field 48 of MT700 is as under: 30 days after shipment date but within the validity of the LC. First view: According to the SWIFT handbook — Field 48 means the period of time after the date of shipment within which the documents must be presented for Payment, acceptance or negotiation. The period stipulated in the credit is 30 days after shipment date (meaning the documents must be presented within 30 days after shipment date). If the intention of the issuer is not to allow presentation prior to expiry period of 30 days from the date of shipment — he should have kept blank and Inserted his requirement in the additional instructions. ‘Second view: Definition under SWIFT handbook for this field only applies when no specific wording is mentioned. But if any wording is mentioned under the particular field, it will overrule the definition mentioned for this field in the SWIFT handbook. Hence, documents need to be presented 30 days after shipment date only. They should not be presented prior to that date. ‘Suggested Answer: ‘Tagree with the first view. If the second view was correct why does the field allow for 4 lines of 35 characters? If the intention is that presentation is not to be made prior to the 30th day after the date of shipment then the wording in field 48 must so state. A condition "30 days after shipment date but within the validity of the LC" is, according to the SWIFT handbook, expressing the period in which the documents must be presented. Gen240 If the LC says delivery terms as "Delivered CIP or CIP" and the invoicing is on the discharged quantity referencing to the surveyor's certificate of quantity with the total ‘metric ton discharged (SGS certificate of quantity is a part of presentation), will the last date of shipment be understood as the last date of delivery? We have been advised by our bank that the LC requires an extension to the last date of shipment as the quantities are discharged at destination after the last date of shipment. Is this correct? Please advise. (© Copyright Calyer Consuting 2011‘Suggested Answer Last date of (for) shipment is different to last date of (for) delivery. If the terms relate to a delivered quantity, then the LC should specify a last date for delivery and not a last date for shipment. | Gen241 F4SA states: Quality: 100PCT Brand New Pilkington FAGA requires Quality Certificate in 01 original ‘The Invoice shows: Quality 100PCT Brand New Pilkington ‘The Quality Certificate shows: "commodity was all brand new" only. In my opinion, the L/C does not require certificate of quality to show the quality as in field 45A. And the certificate of quality mentions the quality of goods and that quality 's not conflicting with the quality stated on the invoice and L/C. So, it fulfils the function of a certificate of quality as per sub-article 14 (f) of UCP 600 and would not be discrepant. Is this right? Could you give me some advice if I am wrong? ‘Suggested Answer: T would agree that the document is not discrepant - the reference to “all brand new" would be equal to "100%" (which means every item). P9000000000000000X... (ONLY WITHOUT SPECIFYING WHICH DOCUMENTS TO ‘SHOW THE SHIPPING MARKS) UC is showing under additional conditions:- SHIPPING MARKS:}0000000000000% BILL OF LADING TO EVIDENCE THE SAME. Presentation of documents as follows: Documents other than the B/L are showing the shipping marks exactly as per the UC, BUT transport document does not show shipping marks, Gerhart apts reusing: - Sing mas tone: Shipment effected in Containers. ] cin yest te dcr a9 CLEAN PRESENTATION, see nd tp nce Saket cet tbe nc, ee srl con sre prc spr ng coeds pss SE° I ivr 36. Transport documents covering containerized goods will sometimes only show a ‘container number under the heading “Shipping marks". Other documents that show a Q detailed marking will not be considered to be in conflict for that reason Unguote Quote I ‘Suggested Answer: leary, if goods are shipping marks on the packages that are within the container when the shipping line will not have stuffed the goods inside. I would think that your client should know that the goods would be shipped in a container and that the condition was an impossible ped in containers the bill f lading will not be able to declare | ‘one to comply with. Given that the other documents show the marks on the ] packages are those that have been requested, and that the condition is not possible ‘with goods shipped in containers I would accept the documents. However, you do have the issue that your reimbursement authorisation is to debit the client's account upon receipt of complying documents. According to the credit terms, the documents ‘would not strictly comply and your client could argue that if the beneficiary could not © Copyright Cofyer Consulting 2013,Ne a A: Set ome enereatnass ‘comply then they should have sought an amendment. Rather than just honour the documents, I think someone should explain to the client the reason why you are honouring (if that is what you decide). Gen243 Is an injunction effective even if 5 working days of the examination period has passed without receiving a refusal message or, if I receive a non-reasonable refusal ‘message and an injunction was claimed after the 5 working days examination period, is it effective? ‘Suggested Answer: ‘An injunction is effective as of the date that itis issued and the issuing bank is bound to comply with the conditions stated therein. If there are issues relating to the timing Of issuance of the injunction then that is a separate issue and does not detract from the fact that an injunction is now in piace and the bank must comply. If you have. Issues with regard to the validity of the injunction, given the fact that 5 banking days had passed, you would need to take out a separate action against the issuing bank in respect of preclusion under UCP and the removal of the injunction. Gen244 After receiving an acceptance advice from the issuing bank, can the issuing bank stop payment at maturity date because of an injunction? ‘Suggested Answer: ‘Yes, an injunction can be issued at any time and the issuing bank will be compelled to comply with its conditions until such time as itis withdrawn. This may require the nominated bank and/or the issuing bank making representations to the respective court to have the injunction removed. Gen245 Case 1 Discrepancy: Manufacturer certificate not issued by the manufacturer. UC under field 46A calls for manufacturer certificate in one original. Beneficiary as per L/C is ABC Company Ltd. The manufacturer certificate has been issued by XYZ Company Ltd. The data contents in the certificate matches the other documents (say U/C no, goods description, invoice no,) and stated goods are manufactured on 2c date and signed by XYZ company Id. Moreover, other documents do not evidence XYZ Company Ltd as manufacturer. Please advise whether the discrepancy quoted by us is valid or not. Since our client states the discrepancy is invalid case 2 U/C requires the following certificatio ‘The shipment is effected in regular or conference Liner vessel covered by Institute

You might also like

• The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life

  

  From Everand

  The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life

  Mark Manson

  Rating: 4 out of 5 stars

  4/5 (5823)
• The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You Are

  

  From Everand

  The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You Are

  Brené Brown

  Rating: 4 out of 5 stars

  4/5 (1093)
• Never Split the Difference: Negotiating As If Your Life Depended On It

  

  From Everand

  Never Split the Difference: Negotiating As If Your Life Depended On It

  Chris Voss

  Rating: 4.5 out of 5 stars

  4.5/5 (852)
• • Magazines
  • Podcasts
  • Sheet music
• Principles: Life and Work

  

  From Everand

  Principles: Life and Work

  Ray Dalio

  Rating: 4 out of 5 stars

  4/5 (612)
• The Glass Castle: A Memoir

  

  From Everand

  The Glass Castle: A Memoir

  Jeannette Walls

  Rating: 4.5 out of 5 stars

  4.5/5 (1720)
• Grit: The Power of Passion and Perseverance

  

  From Everand

  Grit: The Power of Passion and Perseverance

  Angela Duckworth

  Rating: 4 out of 5 stars

  4/5 (590)
• Sing, Unburied, Sing: A Novel

  

  From Everand

  Sing, Unburied, Sing: A Novel

  Jesmyn Ward

  Rating: 4 out of 5 stars

  4/5 (1105)
• Hidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space Race

  

  From Everand

  Hidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space Race

  Margot Lee Shetterly

  Rating: 4 out of 5 stars

  4/5 (898)
• Shoe Dog: A Memoir by the Creator of Nike

  

  From Everand

  Shoe Dog: A Memoir by the Creator of Nike

  Phil Knight

  Rating: 4.5 out of 5 stars

  4.5/5 (541)
• The Perks of Being a Wallflower

  

  From Everand

  The Perks of Being a Wallflower

  Stephen Chbosky

  Rating: 4.5 out of 5 stars

  4.5/5 (2105)
• The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

  

  From Everand

  The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

  Ben Horowitz

  Rating: 4.5 out of 5 stars

  4.5/5 (349)
• Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

  

  From Everand

  Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

  Ashlee Vance

  Rating: 4.5 out of 5 stars

  4.5/5 (474)
• Bad Feminist: Essays

  

  From Everand

  Bad Feminist: Essays

  Roxane Gay

  Rating: 4 out of 5 stars

  4/5 (1025)
• The Outsider: A Novel

  

  From Everand

  The Outsider: A Novel

  Stephen King

  Rating: 4 out of 5 stars

  4/5 (1867)
• Her Body and Other Parties: Stories

  

  From Everand

  Her Body and Other Parties: Stories

  Carmen Maria Machado

  Rating: 4 out of 5 stars

  4/5 (823)
• The Sympathizer: A Novel (Pulitzer Prize for Fiction)

  

  From Everand

  The Sympathizer: A Novel (Pulitzer Prize for Fiction)

  Viet Thanh Nguyen

  Rating: 4.5 out of 5 stars

  4.5/5 (122)
• The Emperor of All Maladies: A Biography of Cancer

  

  From Everand

  The Emperor of All Maladies: A Biography of Cancer

  Siddhartha Mukherjee

  Rating: 4.5 out of 5 stars

  4.5/5 (271)
• Angela's Ashes: A Memoir

  

  From Everand

  Angela's Ashes: A Memoir

  Frank McCourt

  Rating: 4.5 out of 5 stars

  4.5/5 (442)
• Brooklyn: A Novel

  

  From Everand

  Brooklyn: A Novel

  Colm Toibin

  Rating: 3.5 out of 5 stars

  3.5/5 (1948)
• The Little Book of Hygge: Danish Secrets to Happy Living

  

  From Everand

  The Little Book of Hygge: Danish Secrets to Happy Living

  Meik Wiking

  Rating: 3.5 out of 5 stars

  3.5/5 (403)
• A Man Called Ove: A Novel

  

  From Everand

  A Man Called Ove: A Novel

  Fredrik Backman

  Rating: 4.5 out of 5 stars

  4.5/5 (4771)
• Steve Jobs

  

  From Everand

  Steve Jobs

  Walter Isaacson

  Rating: 4.5 out of 5 stars

  4.5/5 (809)
• The World Is Flat 3.0: A Brief History of the Twenty-first Century

  

  From Everand

  The World Is Flat 3.0: A Brief History of the Twenty-first Century

  Thomas L. Friedman

  Rating: 3.5 out of 5 stars

  3.5/5 (2259)
• The Art of Racing in the Rain: A Novel

  

  From Everand

  The Art of Racing in the Rain: A Novel

  Garth Stein

  Rating: 4 out of 5 stars

  4/5 (4208)
• The Yellow House: A Memoir (2019 National Book Award Winner)

  

  From Everand

  The Yellow House: A Memoir (2019 National Book Award Winner)

  Sarah M. Broom

  Rating: 4 out of 5 stars

  4/5 (98)
• Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New America

  

  From Everand

  Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New America

  Gilbert King

  Rating: 4.5 out of 5 stars

  4.5/5 (266)
• A Tree Grows in Brooklyn

  

  From Everand

  A Tree Grows in Brooklyn

  Betty Smith

  Rating: 4.5 out of 5 stars

  4.5/5 (1929)
• A Heartbreaking Work Of Staggering Genius: A Memoir Based on a True Story

  

  From Everand

  A Heartbreaking Work Of Staggering Genius: A Memoir Based on a True Story

  Dave Eggers

  Rating: 3.5 out of 5 stars

  3.5/5 (231)
• Yes Please

  

  From Everand

  Yes Please

  Amy Poehler

  Rating: 4 out of 5 stars

  4/5 (1903)
• Team of Rivals: The Political Genius of Abraham Lincoln

  

  From Everand

  Team of Rivals: The Political Genius of Abraham Lincoln

  Doris Kearns Goodwin

  Rating: 4.5 out of 5 stars

  4.5/5 (234)
• The Woman in Cabin 10

  

  From Everand

  The Woman in Cabin 10

  Ruth Ware

  Rating: 3.5 out of 5 stars

  3.5/5 (2524)
• Wolf Hall: A Novel

  

  From Everand

  Wolf Hall: A Novel

  Hilary Mantel

  Rating: 4 out of 5 stars

  4/5 (3973)
• Fear: Trump in the White House

  

  From Everand

  Fear: Trump in the White House

  Bob Woodward

  Rating: 3.5 out of 5 stars

  3.5/5 (738)
• John Adams

  

  From Everand

  John Adams

  David McCullough

  Rating: 4.5 out of 5 stars

  4.5/5 (2409)
• On Fire: The (Burning) Case for a Green New Deal

  

  From Everand

  On Fire: The (Burning) Case for a Green New Deal

  Naomi Klein

  Rating: 4 out of 5 stars

  4/5 (74)
• The Light Between Oceans: A Novel

  

  From Everand

  The Light Between Oceans: A Novel

  M.L. Stedman

  Rating: 4.5 out of 5 stars

  4.5/5 (789)
• Manhattan Beach: A Novel

  

  From Everand

  Manhattan Beach: A Novel

  Jennifer Egan

  Rating: 3.5 out of 5 stars

  3.5/5 (880)
• The Constant Gardener: A Novel

  

  From Everand

  The Constant Gardener: A Novel

  John Le Carré

  Rating: 3.5 out of 5 stars

  3.5/5 (104)
• The Unwinding: An Inner History of the New America

  

  From Everand

  The Unwinding: An Inner History of the New America

  George Packer

  Rating: 4 out of 5 stars

  4/5 (45)
• Rise of ISIS: A Threat We Can't Ignore

  

  From Everand

  Rise of ISIS: A Threat We Can't Ignore

  Jay Sekulow

  Rating: 3.5 out of 5 stars

  3.5/5 (137)
• Little Women

  

  From Everand

  Little Women

  Louisa May Alcott

  Rating: 4 out of 5 stars

  4/5 (105)