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In the July edition of this newsletter it was stated that the Task Force engaged by the ICC Banking Commission - to deliver recommendations as to the structure of a revision of UCP 500 - had identified (amongst others) that:
Seven articles of UCP
500 had accounted for over 58% of all Opinions issued by
the Banking Commission; and that
Seventeen articles had
given rise to either none, one or two Opinions.
This
newsletter and the one for October look at some of the
issues raised in those 58% of Opinions and whether they
have had any bearing on the content of the final text of
the UCP 600. The text of which is currently with the
National Committees of the ICC for their consideration
and voting at the ICC Banking Commission meeting on
October 25, 2006.
It has previously been
highlighted that the seven articles of UCP 500 were 9,
13, 14, 21, 23, 37 and 48. We will look at each of these
in turn.
In this newsletter we discuss Article 9,
13 and 14.
UCP 500 Article 9 - Liability
of Issuing and Confirming Banks
(UCP
600 Articles 7, 8 and 10 - Issuing Bank Undertaking,
Confirming Bank Undertaking and Amendments
)
The issues
in relation to Article 9 were the following:
1.
The effect of Position Paper #1 relating to time limits
imposed on the acceptance or rejection of
amendments.
2. The necessity for re-wording of
sub-Article 9(d)(iii) with respect to the beneficiary
advice of acceptance or rejection of amendments (in
particular, advice or intimation of
rejection).
3. Issues relating to the difference
between payment, acceptance and negotiation. The effect
of court decisions regarding discounting of deferred
payment undertakings.
4. The effect of amendments
received after receipt of documents by a nominated bank
but prior to them effecting settlement.
5. Should
'Negotiation' remain as a settlement method?
6.
Issuing bank liability when documents are received
directly from a beneficiary or other bank, and not from
the bank to which the credit was restricted.
7.
Sub-Articles 9(c)(i) and 9(d)(ii) - there should be a
definition of what is "without delay".
8. If a
draft is drawn on the applicant it is considered as an
additional document and will be checked as such. What
will be checked and what is meant by additional
document?
Taking each of these points in turn:
Summary:
1. This issue
is covered in UCP 600 sub-article 10(f). It should be
noted that the ICC Position Papers #1-4 were in respect
of UCP 500 and have no effect under UCP 600. This is
made clear in the introduction to UCP 600.
2
& 4. The drafting group attempted to amend the text
to enforce a position that the beneficiary must provide
an indication of acceptance or rejection. However, the
majority of ICC National Committees elected to retain
the wording that exists in UCP 500. Due to this
decision, no further changes were made to reflect the
issue under point 4.
3 & 5. UCP 600
introduces the concept of Honour or Negotiation, Honour
encapsulating the settlement types - payment, acceptance
and deferred payment. The ICC National Committees voted
by a majority to retain negotiation as a settlement
type.
6. Sub-article 6(a) makes it clear that a
credit available with a nominated bank is also available
with the issuing bank and therefore the beneficiary has
a choice.
7. The words without delay have been
likened to 'reasonable time' in that there is no
definitive period. It is straight forward to impose a
deadline where there is a clear 'penalty' for failure to
comply i.e., if an issuing bank refuses on the 8th
banking day (6th under UCP 600), the refusal is not
valid and they must honour. However, in circumstances
such as the article highlighted, if the UCP 600 stated
say, 3 banking days instead of without delay, what would
be the penalty for the bank reverting on day 4 or 5.
There can be none and as such, we will have to live with
terms such as 'without delay' but there must be an
expectation that banks will act in accordance with the
intent in which the words are used i.e., expeditiously.
8. Sub-article 6(c) removes reference to
treatment as an additional document and states that a
credit must not be available by a draft drawn on the
applicant. This does not stop an issuing bank calling
for a draft as part of the documents required, but the
bank would need to be specific as to the required
content.
UCP 500 Article 13 -
Standard for Examination of Documents
(UCP 600 Article 14 - Standard for Examination
of Documents)
1. Opinions were issued in
respect of the following issues. The question was
whether these should be covered by UCP 600, ISBP or
both.
i. Typographical errors
ii. Date
formats
iii. Non-documentary conditions
iv.
Consigned transport documents versus to order documents
v. Addendums to documents
vi. Mathematical
calculations
vii. Shipping marks
viii. Due date
calculations
ix. Re-definition of "reasonable time"
x. Re-visit the principle of inconsistency. That it
is not a requirement for a mirror image but for a level
of consistent data. xi. What is close of business for
the purposes of reasonable time?
2.
Responsibilities of banks where goods are consigned
directly to the applicant and documents are received
with discrepancies
3. What are banking days? Do
these include short working days?
4. Credits
which include a date for negotiation of documents as
opposed to a date for presentation.
5.
Re-enforce the position of an issuing bank when
documents are forwarded that are not called for i.e.,
they will not be reviewed under any circumstances.
6. The need for certificates to be dated or not.
7. Language of documents. Again, taking these
points in turn:
Summary:
1. Most of these items are contained within ISBP
and the decision was made that this was the best place
for them to reside. In respect of (iii) the ICC National
Committees were given 2 further structures to consider,
but they elected to retain the wording that exists in
the UCP today. Item (ix) has been answered by the
removal of the concept of 'reasonable time' in UCP 600.
Item (x) has been re-defined and appears at sub-article
14(d).
2. The principle for the actions of banks
is clearly defined in Article 5 (UCP 500 Article 4).
Banks deal with documents and not with goods.
3.
Article 2 of UCP 600 provides the definition of 'banking
day'.
4. Sub-article 6(d)(i) covers this issue.
5. Sub-article 14(g) covers this issue and does
not refer to sending the document to the issuing bank.
That will remain an option for the bank to consider.
6 & 7. The decision was made to keep these
principles in ISBP.
UCP 500 Article
14 - Discrepant Documents and Notice
(UCP 600 Article 16 - Discrepant Documents,
Waiver and Notice)
At the time, this
article was the #1 recipient of ICC Opinions which is a
worrying statistic given the important nature of refusal
of documents and the need to have a correct refusal
notice issued. To combat this, the ICC issued a document
covering examination, waiver and notice**. In
particular, this document covered the issues surrounding
liability of an issuing bank having sought and received
waiver; holding documents at disposal; clarity of
discrepancies observed and the discrepancies being
contained within one single advice of refusal.
** This document is available from the ICC
website - www.iccwbo.org
Summary:
UCP 600
Article 16 has been re-drafted to encompass the
principles of the ICC document referenced above
including additional options for the handling of
discrepant documents and removal of the words "held at
your disposal". It also tackled the issue of banks
providing a refusal notice that contained reference to
releasing the documents once the waiver had been
received and accepted, a position that was seen by the
courts to be against the wording of Article 14 of UCP
500.
In the next edition:
Part 2 of this summary of problematic articles in UCP 500 - Articles 21, 23, 37 and 48
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