The ICC Banking Commission met in Zurich on 22 and 23 March. Once again, the
Opinions for review were quite varied in their topics and length of enquiry.
Before we look at the issues involved, and the conclusions - a further update on
the scope of the ISBP revision.
The ISBP Drafting Group met again to discuss the possible changes to the
existing text of ISBP Publication 681. It is intended that a draft document will
be released in early May for comments to be received from ICC national
committees by the end of June.
As mentioned in the last newsletter, and given the voting that was in favour of
an expanded version of the publication, it is now for the ICC national
committees to provide their input to the Drafting Group as to what they expect
to be covered in respect of practices relating to the handling of documentary
credits. It is disappointing to note that despite the majority of countries
voting for an extended version, only 5 have so far offered any comments as to
what they would like to see included.
The Opinions discussed, and agreed, included a number (TA727-732 and TA734) that
were originally submitted as educational queries. These were withdrawn at the
Orlando meeting in September 2010 for consideration as official Opinions at the
Zurich meeting.
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TA727rev - This query focused on letters of credit that include
terminology such as "Forwarders bill of lading is not acceptable", or "Transport
documents issued by freight forwarders not acceptable", or "Transport documents
issued or signed by freight forwarders not acceptable".
The initiator provided 4 case examples to highlight different forms of issuance
ranging from signature of the forwarder on a bill of lading issued on the
letterhead of the carrier; a bill of lading issued on the letterhead of the
carrier and signed by the master; a bill of lading issued on the letterhead of
the forwarder and signed by them as agent of a named carrier; and a bill of
lading issued on the letterhead of the forwarder, naming the carrier separately
and signed by the forwarder as agent of the master. The question was asked as to
which, if any, would be acceptable under a credit containing the terminology
stated above.
The analysis made it clear that in the context of UCP 600 and letters of credit,
the term "freight forwarder bills of lading" has no meaning - whether in respect
of them being allowed or not allowed. ISBP Publication 681, paragraphs 72
(Multimodal or Combined Transport Documents), 95 (Bills of Lading) and 138 (Air
Waybills – additionally for reference to house air waybills) offer a deterrent
to the usage of terms such as "Freight Forwarder Bills of Lading are
acceptable", i.e., by stating that the transport document may be signed by the
freight forwarder in the capacity of a freight forwarder, without the need to
identify itself as carrier or agent for the named carrier. The document also
need not show the name of the carrier.
Where freight forwarder transport documents are stated to be not acceptable, the
term is ambiguous and does not clearly define the type of document that would be
acceptable.
The conclusion that was given stated that unless the text of a credit,
incorporating one of the stated clauses, specifically states what form the
transport document is expected to take or its signing requirements, each of the
clauses referred to in the query has no meaning, and transport documents may be
accepted on the basis that they comply with the requirements of articles 19 or
20.
This Opinion sends a clear message to banks that the credit must expressly state
what is expected to be presented and a clause stating “freight forwarder bills
of lading are not acceptable” or similar, is not sufficient and will be
disregarded.
See Opinion TA727rev for the full transcript of the above Opinion.
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TA728rev - This query referred to a standby credit that required, in
addition to a beneficiary certificate, a copy of an unpaid invoice. The
presented invoice was issued for an amount that was greater than the amount of
the credit. The initiator asked the question whether a nominated bank acting on
its nomination, a confirming bank, if any, or an issuing bank must accept the
invoice or whether they can decline under sub-article 18 (b).
The analysis made the point that this issue highlights one of the problems that
can arise when a bank issues a standby credit subject to UCP 600, requiring
presentation of a document such as a copy of an unpaid invoice without
compensating for the fact that certain articles of UCP 600 will not apply in the
examination of that document. When the invoice was originally issued, it was not
subject to the content of article 18.
The conclusion stated that where a copy of an [unpaid] invoice is to be
presented under a standby, it is not subject to examination under sub-article 18
(b) except to the extent required by the terms and conditions of the standby and
must be accepted if it otherwise complies with the terms and conditions of the
standby.
See Opinion TA728rev for the full transcript of the above Opinion.
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TA729 - This query was withdrawn at the meeting as it was found to
represent a hypothetical situation and should therefore be considered as an
educational query.
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TA730rev - This query referred to a number of clauses that appear on
insurance documents that may cast doubt in the mind of the document examiner as
to whether or not the insurance premium has been paid and whether the insurance
document is therefore effective.
Clause 1 which is part of the insurance policy text that has been printed on to
plain paper, included "Unless otherwise agreed, the insurer's obligation shall
in no way commence unless the premium is paid or the down payment is made,
regardless of whether the policy is delivered or not."
There is no marking of premium paid on the insurance policy.
Clause 2 which is pre-printed on the insurance document includes "We, ABC
INSURANCE hereby agree, in consideration of the payment to us by or on behalf of
the assured of the premium as arranged, to insure against loss, damage,
liability or expense to the extent and in the manner herein provided."
There is no marking of premium paid on the policy.
Clause 3 the complete text of the insurance document that has been created and
printed on plain headed paper of the insurance company and signed, includes "In
case of any claim payment through this policy, the assured (insured party)
agrees to pay the additional premium arising from the difference between the
foreign exchange rates, on the claim payment day and on the policy issuance
day." The terms of the credit are CIF.
The analysis states that article 28 makes no reference to the payment of
insurance premium and that the position taken by the UCP is that the insurance
document would not be available for use unless the premium had been paid or
arrangements made with the insurance company, underwriter or their agent or
proxy for the payment of the required fee.
The analysis goes on to say that it is not the responsibility of banks to review
pre-printed text that may be considered to be terms and conditions. The
referenced clauses are seen to be terms and conditions.
In each case, the Banking Commission determined that the documents would be
acceptable.
See Opinion TA730rev for the full transcript of the above Opinion.
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TA731rev - This query also covered clauses that had been seen on
insurance documents and the question was whether the text would be acceptable or
not.
Clause 1 which is pre-printed on the insurance document as part of the signature
area:
"This insurance does not cover any loss or damage to the property which at the
time of happening of such loss or damage is insured by or would, but for the
existence of this Policy, be insured by any fire or other insurance policy or
policies, except in respect of any excess beyond the amount which would have
been payable under the fire or other insurance policy or policies had this
insurance not been effected."
Clause 2 that is pre-printed on the insurance document:
"This policy is prepared according to the material facts disclosed by the
proposer as is shown in the proposal form and is subject to the general and
special conditions and clauses enclosed or attached herewith and the Company
hereby agrees to indemnify the Assured, against payment of the premium due, in
case of a marine peril as described above."
The document contains a heading "Clauses" and shows thereunder "[Country T]
General Conditions" and a list of applicable clauses including ICC (A), War,
Strikes Clauses, Institute Classification Clauses, etc.
Clause 3 appears as part of the text inserted onto the insurance document:
"The cover will be valid, if and only if, the transporting vessel(s) have a
valid ISM Certificate and Classification Certificate (according to Institute
Classification Clause 01.01.2001) during the transport."
There is no data on any required document meeting the above-mentioned condition.
Clause 4 appears as part of the text inserted onto the insurance document:
"CAUTION:
This policy is subject to the following mentioned conditions and warranties:
1. The vessel should be fully classed and class maintained with class society
member of IACS (including Turk Lloyd) as per Institute Classification Clause
01.01.2001 as per attached wording. Therefore, the vessel being nominated should
be complied with the stipulation stated thereof.
2. Vessel should also be a member of a respected P & I (Protection & Indemnity)
club member of International Group.
3. Vessel should also be complied with the ISM requirements.
4. A vessel which does not have above mentioned qualifications and are aged over
35 and tankers aged over 15 will not be covered."
There is no data on any required document meeting the above-mentioned
conditions.
In responding to the effect of these clauses, the content of sub-article 14 (a)
should be remembered:
"[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."
The Banking Commission decided as follows:
In respect of Clause 1, unless another insurance document issued in the same
context as the quoted clause was presented, there would be no grounds to refuse.
In respect of Clause 2, by use of "enclosed" or "attached herewith" the document
draws a distinction between the terms by the separate reference to "attached
herewith". In interpreting "enclosed" this can only mean the clauses that are
stated on the document itself.
The insurance document refers to "[Country T] General Conditions" and states
other applicable clauses. It therefore follows that the "general and specific
conditions and clauses" are stated (enclosed) on the document. The document will
be acceptable.
In respect of Clauses 3 and 4, absent any data on another stipulated document
that conflicts with the wording in the clauses, the document will be acceptable.
See Opinion TA731rev for the full transcript of the above Opinion.
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TA732 - Yet another query regarding insurance documents. This time
whether the date stated as part of the countersignature data could be deemed to
be the date of issuance of the insurance document or evidence of an effective
date of insurance.
The insurance document showed "Countersigned at ….. (blank) Date: 13/10/2009"
and was properly signed. However, there was no issuance date or evidence of an
effective date for the insurance coverage. The shipment date was the same as the
date appearing in the countersignature area.
Sub-article 28 (e) states that 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.
The analysis stated that the date of the countersignature is the date that the
insurance becomes valid (or effective) and can be taken into consideration by
banks when determining compliance with the terms and conditions of the credit
and UCP 600 article 28.
Absent any other date appearing in the document that could cast doubt as to the
date of issuance or effective date of the insurance, the document would be
acceptable.
See Opinion TA732 for the full transcript of the above Opinion.
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TA733 - remained as an educational query with the response sent
solely to the initiator.
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TA734 - The last query to be covered in this newsletter referred to
clauses that are often seen in credits:
"All documents except Bill of Lading must indicate this credit number and P.O.
no. XXXXX"
and
"All documents except invoice and drafts must not show invoice number, invoice
value, invoice date, unit price, contract number, name of applicant, trade term,
L/C No., L/C issuing date and name of issuing bank."
The questions that were raised were in the context of how to interpret each of
the clauses.
In respect of the first clause, the issue is how to interpret the word "except".
The view of the initiator was that "except" means that the "excepted" document
does not need to comply with the instruction that follows. Only the remainder of
the documents must comply. The fact that the bill of lading may or may not quote
the credit and P.O numbers is not a matter of concern, since the document is
"excepted" by the clause.
In respect of the second clause, the initiator stated that the clause points the
document checker, not in the direction of the invoice and drafts, since those
documents have been "excepted", but to all the other documents to ensure that
they do not quote any of the stated information. Therefore, the invoice and
drafts may or may not quote any or all of this data.
The analysis and conclusion of the Banking Commission was as follows:
For the first clause, the emphasis is that all documents must indicate certain
data except the bill of lading. This condition does not prohibit the bill of
lading mentioning the stated data. If the intention is that the bill of lading
is not to include such data, then the credit should be specific and so state.
For the second clause, the emphasis is that the described data must not appear
on any document except for the invoice and drafts. This condition does not
require the invoice and drafts to mention all or some of the prescribed data.
Whether the data is to appear on the invoice and drafts will be subject to a
specific condition in the credit, the requirements of article 18 and the
applicable paragraphs of ISBP publication 681.
See Opinion TA734 for the full transcript of the above Opinion.
The next newsletter will contain the remaining Opinions that were discussed and
approved at the March 2011 ICC Banking Commission meeting.
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