Coastline newsletter / 2008 edition

ISSUE 23 Nov2008

Overview of the DOCDEX issues and Opinions discussed at the ICC Banking Commission in October '08 - Part 2

By Gary Collyer


This newsletter completes the roundup of Opinions that were discussed at the ICC Banking Commission meeting held in Paris on 23 and 24 October. In the previous newsletter we covered opinions 657-664. Here we cover opinions 665-672.

The first three Opinions (665-667) referred to issues that had previously been addressed by the Banking Commission.

Opinion TA665 focussed on the language which appears at page 91 of the Commentary to UCP 600:

"Unless it is evident from the bill of lading that the shipped on board statement applies to the vessel and the port of loading, the bill of lading will require, as was the case in UCP 500, an on board notation showing the port of loading and the name of the vessel, even if the goods are loaded on the vessel named in the bill of lading".

In particular, the query referred to the requirements when a bill of lading is pre-printed "shipped on board" and there is a place of receipt that is not mentioned in the credit. The query highlighted two interpretations that had been seen and requested an opinion as to which was the correct interpretation.

The analysis and conclusion referred to a similar issue discussed under opinion TA635rev and, in particular, the analysis that was given under that opinion - "A bill of lading is a generic term for a transport document that includes, but is not necessarily limited to, transport by sea from a port of loading to a port of discharge. It is recognized, however, that there will still be occasions when the shipping company or its agent will include reference to a place of receipt or taking in charge that is different from the port of loading. To cover this eventuality, the content of sub-article 20 (a) (ii) reads: "indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by: .....".

The emphasis in this condition is that the document checker must be able to determine that the bill of lading appears to indicate that the shipped on board statement (pre-printed wording or by a separate notation) relates to loading on board the named vessel at the port of loading stated in the credit and not to any pre-carriage of the goods between a place of receipt or taking in charge and the port of loading.

Unless it is evident from the bill of lading that the shipped on board statement applies to the vessel and the port of loading, the bill of lading will require an on board notation showing the port of loading and the name of the vessel, even if the goods are loaded on the vessel named in the bill of lading.

When a place of receipt or taking in charge is the same as the port of loading, e.g., place of receipt Hong Kong CY and port of loading Hong Kong and the bill of lading does not evidence any means of pre-carriage, i.e., only shows the name of the vessel, they are to be deemed one and the same place and therefore an on board notation, as described above, will not be required.

The conclusion stated that unless it was evident from the bill of lading that the on board notation applies to the named vessel and the port of loading stated in the credit [i.e., and not to the carriage between the place of receipt and the port of loading], the bill of lading will require an on board notation showing the name of the vessel and the port of loading.

See Opinion TA665rev for the full transcript of the above Opinion.

The query under opinion TA.666rev referred to opinion TA.650rev wherein it was stated that where a multimodal or combined transport type document is required and the first leg of the journey according to the credit is by sea, the document must have an on board notation. This new opinion referred to 4 separate scenarios where the stated port of loading in the credit was shown as either the place of receipt or port of loading. In all cases it was stated that the minimum requirement was a dated on board notation.

See Opinion TA666rev for the full transcript of the above Opinion.

Another example of a credit requiring a port to port shipment but the pre-printed "shipped on board" bill of lading showing a place of receipt different to the port of loading formed the basis of opinion TA667rev.

Similar to opinion TA665rev, the analysis referred to that given under opinion TA.635rev (see above for details).

The conclusion reflected the position given under TA665rev, i.e., that the bill of lading will be discrepant unless it is evident that the shipped on board statement applies to the named vessel and the port of loading stated in the credit.

See 0pinion TA667rev for the full transcript of the above opinion.

A change of topic for the next opinion. A credit required the presentation of a beneficiary certificate along with the relevant courier receipt certifying that copy documents had been sent to the applicant within 3 working days after the date of shipment. The issuing bank had issued a refusal notice citing as a discrepancy - the presented courier receipt was not signed.

The nominated bank agreed that it had not been signed, but there was no space for a signature. The question asked was one of whether the refusal was correct. The other "unasked" question was whether a receipt without a space for signature should still be signed?

The conclusion was that the ICC Banking Commission cannot dictate to companies that there must be a space for signature on their documents. If the company decides that their format does not warrant or require a signature then that is their choice. There was no discrepancy.

See 0pinion TA668rev for the full transcript of the above opinion.

Opinion TA669 sought confirmation from the ICC Banking Commission as to whether an opinion issued under UCP 500 (TA572) was equally effective under UCP 600. TA572 referred to a credit which stated "Transport document issued by freight forwarder not acceptable."

The analysis and conclusion to that opinion stated "The terminology "Transport document issued by Freight Forwarder not acceptable" is an ambiguous term that does not clearly define the type of document that would be acceptable. For example, it is not clear whether the credit is seeking to remove the ability for a freight forwarder to issue a bill of lading that would be acceptable under UCP 500 Article 30 or whether it extends to the manner in which the bill of lading would be signed. In regard to this enquiry, the bank would be obliged to accept a bill of lading that was signed "as carrier" irrespective of any knowledge they may have as to the capacity of the issuer."

The conclusion given in TA669 was that the same position will apply and would also apply to a credit that referred to "House bill of lading not acceptable".

See 0pinion TA669rev for the full transcript of the above Opinion.

A credit requires presentation of a "vessel certificate issued by shipping company or their agents". The question posed was whether a certificate issued by the carrier or the agent of the carrier would be acceptable? The answer was yes.

See 0pinion TA670 for the full transcript of the above Opinion.

Opinion TA671 focussed on a specific transaction, the wording used in the credit and how it may have been affected by the wording of an amendment. The credit allowed for partial shipments in two lots (field 43P of the SWIFT MT700). In the goods description (field 45A) it also referred to shipment in two lots for an equal quantity of goods.

The credit was subsequently amended and partial shipments were again stated to be allowed - but without mention of "in two lots". Field 45A was amended to state that shipment was to be in two lots but no mention of equal quantities. It transpired that the beneficiary made three shipments. The first two were accepted by the issuing bank and the third was refused due to shipment in three lots. The nominated bank objected and therefore requested an opinion as to the effect of the amendment removing "in two lots" from field 43P.

The conclusion stated that the reference to shipment in two lots still remained in the credit, albeit in the goods description field. The issuing bank was correct to refuse.

See 0pinion TA671 for the full transcript of the above Opinion.

And finally, opinion TA672 referred to a deferred payment transaction where the confirming bank had acted according to UCP 600 sub-article 12 (b) and prepaid under a deferred payment undertaking that they had incurred. One day prior to the maturity date, the issuing bank informed the confirming bank that a court order had been issued that would stop them from reimbursing on the due date. Various messages flowed between the banks with the confirming bank indicating the content of sub-article 12 (b) and the responsibilities of the issuing bank under sub-article 7 (c). It appears that the court order was issued due to issues relating to the quality of the goods. The confirming bank was of the opinion that the issuing bank must pay notwithstanding the court order given the wording in UCP 600.

In the analysis it was stated that a bank cannot ignore a court order. However, the conclusion went on to state "The general principle, as stated in the conclusion to ICC Opinion R519, is that local law will prevail over the transaction.

However, the credit was subject to UCP 600 and apparently contained no exclusion to the rule appearing in sub-article 12 (b). Due to the content of sub-article 12 (b) and sub-article 7 (c), the issuing bank should seek to resist such an injunction in order to preserve the integrity of its credit and the UCP. It must be expected that the issuing bank will seek to have the injunction removed by referring the court to the appropriate articles of UCP 600 and the terms and conditions of the credit. The issuing bank would also be well advised to inform their applicant(s) of the content and effect of sub-article 12 (b) for this and any future transactions. It is the responsibility of the applicant to cover any issues of quality of goods in the documents called for and the data content required to appear on those documents and not to seek redress that affects the right of a nominated bank to receive reimbursement in respect of a complying presentation."

The message is quite clear in that it is expected that issuing banks will not readily accept court injunctions that are issued covering quality of goods issues and that they will return to the court explaining the transaction, the applicable rules of UCP 600 and thereby seek the removal of the injunction. Where goods are of a kind where quality is a material factor, then the documents called for under the credit should reflect that a form of inspection is required and whether or not this is to be performed by an independent party.

See 0pinion TA672rev for the full transcript of the above Opinion.

And finally ....

This newsletter brings us to the end of another year, a year that has seen its fair share of human and financial catastrophes. Let us hope that 2009 will bring a more positive outlook in our personal and professional lives. I wish you and your families all the very best for the forthcoming festive season and for 2009.

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