Coastline newsletter / 2011 edition

ISSUE 36 Jan2011

Overview of the DOCDEX issues and Opinions discussed at the September 2010 ICC Banking Commission (Part 2)

By Gary Collyer

In this newsletter, we will continue to look at the Opinions that were approved by the ICC Banking Commission at their meeting on 22-23 September.

TA709rev - The issue in this query focused on whether an insurance document that was dated after the date of shipment but evidenced coverage effected on a warehouse to warehouse basis met the requirement of sub-article 28 (e) 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'. In particular, the text reading "unless it appears ...... date of shipment" was pertinent to this query.

It is fair to say there was a level of disagreement as to whether such document provided evidence that coverage was effective from a date not later than the date of shipment, with 8 of the 19 countries who offered written comments disagreeing with the draft opinion that stated the document was acceptable.

Based on a consensus view from the floor, the draft conclusion was modified slightly to read "An insurance document that is dated later than the date of shipment but which clearly indicates on the document, by addition or note, "coverage effected on a warehouse to warehouse basis" or words of similar effect, is acceptable."

See opinion TA709rev for the full transcript of the above opinion.

TA711rev - This question related to whether a collecting bank was liable under URC 522 where they had issued a delivery order (where goods were consigned to the bank), the importer had thereby taken control of the goods and the collection remained unpaid.

The analysis and conclusion emphasised that sub-article 10 (a) states that consigning the goods to the collecting bank should not occur without their agreement. The URC contains no rules in relation to the facilitation of release of the goods, but best practice would dictate that the bank giving the delivery order should have taken an instruction from their customer to honour the collection notwithstanding any errors or defects in the documents or contestation of the customer. The issue of whether the collecting bank was liable was a matter for the applicable law to determine.

See opinion TA711 (rev) for the full transcript of the above opinion.

TA712rev - This question related to 13 documentary credits that had been issued by a bank that was subsequently placed under temporary administration, by the respective Central Bank in their country, and who had not honoured the drawings under these credits due to that status. It would now seem that the bank has been re-formed under another name, but the drawings remain outstanding.

The conclusion reflects the fact that given the administration order imposed by the Central Bank there is little that the ICC can do to bring this to a speedy conclusion. The issuing bank has an obligation to honour the drawings that were made under the credits, which the issuing bank previously confirmed represented complying presentations thereunder. Once the Central Bank conclude their findings, it is hoped that reimbursement will be made.

See opinion TA712rev for the full transcript of the above opinion.

TA713 - This query follows on from some examples of deduction of fees discussed in opinion TA700.

In this case, the issue concerns a collection instruction subject to URC 522. The collection instruction requested the collecting bank to send a SWIFT advice of acceptance and stated that the collecting bank's charges were for the drawee's account and may not be waived. The collecting bank sent the advice and stated that GBP15.00 would be deducted from the payment covering the SWIFT fee. The remitting bank questionned the right of the collecting bank to deduct this fee.

It was noted in the analysis that under sub-article 26 (c) (i) the collecting bank is required to send an advice of acceptance (or payment). The usual manner of doing so would be by SWIFT. Therefore, as it is an obligation of the collecting bank to send the advice and given the content of the collection instruction, the collecting bank was not entitled to deduct the amount of GBP15.00 from the payment at maturity.

See opinion TA713 for the full transcript of the above opinion.

TA714rev - This query referred to a dispute regarding the settlement of the final 20% under a credit.

The credit stated that 20% was payable against a provisional acceptance certificate and if this document was not presented within 12 months from the last shipment date the beneficiary can present their own declaration confirming that they had fulfilled their obligations under the contract. The date of the last shipment was 30 April 2008. The credit was stated to expire on 30 April 2009.

On 29 April 2009, the nominated bank sent the beneficiary declaration to the issuing bank and confirmed all terms and conditions complied with. The nominated bank accepted this document even though it was presented one day before the end of the 12 month period. The issuing bank received the document on 4 May and refused due to the document not being compliant on 29 April; the document being dated 16 April - well before the end of the 12 month period and that the declaration was only valid for a presentation on or after 1 May 2009.

The analysis and conclusion recognise that there is nothing to stop the beneficiary presenting the declaration early (in fact they may need to to preserve a presentation within the expiry date); the fact that the document was discrepant on 29 April is agreed, but on 30 April it became compliant. As the credit stated that the document was to be presented within 12 months from the last shipment date, 30 April 2009 was the earliest date for a complying presentation to be made. The document was compliant.

See opinion TA714rev for the full transcript of the above opinion.

TA715 - This query referred to the reimbursement condition stated in a credit and whether it modified the scope of the second paragraph of article 35 of UCP 600.

The query referred to credits available by negotiation, where the reimbursement condition referred to the issuing bank reimbursing upon their receipt of the documents, and whether this would have an impact on the application of article 35 should the documents be lost in transit.

Members of the Banking Commission were reminded that the wording in article 35 was added due to this particular reimbursement wording and certain issuing banks stating that if the documents were not received they were not obligated to honour.

The conclusion reiterated that the wording referred to above does not modify the content of article 35 or the reimbursement undertaking of the issuing bank that exists in sub-article 7 (c).

See opinion TA715 for the full transcript of the above opinion.

TA716rev2 - This query relates to whether an invoice can merely be made out in the name of the applicant, without an address or country stated.

The conclusion states that under international standard banking practice it is expected that an address will appear on the invoice, however an invoice that merely quotes the name of the applicant would be acceptable under sub-article 18 (a) (ii). Reference was also made to sub-article 14 (j) which starts with the word "when" i.e., 'When the addresses of the beneficiary and the applicant appear in any stipulated document, .......'. This sub-article does not impose that addresses must appear on each document.

The conclusion makes it clear that if addresses are required then the credit should so state and that the applicant has a responsibility in this respect to indicate such a requirement in the application form.

See opinion TA716 (rev) for the full transcript of the above opinion.

TA717rev2 - This query originally contained a spreadsheet referring to some 20+ variations on availability and expiry provisions in a credit.

It was decided that most of the examples were bad practice and that it would be wrong for the Banking Commission to pass comment on each example as to do so may provide credence for further usage. The conclusion is based on the international standard banking practice (and the basis for article 6 of UCP 600) that the expiry place and the place for availability should be the same.

See opinion TA717rev2 for the full transcript of the above opinion.

TA719rev - This query refers to the situation where the issuing bank has honoured under their credit and the amount paid is incorrect due to a misreading of the applicant's instructions.

The applicant agreed to accept the discrepant documents with a reduction of 90%. The issuing bank sent a message to the presenter seeking authorisation to pay 90%. Consent was received and 90% of the value paid. The issuing bank is now seeking the refund of the 80% that was overpaid according to the applicant's instructions.

The conclusion states that the issuing bank's settlement is final and is considered to have been made on a without recourse basis. Whether the beneficiary or their bank has a duty to refund the overpaid amount is not for the UCP or ICC to determine. This is a legal question.

See opinion TA719rev for the full transcript of the above opinion.

TA720rev - Another dispute concerning two letters of credit and whether the discrepancies noted by the issuing bank were correct. In particular, whether the goods were insured for the correct value.

Each letter of credit stated "Insurance Policy/Certificate in full set for 110 percent of the provisional invoice value ......". The credit also required that the provisional invoice be for 95% of the goods value.

Based on the documentary requirements in the credit, the conclusion stated that the goods were not underinsured, despite the requirements of sub-article 28 (f) (ii) that would give a different conclusion. The conclusion is clearly marked to reflect that the response does not change the effect of sub-article 28 (f) (ii) but is given due to the wording in the credit which is seen to modify this sub-article. The other two discrepancies under each credit were found not to be valid.

See opinion TA720rev for the full transcript of the above opinion.

TA722rev - This query relates to the wrong contract number on the beneficiary's certified copy of a fax. The contract number was, in fact, the beneficiary reference that appeared on other documents.

The documents were found to be discrepant. The underlying point here is that the credit did not require the contract number to appear on any document except the invoice. The addition of the wrong contract number on the copy of the fax was unnecessary and caused the refusal.

See opinion TA722rev for the full transcript of the above opinion.

TA723rev - This query relates to a requirement in a credit for a dated freight invoice.

The freight invoice that was presented showed (in order of detail): name of the vessel, port of loading, port of discharge, date, and B/L No. There was no other date on the document and the date was the same as that appearing on the B/L.

Documents had been refused due to the freight invoice not being dated; the date on the document being seen as the date of the B/L. Whilst this may be the case, there is no evidence on the document that the date was to be construed as part of the information relating to the B/L. It did not state "B/L date". Absent any data to the contrary, the view was that the document complied.

See opinion TA723rev for the full transcript of the above opinion.

TA726 - This query referred to a charter party bill of lading that showed two ports of loading i.e., Melbourne and Brisbane or Melbourne/Brisbane (where shipment from each port was effected). The question was whether a single on board notation (or date) was sufficient or separate on board notations were required for each port.

The conclusion reflects that a shipped on board notation is required for each of the ports. Whilst it was pointed out that a shipping company will ‘generally' or ‘usually' only add the on board notation, or release a pre-printed shipped on board bill of lading, when all the goods therein have been shipped, a document examiner can only go by the information on the B/L. A shipped on board notation or reference could apply to both or one of the ports.

See opinion TA726 for the full transcript of the above opinion.

TA735rev - This query referred to a credit that required a bill of lading covering shipment as follows: Field 44A: South Korea; 44E: Any port in Korea; 44F: Peru Callao Port; 44B: Lima and whether the transport document should be examined under article 19 or 20.

Following some discussion, the conclusion was that it should be article 20 (although the writer does not agree, given the wording in the recent recommendation paper for on board notations).

See opinion TA735rev for the full transcript of the above opinion.

TA736rev - This query refers to a dispute between a nominated bank and the issuing bank (under a UCP 500 credit).

An amendment was issued requiring a pre-shipment inspection document and the issuing bank changed the reimbursement conditions to the effect that they will pay when they receive proceeds under an export LC in favour of the applicant (i.e., the wording that often appears in back-to-back credits). The nominated bank informed the issuing bank that the beneficiary rejected the amendment and no pre-shipment inspection certificate was presented.

A presentation was made and the issuing bank refused due to the absence of the certificate. They then sent a further message saying that the documents would be accepted if the beneficiary agreed to the new reimbursement conditions. The nominated bank reiterated that the amendment had been refused and that the issuing bank was required to honour. The applicant then obtained a court order stopping the issuing bank from honouring.

At one point, the nominated bank requested the return of the documents. It is not clear as to why they did so, but this does not change the position that the issuing bank is liable to reimburse the nominated bank once the injunction is lifted and does not renounce the rights of the nominated bank or the beneficiary under the issuing bank's undertaking.

See opinion TA736rev for the full transcript of the above opinion.

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