Coastline newsletter / 2013 edition

ISSUE 49 Apr2013

Overview of the draft Opinions and DOCDEX cases discussed at the April 2013 ICC Banking Commission – Part 1

By Gary Collyer

The ICC Banking Commission met in Lisbon on 16 and 17 April. As usual, the issues discussed during the allotted session covering the Opinions and DOCDEX cases remained quite varied. However, it should not go unnoticed that once again a number of the issues can be directly attributed to poor wording in the letter of credit.


There had been 2 DOCDEX cases reviewed by the appointed experts in the period following the November 2012 ICC Banking Commission. 

Case 323

This case had the unusual circumstance of two Initiators (offices of the same bank) and two respondents. It focused on a credit issued by one of the respondents (first respondent) that was available with any bank by negotiation. The second respondent had agreed with the beneficiary, prior to the issuance of the credit, to provide financing against a draft once accepted by the issuing bank. Both the beneficiary and second respondent requested that the initiator route the documents through the second respondent so that financing could occur according to their agreement. Despite this agreement, one of the initiator's provided finance to the beneficiary and forwarded the documents to the second respondent with a request that the documents (two sets) be sent to the issuing bank on 'a collection basis'. The second respondent duly complied.

The issuing bank refused the documents and sent their refusal message to the second respondent in accordance with article 16. The second respondent informed the initiator by fax (the initiator denies receipt of the fax message). The initiator contended that either one or both respondents should have informed them of any refusal according to articles 14 and 16.

The experts found that the second respondent had acted according to instructions received, and the issuing bank according to UCP 600 articles 14 and 16. The decision was given against the two initiators.

Case 325

This case involved a beneficiary and issuing bank. An issuing bank had refused documents for the following discrepancy "'To Applicant' was not mentioned on invoice according to UCP 600 article 18 A-2, the invoice must be made out in the name of the applicant."

The issuing bank did not provide a response to the DOCDEX case. An invoice had been issued showing the beneficiary's name as 'shipper/exporter', the issuing bank's name as 'consignee' and the applicant's name as 'notify party'.

The experts determined that showing the applicant name as notify party did not meet the requirements of article 18 and found in favour of the issuing bank. As the issuing bank decided not to take part in the DOCDEX process they will not know the outcome of the case until reported in ICC publications or on DC-PRO (if they are a member).

The Opinions discussed were in the sequence TA761 and 770 (both had previously been withdrawn at the Mexico City meeting) and TA775-786.

TA.761rev – This draft opinion had been withdrawn at the Mexico City meeting in order to be re-written. However, it had been re-submitted in the same form as originally presented.

The question raised was probably more appropriate for SWIFT than the ICC Banking Commission as it focused on the structure of an MT760 message and the interpretation of code words inserted in field 40C to indicate the applicable rules, or whether no rules will apply.

An MT760 had been issued and field 40C indicated "NONE". According to the SWIFT handbook this means that the guarantee and counter-guarantee, to which the query referred, would not be subject to any rules.

However, field 77C gave details of the guarantee text and indicated that it was to be subject to URDG 758 with the exception of articles 16, 22 and 35. The counter-guarantee that followed was subject to English law and the jurisdiction of the English courts.

Despite the content of the SWIFT handbook, the initiator requested confirmation that the guarantee would be subject to URDG and the counter-guarantee subject to the applicable law.

The analysis and conclusion supported the view of the initiator.

See TA.761rev for the full transcript of the opinion.

TA.770rev2 – This query was also held over from Mexico City while further discussions could be held to ascertain the scope of any ICC response to the question "If a credit required shipment to be effected from "any Chinese Port", and where the shipment has been effected from Hong Kong, would that comply with the requirement of the credit?"

The analysis and conclusion stated that when a credit indicates that shipment is to be effected from "Any Chinese Port" (or to "Any Chinese Port"), it is recognised that in the context of examination of documents on their face, in accordance with UCP 600 sub-article 14 (a), this would include Hong Kong being shown as the port of loading (or port of discharge).

The analysis and conclusion went on to state that it is advisable for applicants and beneficiaries to be specific as to the port of loading or discharge. This is mainly due to the different customs systems and regimes that operate in Hong Kong and at ports in the Chinese Mainland. Although the question referred to shipments from any Chinese port, the answer would equally apply to shipments that are to be made to "any Chinese port".

See TA.770rev2 for the full transcript of the opinion.

TA.775rev – An initiator requested the views of the ICC Banking Commission in respect of what was stated to be an increasingly common practice of charter party bills of lading being signed in the name of a carrier or as agent for a named carrier.

The analysis stated that clearly when a credit allowed for a charter party bill of lading to be signed by or for [or on behalf of] the carrier it would modify the content of sub-article 22 (a) (i).

The conclusion stated that sub-article 22 (a) (i) does not permit a charter party bill of lading to be signed in the manner stated.

In the discussion that took place in Lisbon it was agreed that this issue would be revisited if it became apparent that this was a growing and widespread trend for charter party bills of lading to be signed in this manner.

See TA.775rev for the full transcript of the opinion.

TA.776rev – A confirming bank had stipulated that its confirmation would be null and void if any wording appearing on a presented document was not in English, except for the description of the goods indicated in the credit. The credit contained no restriction on the applicable language of documents and only the applicant's name and address and the goods description were not in English (they were given in Spanish).

Documents were presented and the confirming bank noted that the shipping marks contained wording that was not in English (some wording was given in Spanish).

The confirming bank declined to act under its confirmation due to these shipping marks. They also refused to claim reimbursement under the credit, even though the documents were compliant with the terms and conditions of the credit as issued by the issuing bank.

Questions focused on whether the confirming bank was able to refuse to handle the documents and were they in a position to claim reimbursement even though the documents did not comply with their own requirements?

In the analysis it is highlighted that a confirming bank may qualify its confirmation. However, for this case it did not change the fact that the documents complied with the credit as issued.

The confirming bank, as nominated bank, could have agreed to claim reimbursement and act under its nomination, by effecting settlement upon receipt of funds or effecting settlement to the beneficiary on a with recourse basis, but they were under no obligation to do so.

See TA.776rev for the full transcript of the opinion.

TA.777rev - This query and TA778 were very similar in that the same countries were involved and the issue concerned the validity of numerous discrepancies observed by an issuing bank under separate credits. This query related to 6 discrepancies including "inconsistences between weights on the documents", "different port of discharge on documents (effectively omission of 'South' in 'South Korea', although the correct port was shown)" and "packing details different on bill of lading and packing list."

The nominated bank offered a full rebuttal to each discrepancy and the Banking Commission agreed that the documents were not discrepant.

See TA.777rev for the full transcript of the opinion.

TA.778rev - Similar to TA.777, a presentation resulted in 9 discrepancies being observed including those that are highlighted under TA.777 above. Once again, the nominated bank offered a full rebuttal to each discrepancy and the Banking Commission agreed that the documents were not discrepant.

See TA.778rev for the full transcript of the opinion.

In the next newsletter we will conclude the review of the draft opinions TA779-786.

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