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René Müller is Director at Crédit Suisse AG. He was Co-Chair of the Drafting Group that created the eUCP and was a member of the Drafting Group for the UCP 600. He is presently a member of the Drafting Group working on the revised ISBP. He has been in trade finance and its related services for more than 40 years and is the coordinator for the Commission on Banking Technique and Practice at the Swiss National Committee.

DCI The 5th version of the ISBP revision draft has now been sent to Drafting Committee members. Are there any paragraphs with which you have reservations?

Müller There is one particular paragraph where it is now up to ICC national committees to decide whether it is to be introduced or left out. It relates to the issue in connection with the wording of a letter of credit and the type of document to be presented. At present, when a credit calls for a bill of lading (which covers a port-to-port shipment) but states as the "port of loading" or "port of destination" a place that is in the interior of a country or continent, a presentation of a multimodal transport document (MTD) is not acceptable. The beneficiary should ask for an amendment of the credit. This view is supported by two official opinions and the ICC's "On board notation paper".

The new paragraph would stipulate that when a credit requires presentation of a transport document other than a MTD, but from the routing indicated in the credit it becomes clear that more than one mode of transport is to be used, then article 19 of UCP 600 covering the MTD is to be applied in the examination of the document presented.

In my view, this ends up correcting wrong issuance at the level of document examination. This would, at present, be the only place in the ISBP where this occurs, but I believe it leaves the door open for arguments on many other levels, i.e., correcting wrong issuance always on the level of document examination, and I have no idea where this could end.

DCI This is the third version of the ISBP to appear in the last 10 years. Are you concerned that document checkers may be confused by the rather frequent revisions that have taken place?

Müller No I am not concerned in any way. We have to consider the fact that each year a number of new official opinions are being issued, and those represent "international standard banking practice in the examination of documents" and other issues. I believe that it is of real value to have these opinions grouped and published in a form that does not require each document examiner to have a complete set of all opinions given.

DCI This revision draft contains new language that says: "This publication is to be read in conjunction with UCP 600 and not in isolation." Was this language inserted because some document checkers were refusing documents on the basis of the ISBP alone and not referring to UCP 600?

Müller It is in fact a reminder to all parties that the publication is not a standalone item but an amalgamation of the results of banking practice stemming mainly from official opinions, and that they will have to looked at in connection with UCP 600. Some banks started to refuse documents referring to paragraphs of ISBP rather than doing so based solely on UCP 600, which are rules. The paragraphs should only be referred to when having to elaborate on the refusal based on the rules.

DCI So this language is meant to signal that ISBP is a complement to, and not a substitute for, UCP 600?

Müller It is indeed inserted to signal that the nature of ISBP is to be a complementary reference and information as to how the rules are in practice being interpreted in described circumstances.

DCI There was considerable controversy surrounding the language of the credit. The final draft says that when the credit requires that documents be in a certain language, that will control, but if the credit is silent, the documents can be in any language. This appears to be a change from the previous ISBP, which only said that it was expected that the language of the documents should be in the language of the credit. Why the change?

Müller I am glad that you are asking this question in this form. In fact, ISBP does not say precisely this. What it says is that it is expected that documents issued by the beneficiary will be in the language of the credit. Many banks have read this to mean not only that the documents issued by the beneficiary are to be issued in the language of the credit, but that is not what it says. That is why the Drafting Group felt that a clearer wording, though "provocative", would draw every bank's attention to the fact that if nothing is stipulated in relation to the language of the documents to be presented, they can be in any language.

DCIOn that subject, suppose the credit is silent as to language and the documents turn out to be in an exotic language so that document checkers will have to go through all the process of having them translated before they can decide if they're compliant?

Müller Situations in which a bank did have to have the documents translated before examination have occurred, and it hit us on more than one occasion, but it helped in specifying certain languages for specific countries. In one of the more exotic examples, we had a particularly difficult transaction when we had to have a credit translated into Russian (from German) with a couple of attachments. When I received the translation, I called the translator to tell him that I had no knowledge of the Russian language, but that I believed there was one mistake.

I met him and we went through the documents. In one place, I drew his attention to the fact that all paragraphs in Russian were a bit longer than the ones in German, but that a particular paragraph was shorter and asked whether this could be true. He reviewed it and realized that two sentences had not been translated. The second item was wording in brackets which referred to an exhibit placed on the opposite page. He confirmed that this was precisely what the Russian wording was also saying. Then I asked him to look at the exhibit on the opposite page - there was none but only text! The wording in brackets had been literally translated without realizing that the exhibit was not on the opposite page but one further down.

On the other hand, most larger banks have staff who speak and read the most common languages and therefore have access to in-house translation.

DCI I asked this question of Gary Collyer but would like to have your thoughts on it. Does it make sense to say that certain terms such as "shipping country", "exporting country" or "third party documents acceptable" should not be used in a credit, but then to go ahead and define them anyway as the revised draft ISBP does?

Müller This is not something new to the revised ISBP. It was there from the first version of the ISBP (Publication 645). Furthermore, as official opinions have been the basis for the ISBP, and in many official opinions a statement had to be made in relation to the terms indicated, I believe it does make sense to tell document examiners what they should look for when a credit does use these "undefined" terms. The only other alternative would have been to say that advising banks should not advise such credits before a clarification was available. That would have slowed the process and angered many a beneficiary around the world.

DCI I am somewhat confused by the language on non-documentary conditions. The new draft says these are to be disregarded but goes on to say that if data in a stipulated document are in conflict with the non-documentary condition, then this would be a conflict of data and presumably a discrepancy. In this case, since you have a non-documentary condition, why not just disregard the data in the stipulated document?

Müller This has been subject to many arguments, and some of them represented extreme positions. An example has always been in relation to the origin of goods. If a credit does not call for a certificate of origin but states under additional conditions "goods of Swiss origin" (a non-documentary condition), and a beneficiary presents an invoice (a stipulated document) which states "goods of Korean origin", one has to ask oneself whether this can simply be ignored. And there were arguments in favour of ignoring it. But the majority were against ignoring this obvious conflict. I am clearly in favour of not ignoring it.

DCI As a final question: Since this is a more comprehensive version of the ISBP than the previous ISBP 681 that was approved in 2007, are you confident that this new revision will remain in effect during the lifetime of UCP 600?

Müller ISBP 681 was created to cope with the revision from UCP 500 to 600. Since 2007, there have been more than 100 new official opinions rendered; therefore, a revision of ISBP was justified. When I look at the frequency of the revisions of UCP (roughly every 10 years since 1951), I believe that this latest revision of ISBP will last during the lifetime of UCP 600 unless some very drastic events require an immediate revision of the rules.

René Müller's e-mail is rene.mueller@credit-suisse.com