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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
At the meeting in Istanbul, Turkey on 21-22 November, the ICC Banking Commission approved a number of new Opinions on queries submitted to it. Eight of these are printed below; more will follow as soon as they can be edited.
Article 9
Where a bank tried to amend or cancel an irrevocable L/C; impact of this on further advances under the credit
Query
On 11 March, a Bank A in Country S opened an irrevocable letter of credit by telex with a bank in Country I, in our favour, which included the following details:
- Amount: US$118,000.00 max - Expiry: 7 May at your (bank in Country I) counters - Subject to UCP 500
On 13 March the credit was received by ourselves. On the basis of the issuance we were able to secure 80 per cent packing credit advance for purchase of the goods.
During middle of April, within the validity of shipment and expiry, Bank A sent a telex to the bank in Country I with the following instruction: "Please do not deliver the original letter of credit to Company M. The buyer is not interested in taking delivery of the goods under this L/C."
Upon receipt of this message we were unable to obtain any further finance. By this message Bank A frustrated and revoked its own irrevocable letter of credit. Please advise.
Analysis and conclusion
Article 9 of UCP 500 states that an irrevocable credit constitutes a definite undertaking of the issuing bank, provided that the stipulated documents are presented to the nominated bank or to the issuing bank and that the terms and conditions of the credit are complied with to pay at sight, to accept draft(s) drawn by the beneficiary on the issuing bank and pay them at maturity, or where the credit is available by negotiation, to pay drawers and/or bona fide holders without recourse. Therefore, once issued, i.e. formal advice received by the beneficiary (either directly from the issuing bank or via a local advising bank) the issuing bank is liable to honour complying documents.
Any subsequent request of the issuing bank to amend or cancel the credit is subject to the consent of the beneficiary. In the event the beneficiary does not consent to such amendment or cancellation request, the issuing bank is bound to honour documents that comply with the original credit and any other (accepted) amendment(s).
ICC is unable to comment with regard to the effect on any further advances under the credit, as this is an arrangement outside the credit and UCP. This is a bank/customer relationship issue.
Sub-Article 20(b), Articles 23 and 26 and the ICC Decision on Original Documents
Where bill of lading and signatures thereon are produced by imaging technology and sent via the Internet, can they qualify as original documents under sub-Article 20(b)?
The purpose of this query is to clarify whether Article 20(b)(ii) applies in relationship to Company A's bills of lading. As background, Company A has used imaging technology to produce our bills of lading since 1996.
The bills of lading are distributed by direct printing and subsequently sending them by courier to our customers; or, for approved customers, we send them via the Internet. The documents are identical whether they are printed internally or via the Web as the signature is imaged onto the document.
As we expand our bills of lading into other markets, some banks have raised the question as to whether or not the facsimile signature qualifies under Article 20(b), which reads: 'b. Unless otherwise stipulated in the Credit, banks will also accept as an original document(s), a document(s) produced or appearing to have been produced:
i. ... by reprographic, automated or computerized systems; ii. ... as carbon copies, provided that it is marked as original and, where necessary, appears to be signed.
A document may be signed by handwriting, by facsimile signature, by perforated signature, by stamp, by symbol, or by any other mechanical or electronic method of authentication.'
It is my understanding that International Financial Services Association (IFSA, formerly known as USCIB) has previously supported the fact that Company A's bill of lading is in compliance with sub-Article 20(b) as stated above. Furthermore, we have issued in excess of 500,000 bills of lading in North America, signed with the facsimile signature since 1996. I believe the confusion lies in our ability to deliver the aforementioned bill of lading via the Internet, which may be incorrectly interpreted as an electronic document. Any opinion regarding this matter is appreciated.
The text of the query includes the wording of sub-Article 20(b) which is relevant to this issue. In addition, the content of the ICC Decision on Original Documents dated 12 July 1999 needs to be recognized.
In that Decision, Section 2, Determination of Originality, states: "Banks undertake to determine whether a document appears on its face to be an original document, as distinguished from a copy. Except as expressly required by a letter of credit (including an incorporated term such as UCP 500 sub-Articles 23(a)(iv) or 34b), banks do not undertake to determine whether an apparent original is the sole original. Banks rely on the apparent intent of the issuer of the document that it be treated as an original rather than a copy. In this regard, a person sending a telefax or making a photocopy on plain paper or pressing through carbon paper presumably intends to produce a copy. On the other hand, a person printing a document on plain paper from a text that that person created and electronically stored presumably intends to produce an original. Accordingly, documents bearing facsimile signatures or printed in their entirety (even including the issuer's letterhead and/or signature) from electronically stored text are presumably intended by the document issuer to be original and in practice are accepted by banks as original."
Section 3.3 of the Decision looks at documents which bear a facsimile signature and states: "Banks treat a facsimile signature as the equivalent of a hand signature. Accordingly, a document that appears to bear the document issuer's facsimile signature is also treated as an original document."
The issue of originality with regards to bills of lading is covered in the context that Articles 23 and 26, for example, require the presentation of a sole original bill of lading or multimodal transport document. Such documents either specify on their face that the document is original or within the printed text on the face that "in witness whereof X original bills of lading have been signed ... ", or similar wording.
The signature on the bill of lading is classified as being a facsimile one and as such is acceptable under the terms of sub-Article 20(b).
In the context of the printed wording which appears on the face of the bill of lading or multimodal transport document, "originality" can be established. The signature on the bill of lading is classified as being a facsimile one and as such is acceptable under the terms of sub-Article 20(b).
The document, issued as described above, would be acceptable under UCP 500.
Article 21
The criteria that will apply when a credit requires that a certificate of origin be issued by a chamber of commerce
I have been approached by Bank R to present a case in relation to a certificate of origin issued by a chamber of commerce in Country M. This query is in respect of, and in replacement for, TA. 423 which was withdrawn prior to the last meeting of the ICC Banking Commission.
The key issue is whether a certificate of origin was 'issued' by the chamber of commerce in Country M. Based on my research, it is widely accepted international banking practice that a certificate of origin is deemed to be issued by a chamber of commerce if it fulfils the following conditions: the format and/or wording of such certificate of origin are prescribed by the relevant chamber of commerce. It is not uncommon that the exporter is required to fill in the prescribed form and to make a declaration about the origin of the goods by signing on the certificate of origin; and the relevant chamber of commerce then certifies that the declaration made by the exporter about the origin of goods is correct by putting its chop and/or authorized signature(s) on the said certificate of origin.
In the present case, the certificate of origin presented under the L/C fulfils all the above conditions and appears on its face to be in full compliance with the terms and conditions of the L/C. For the avoidance of doubt, Bank R has obtained a written confirmation from the chamber of commerce in Country M (i.e., the issuer of the certificate of origin in dispute), confirming that the chamber issued the said certificate.
The said certificate of origin was issued in the standard form prescribed and supplied by the chamber of commerce and each applicant must use the standard form.
It is a pre-requisite that the chamber requires the applicant to complete the form making any necessary declarations.
Only upon receipt of the certificate, duly completed, will the chamber 'issue' the certificate of origin by placing the chop (stamp) of the chamber on the certificate and by signing it?
The certificate of origin is issued on a standard A4 sheet headed 'Certificate of Origin' and addressed 'To Whom It May Concern'. It is neither 'issued' on headed paper of the chamber or the beneficiary (applicant for the issuance of the certificate of origin). It requires the completion of details of the producer, origin, etc. The certificate then bears the official stamp of the chamber of commerce and a further stamp stating Executive Secretary, The Chamber of Commerce. This is then signed accordingly.
We believe the document to comply with the requirement in the credit that the certificate of origin be 'issued' by a chamber of commerce.
Where a credit requires that a certificate of origin be issued by a chamber of commerce, the following criteria will apply.
1. The condition is satisfied if the document is issued by a chamber of commerce, i.e. on its letterhead or specified form _ even though the detail(s) may have been completed by the beneficiary and the chamber merely signs.
2. Another acceptable alternative to this would be where the document is "neutral", i.e. it is not on headed paper but within the body there is evidence of completion and/or signature of a chamber of commerce.
3. A document issued on the letterhead of the beneficiary or any other party (one that is not a chamber of commerce) would not be seen to comply with a requirement of "issued" by a chamber of commerce.
From the information supplied, the certificate of origin complies with the credit terms and conditions.
Article 23
Where two vessels are quoted but only one port, does the bill of lading require an on board notation stating the name of the vessel?
We refer to the ICC opinion under document 470/TA.312 and inform you that we, as the nominated bank, recently had a dispute with an issuing bank in Country H on the interpretation of the said ICC opinion vis-_45;vis our case which is as follows:
The L/C requires presentation of a marine B/L evidencing shipment from Izmir/Turkey to Huangpu/China. The B/L presented to us contained shipment information in the respective boxes as:
Pre-carriage by Vessel V Place of receipt blank Ocean Vessel Vessel C Port of Loading Izmir/Turkey Port of Discharge Huangpu/China Via Gioia Tauro and Hong Kong
The 'received' type B/L evidences shipment by containers and bears a dated on board notation.
The issuing bank's advice of discrepancy (MT734) stated: 'B/L without showing the actual vessel name on on board notation', followed by another message referring to TA.312 in support of its action.
The B/L contained transhipment information from which it was apparent that on board belonged to the Vessel V in charge of pre-carriage from Izmir to Gioia Tauro; hence our case was different from the one contained in TA.312. We contested the above discrepancy by sending the following message to the issuing bank: 'In our opinion we as banks must exercise our own judgment in many cases. There is no need to indicate on paper what is clearly apparent. It is obvious that on board notation belongs to the pre-carrier Vessel V departing from the port of loading Izmir. It cannot belong to Vessel C because this vessel is clearly shown to have assumed the ocean leg of the transport starting from Gioia Tauro (Italy). Your views would be justified if there were indeed a confusion as to whether goods were loaded on Vessel V or Vessel C, whereas there is no confusion on this issue since a vessel docked at an Italian port cannot be loaded in Turkey.'
It transpires that the issuing bank would accept the B/L if only Vessel V's name appeared on the B/L at the cost of an absence of the more important information (name of the ocean carrier) actually needed by its customer.
Please advise which bank's interpretation is correct.
Analysis
The analysis and conclusion of query TA.312 stated:
"Analysis
Sub-Article 23(a)(ii) states: 'indicates that the goods have been loaded on board, or shipped on a named vessel'. It also refers to 'Loaded on board or shipment on a named vessel may be indicated by pre-printed wording on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment.'
Conclusion
The bill of lading that has been presented shows two vessels albeit one port of loading. From the text of the question it would appear that the bill of lading that was presented was a 'received for shipment' type which bore a dated on board notation.
In stating two vessels, the bill of lading does not meet the requirements of the above sub-Article in showing a 'named vessel'. The on board notation should include the name of the vessel to which the on board notation refers."
The manner in which the bill of lading was drawn up under query TA.312 is the same as quoted in this query, i.e. that two vessels names are quoted but only one port.
The fact that the bill of lading in the Port of Discharge box stated "Huangpu/China Via Gioia Tauro and Hong Kong" does not in itself convey the meaning that the ocean "VesselC" is the vessel that leaves Gioia Tauro for Hong Kong and then Huangpu. The bill of lading, on its face, is not clear as to which vessel is sailing from which port.
In line with the comments given in query TA. 312, the bill of lading requires an on board notation stating the name of the vessel.
UCP 500 Sub-Article 27(c); UCP 400 sub-Articles 29(b) and (c)
In an air transport shipment, if the issuing bank does not want transhipment to occur, will it have to specifically exclude sub-Article 27(c) in the credit?
This is to seek your opinion regarding a credit prohibiting transhipment but where an air waybill was presented which showed two flight dates and flight numbers.
We refer to case no.111 of ICC publication no. 459 and R.124 of ICC publication no. 434. We would like to know if the situations were changed by applying UCP 500 sub-Article 27(c) (i/o Article 29 of UCP 400).
We also refer to the reasons for change in ICC publication nos. 411 and 511 respectively. According to our understanding, 411 tended to regard the same case as transhipment and indicated it should be rejected. However, 511 seemed to take a different position in that it accepted the AWB even though the credit prohibited transhipment and suggested that the applicant override the provision of sub-Article 27(c) by explicitly excluding it from the credit. In that case, does it imply that it will be meaningless to prohibit transhipment if sub-Article 27(c) is not excluded?
For your information, we have never seen any credit expressly exclude the applicability of sub-Article 27(c) before. Moreover, different flight dates and flight numbers are always shown on the same AWB, i.e. the entire carriage is covered by one and the same air transport document.
Sub-Article 29(b) of UCP 400 reads: "Unless transhipment is prohibited by the terms of the credit, banks will accept transport documents which indicate that the goods will be transhipped, provided the entire carriage is covered by one and the same transport document." Sub-Article 29(c) of UCP 400 adds: "Even if transhipment is prohibited by the terms of the credit, banks will accept transport documents which: (ii) state or indicate that transhipment will or may take place, when the credit stipulates a combined transport document, or indicates carriage from a place of taking in charge to a place of final destination by different modes of transport including a carriage by sea, provided that the entire carriage is covered by one and the same transport document, or ... ".
Sub-Article 27(c) of UCP 500 states: "Even if the Credit prohibits transhipment, banks will accept an air transport document which indicates that transhipment will or may take place, provided that the entire carriage is covered by one and the same air transport document."
ICC publication 511, page 81, goes into some detail with regard to the discussions concerning transhipment which took place at the time of the revision of UCP 400. The result was that it was recognized that in the current freight movement environment, goods will invariably be transhipped during the course of dispatch of the goods.
If an issuing bank wishes to issue a credit which does not allow transhipment to occur (i.e. evidence to appear within the documents of such an event(s)), then a statement that transhipment is prohibited is not sufficient. The issuing bank will need to specifically state (where there is an air shipment) that sub-Article 27(c) does not apply.
Sub-Article 33(b); Article 28
Whether a document stating "franco de port (place of destination)" would be acceptable under a credit requiring the transport document to evidence payment of freight; where the issuing bank refused the CMR because it did not show that it was a copy for the consignor/shipper.
First of all, we wish to thank you for the opportunity we received at the last meeting to come back to these issues to which we attach a great importance.
As suggested we herewith present some new queries on the points at issue in respect of opinions given under references R.289 and R.371 in order to obtain the ICC's opinion giving the correct interpretation and translation.
Case 1: freight prepaid on a railway bill
A credit provides for the presentation of a duplicate of the railway bill marked freight prepaid. There were no specific requirements with regard to the language for the issue of documents.
A duplicate of the railway bill was presented. In box 24 (in several cases this is box 22) it had the indication 'franco de port (place of destination asked for in the L/C)'.
The issuing bank refused the documents stating that railway bill was not marked freight prepaid.
In our opinion this cannot be considered as a discrepancy for the obvious reasons that: the indication 'franco de port (place of destination)' equates to 'freight prepaid' or 'carriage paid'. Several dictionaries (a.o. the Harrap's) refer to 'carriage paid' as the translation of 'franco de port'; moreover, ICC publication no 373 ('Key Words') as well as publication no. 417 should bring us to the same conclusion. In addition, we draw your attention to the fact that one of the pre-printed boxes reads 'port d_; which equates to 'freight collect'.
Railway authorities or their officers normally tick the related pre-printed box and are normally not prepared to add equal wordings in another language.
Since the position of the issuing bank would render almost all railway bills (at least in Europe) discrepant, we shall appreciate receiving your agreement with this opinion.
Case 2: copy for consignor/shipper of a CMR.
A documentary credit has been issued requiring, amongst others, the presentation of 'original copy for consignor/shipper of roadway bill CMR, showing ...'.
The presented CMR in no way indicates upon its face that it is the copy for the consignor/shipper. In fact, the presented CMR does not indicate at all to whom this copy was assigned. (The CMR is usually issued in four original copies, each one having a specified beneficiary.)
The issuing bank refused the CMR for the following reason: CMR not showing/evidencing that it is the copy for the consignor/shipper.
The issuing bank replied that indeed sub-Article 28(a)(iv) applies where it reads 'in all other respects meets the stipulations of the credit'. One of these stipulations is that the L/C required the 'copy for shipper' of the CMR.
Is the issuing bank right to retain this fact as a discrepancy only because the presented CMR did in no manner show (thus 'on its face') to be the copy for the consignor/shipper. Furthermore, the issuing bank stresses the importance of the required 'original copy for consignor/shipper of the CMR' in order to be sure of the good arrival of the goods, taking away the risk that the shipper would stop or divert the transportation of the goods.
Case 1.
The letter of credit in question required the railway bill to evidence freight paid; the document presented evidenced "franco de port (place of destination)". Sub-Article 33(b) states: "If a Credit stipulates that the transport document has to indicate that freight has been paid or prepaid, banks will accept a transport document on which words clearly indicating payment or prepayment of freight appear by stamp or otherwise, or on which payment or prepayment of freight is indicated by other means." As has been stated above, various dictionaries explain the meaning of "Franco" as postage paid, carriage paid, etc. In this respect, a document stating "franco de port (place of destination)" would be acceptable under a credit requiring the transport document to evidence payment of freight.
Case 2.
Article 28 of UCP 500 does not cover the issue of "copy for the consignor/shipper" in respect of CMRs unlike the reference in Article 27 for the presentation of a similarly titled document where air waybills are required.
Where a letter of credit requires the presentation of a document and then details a specific version of that document, then this should be adhered to by the beneficiary. In this instance, the presentation of a CMR which does not bear reference to it being "copy for the consignor/shipper" would be deemed to be discrepant.
The responses given on these enquiries should not be seen to override the opinions given in R.289 and R.371since those opinions were given based upon the specific information stated in those particular queries.
URC 522 Article 2, sub-Article 19(b) and Article 10
Where a collecting bank deducted an amount from the collection without seeking instructions from the remitting bank; whether an approval must be obtained for transport documents consigned to banks
On 23 March our Bank N sent a URC 522 export collection to the head office of a bank in Country S (via courier) with a covering schedule enclosing documents including an original air waybill showing goods consigned to the head office of the bank in Country S, requesting it to deliver the documents against payment at sight for US$60,903.00.
On 31 March the bank in Country S sent a message to Bank N "transferred in accordance with your instructions _
USD 60903.00 value of documents USD 243.60 commission USD 69.60 charges USD 30415.00 deduction USD 30174.80 net with value 6 April".
Additional information stated "deduction as agreed between drawer and drawee".
Various communications took place whereby Bank N insisted upon settlement of the full value without deduction.
On 2 May the bank in Country S finally paid the value that was deducted from the original collection amount together with interest for the respective period.
Was the bank in Country S correct in its initial action of deduction without approval? With regard to transport documents consigned to banks, does this mean an approval must be obtained in respect of each consignment? We have been dealing in this way for over 15 years with this client and their bankers with payments made without delay.
Article 2 of URC 522 requires that a collecting bank deliver documents against payment in accordance with the instructions received.
Any deviation from the terms of the collection instruction requires that the collecting bank seek fresh instructions from the remitting bank prior to proceeding. This would include a payment for a lesser amount than that stated (unless in respect of the collecting bank's charges).
Sub-Article 19(b) of URC 522 stipulates that partial payments will only be accepted if the collection instruction specifically authorizes this event. Otherwise, full payment must be made to allow the release of documents.
If the collecting bank is authorized by the drawee to take up the documents on specific conditions being met, then these should be conveyed to the remitting bank for agreement/further comment before they are released to the drawee and any payment made.
It would seem that the collecting bank recognized the error of its ways by the subsequent payment of the deducted amount and some compensation by way of an interest payment.
Article 10 stipulates that goods must not be consigned to banks without their specific approval. Where there is a regular flow of business between the parties, then this can be achieved by a general understanding/agreement for this to occur. The statement in Article 10 covers the situation where the collection transactions are not so frequent or are first-time dealings between the parties.
URC 522 Article 6; sub-Articles 7(a) and 7(b)
Where the release of documents was only to be effected at the time payment was made at maturity
A set of documents were sent by our bankers to the bankers of the client with the following instructions: 'Please deliver the documents against payment at maturity date, i.e. 45 days from B/L date.'
No draft or equivalent was added to the documents. The bills of lading are to the order of the client's bank.
The documents were given to the client and no payment has been effected. According to our bankers, this payment term is under Article 6 of the URC 522.
We would like to know from you how this payment term is to be understood and what are the responsibilities/obligations of both banks (ours and clients) and where, if it is the case, did they neglect their obligations.
Before answering your query the following remarks should be made:
1) One should be aware that the delivery instructions of this collection mean that the release of documents, therefore including the bills of lading, will only be effected at the time payment is made at maturity.
2) You are referring to Article 6 which reads: "In the case of documents payable at sight the presenting bank must make presentation for payment without delay. In the case of documents payable at a tenor other than sight the presenting bank must, where acceptance is called for, make presentation for acceptance without delay, and where payment is called for, make presentation for payment not later than the appropriate maturity date."
3) sub-Article 7(a) states: "Collections should not contain bills of exchange payable at a future date with instructions that commercial documents are to be delivered against payment."
It can be seen from point 3) above that the collection instruction from the remitting bank was not in accordance with the provisions of URC 522 sub-Article 7(a). However, URC 522 makes it perfectly clear to collecting/presenting banks that a) they have no duty to handle a collection and may refuse to do so; b) that if any of the conditions of the collection instruction are unclear or ambiguous they should seek clarification before proceeding; and c) that where such a clause which provides for the documents to be only released at the time of payment at maturity, URC 522 (in sub-Article 7(b)) makes it quite clear that they are not responsible for any consequences by virtue of abiding by such an instruction.
The collecting bank did not act in accordance with the requirements of URC 522 in the handling and disposal of the documents.