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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Article
UCP 500 sub-articles 3(a) and 5(b); articles 23 and 25; subarticle 26(a)(ii), articles 14, 28 and 27
A series of claimed discrepancies concerning language on packing lists, proforma invoices, tanker and combined transport B/Ls, CMRs and air waybills
Query TA 608rev.1
We kindly ask for your Opinions on the following 10 queries from our members as compiled by us and presented in concise formats. All credits are subject to UCP 500.
Query 1
The description of goods in the credit reads "Imaging centre equipment relating with proforma invoice dated xx and nr xx". The proforma invoice is not an integral part of the credit. Twenty per cent of the credit amount is payable against presentation of the beneficiary's mounting certificate.
The commercial invoice presented under the credit indicated the description of goods exactly as above. Other terms and conditions are complied with, including mounting certificate, and payments have been effected by the nominated bank and reimbursed by the issuing bank.
The applicant objected to payments and asked for the refund of the same, claiming that 1) goods shown on the commercial invoice did not match those shown on the proforma invoice and that it was the issuing bank's responsibility to compare these two documents for compliance since the proforma invoice was an integral part of the text of the credit, 2) twenty per cent payment was allowed despite fact that the beneficiary did not perform mounting but presented the mounting certificate, thus certifying the event of mounting falsely.
The issuing bank replied to these claims, stating that the proforma invoice was not an integral part of the credit and there was no credit term calling for checking the commercial invoice against the proforma invoice and that the mounting certificate issued by the beneficiary was compliant.
Since the applicant still insists on a refund of payments and also claims that the issuing bank did not act with reasonable care, we shall appreciate your Opinion.
Query 2
When a credit calls for a tanker bill of lading or liner B/L, can we accept a B/L entitled only "Bill of Lading" under the "however named" concept without seeking any indication that the respective sea transport is being effected by a tanker or under liner terms? (We are in favour of seeking the said indications in order to make sure that respective transports are realized as originally intended, i.e., by tanker or under liner terms.)
Query 3
The credit calls for a marine B/L. The description of goods is "XX tons of liquid detergent".
A tanker B/L signed by the master and referring to a charter party was presented. The nominated bank does not accept the document, stating that it is a charter party B/L, and the credit does not allow the same, adding that if the credit had called for a tanker B/L it would be acceptable since tanker B/L was a form of C/P B/L. Is the stance of the nominated bank correct?
Query 4
The credit calls for a bill of lading. The title of the presented B/L (Congenbill, Edition 1978) reads in print in two lines: "Bill of Lading" - "To be used with charter parties". The second line appears to be deleted by letters xxx and bears a correction stamp. The printed box in the body of the document reserved for the date of a charter party has no date. The document is signed by the master.
The nominated bank does not accept the document under UCP 500 article 23. The beneficiary says that there is no charter party involved, and the master was able to provide the B/L only in this manner.
Is the stance of the nominated bank correct?
Query 5
The credit calls for a combined transport B/L evidencing shipment from India to Istanbul. The presented combined transport B/L (titled in print as such) shows:
- Place of receipt: xxx (an inland place in India); pre-carriage: by rail
- Port of loading: yyy (an Indian Port); Vessel: ABC
- Port of Discharge: Istanbul
- Place of Delivery: Istanbul
The document is also marked "CFS / CY".
The printed wording in the document states: "Received in apparent good order and condition for transportation on board the ocean vessel mentioned herein or any substitute vessel or on board the feeder vessel or other means of transportation (rail or truck) if place of receipt is named in this B/L, the goods specified herein for carriage from the port of loading named herein or place of receipt if mentioned herein on a voyage as described and agreed by this B/L and discharge at the port of discharge named herein or deliver at the place of delivery if mentioned herein ... ".
The nominated bank accepted the document under UCP 500 article 26, but the issuing bank found it discrepant, stating that according to UCP 500 sub-article 26(a)(ii) the document must indicate that the goods have been dispatched, taken in charge or loaded on board or must contain a separate dated on board notation. It also added that to its knowledge the same issuer (a multinational and well-known shipping company) uses another form of combined transport B/L containing a printed wording starting with the word "Shipped", and therefore the existence of this second form is an evidence of the first one's incompatibility with what is intended by article 26.
The nominated bank objected and stated that the expression in the printed wording reading "Received ... for transportation on the ocean vessel mentioned herein" satisfies what is intended by article 26 and that the same printed wording, when read in its entirety, evidences that the issuer undertakes the transport from the place of receipt until the place of delivery as expected from a combined transport.
Which bank's stance is correct?
Query 6
The credit states among its special conditions: "In case of discrepancies we shall accept the documents for collection and as such we shall be relieved from our liability under article14."
The issuing bank, upon receipt of discrepant documents, sends a rejection notice on the day of receipt stating also that it is returning the documents.
The beneficiary, meanwhile, was informed by the applicant that the applicant did not receive any advice of collection from the issuing bank and therefore was unable to take possession of the documents and to pay via a bank transfer, though he was willing to do so.
The nominated bank which sent the discrepant documents to the issuing bank on the expectation that it would treat the documents on a collection basis, as already accepted by its special condition, holds the issuing bank responsible for not complying with its promise, thus causing delay in the payment to be otherwise effected directly to the beneficiary by the applicant as per their agreement.
Can the issuing bank be criticized for its action?
Query 7
Due to frequent use of the International Consignment Note (CMR), we are familiar with its usual format, which includes a printed notation that the respective road transport will be subject to the CMR convention rules. We know that the document must include such notation as required by these rules.
However, from time to time the said document is presented to us issued in formats of the issuers' own design or by simply filling in a blank stationery titled "CMR" or bearing CMR as the logo and/or with words CMR number xxx, but without a notation as described above. Although UCP 500 article 28 has no guidance in this respect, we treat such CMRs as unacceptable, knowing that they are not issued in conformity with the CMR convention rules. We believe that our action is justified within the principles of prudent banking.
We shall appreciate your Opinion in this regard.
Query 8
The credit calls for, among other items, "packing list issued by the manufacturer declaring itself as the manufacturer". The packing list as presented was entitled "packing list issued by the manufacturer", bearing at the bottom the stamp of the beneficiary.
The nominated bank accepted the document, but the issuing bank treated it as discrepant on the grounds that the manufacturer did not declare itself as the manufacturer as required by the credit.
The nominated bank objected, stating that from the title of the document it was clear that the issuer of the document was the manufacturer. Which bank's stance is correct?
Query 9
The credit was available with the nominated bank by negotiation of a sight draft accompanied by the required documents. The draft drawn by the beneficiary on the issuing bank is entitled "bill of exchange", and its text reads "Pay to Ourselves at sight the amount of ... ".
The nominated bank did not negotiate, stating that the text of the draft must read "Pay against this Draft at sight to ourselves the amount of ... " according to the local law and that the mere title does not satisfy this requirement. The beneficiary objected, stating that the draft in question was to be sent to the issuing bank; hence it would be processed in another country. Therefore, conformity with the local law should be of no concern to the nominated bank.
The nominated bank replied, stating that since the place of first presentation was its own place, it had the duty to see that the draft was drawn according to the local law.
Which party's stance is correct?
Query 10
The credit called for, among others, an AWB evidencing shipment from Istanbul to xx Airport. The AWB as presented was signed by a forwarder as the agent of ABC Airlines (a local airliner) identified as the carrier. The AWB showed no transhipment. The document checker at the nominated bank raised a discrepancy, stating that to his knowledge ABC Airlines had no flight to xx Airport and therefore the issuer cannot sign as the agent of that airline. His observation is supported by the code next to the flight number shown on the AWB, which belongs to another airline. The management of the bank shared the views of the document checker, and the nominated bank refused the document under the credit.
The beneficiary objected, stating that the document is acceptable under UCP 500 article 27 and that it should not be a bank's duty to raise discrepancies on the pretexts as mentioned.
Is the nominated bank's stance correct?
Analysis and conclusion
UCP 500 sub-article 3(a) reads: "Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the Credit. Consequently, the undertaking of a bank to pay, accept and pay Draft(s) or negotiate and/or to fulfil any other obligation under the Credit, is not subject to claims or defenses by the Applicant resulting from his relationships with the Issuing Bank or the Beneficiary." Article 4 reads: "In Credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate."
In addition to the above, sub-article 5(b) reads: "All instructions for the issuance of a Credit and the Credit itself and, where applicable, all instructions for an amendment thereto and the amendment itself, must state precisely the document(s) against which payment, acceptance or negotiation is to be made."
Whilst a credit may make reference to a proforma invoice by number and date, it imposes no requirement on the part of the nominated or issuing bank to review the documents with the proforma invoice. Banks are actively discouraged from attaching a copy of the proforma invoice as an integral part of the credit. If an applicant requires a specific goods description to appear on the invoice and other documents, this must be incorporated into the text of the credit, but avoiding excessive detail.
The issuing bank has acted according to the requirements of the UCP and, it would seem, the terms of the credit.
In a credit calling for a tanker bill of lading or liner bill of lading, a bill of lading will be accepted, however named, provided the content of the bill of lading appears to satisfy the terms stated in the credit. Where a tanker bill of lading is required, any reference in the bill of lading to it being subject to a charter party would be acceptable, and the document would be reviewed under article 25. Otherwise, it will be subject to review under article 23. Where a liner bill of lading is required, banks will consider that the bill of lading is a liner bill of lading if it contains any reference to liner terms, unless it references being subject to a charter party, in which event the document would be discrepant.
For the reasons stated in the answer to Query 2, the document would not be acceptable under a credit calling for a marine bill of lading (subject to review under article 23) due to the fact that it is a tanker bill of lading with the reference to it being subject to a charter party. The nominated bank is correct.
The requirement under UCP 500 article 23 is that the bill of lading "contains no indication that it is subject to a charter party". The fact that the heading has been amended to remove reference to applicability of use with charter parties does not make the document acceptable under article 23 due to the further reference to a charter party date. The UCP draws no distinction as to the manner in which "no indication" is to be applied, and therefore any reference, including that stated in the Query, would make the document discrepant. The document must fully comply with the provisions of article 23 to be acceptable.
The fact that a shipping company may maintain more than one form of transport document should not be seen as any form of incompatibility with a specific article of the UCP. The document must be assessed on the acceptability of the data that appears on its face with the terms and conditions of the credit and the applicable provisions of UCP.
The credit required presentation of a combined transport bill of lading, and this document evidences the first mode of transport as "By Rail". The indication "received in apparent good order ... establishes compliance with the requirement of sub-article 26(a)(ii) that the goods have been taken in charge. The nominated bank's stance is correct.
The issuing bank can be criticized as to the wording in the credit for two reasons: (1) that the intent is not in line with the spirit of the requirements of an issuing bank under UCP, in particular article 14, and (2) that whilst there is no obligation on the part of an issuing bank to accept any form of waiver from an applicant, the implication in the text is of a certain course of action that may not be appropriate at the time the documents are received.
Any such refusal of the document would not be in line with UCP. It is for the credit to be specific as to the requirements of a document, and a nominated or issuing bank can only review the document in line with such requirements and the content of article 28.
The requirement in the credit is somewhat circular in its intent - "issued by the manufacturer declaring itself as the manufacturer". If the document is stated to be issued by the manufacturer, then that issuing party is the manufacturer. There is no discrepancy and the nominated bank is correct.
The draft should be issued in a manner that is acceptable to the local law applicable to the place of payment, acceptance or negotiation. This is a matter for local law, not the UCP.
On its face, the document complied with the terms of the credit and UCP 500 article 27. The fact that a flight number is given that does not belong to the named carrier does not create a discrepancy.