Article

UCP 500 articles 13 and 14; sub-articles 14 (d) (i) and (ii) and 14 (e)

Where a credit required a certificate of origin "approved" by the "Arab League Chamber of Commerce"; whether a notice of refusal was sent within seven days after receiving the documents

Query [TA 649rev]

The documentary credit was subject to UCP 500. The L/C documentary requirement in relation to the query is given below:

"Certificate of origin approved by the Arab League Chamber of Commerce"

Under additional conditions:

"In case of documents not in compliance with credit terms you are held to communicate to us an exhaustive list of discrepancies. (A commission in euros ... will be deducted from used amount in case documents presented with discrepancies)."

- 2007-06-10: Documents including a certificate of origin issued by the Country S Chamber of Commerce and legalized by the consulate of Country M were negotiated and sent to the issuing bank.

- 2007-07-10: Advice of refusal: Documents refused due to discrepancy: "Certificate of origin not approved by Arab League Chamber of Commerce. We keep the documents at your disposal in conformity with articles 13 and 14 of UCP 500."

- 2007-07-16: The discrepancy was refuted by the confirming bank, as Country M is a member of the Arab League. As the confirming bank's claim was not honoured, it traced the outstanding amount and reiterated that the refusal was sent too late by the issuing bank. The confirming bank stated that the issuing bank is precluded from claiming that the documents are discrepant, as the refusal was not sent within the time stipulated in UCP 500 article 14.

- 2007-09-24: The issuing bank argued that the confirming bank had not listed the discrepancies and suggested presentation of a certificate of origin approved by the Arab League Chamber of Commerce.

The confirming bank argued that the listing of discrepancies was not applicable, as the confirming bank considered the documents compliant. The certificate of origin was legalized by the consulate of Country M. Country M is a member of the Arab League. The confirming bank reiterated that the refusal was sent too late, and therefore the issuing bank is obliged to pay irrespective of the documents being discrepant or not.

The issuing bank has still not paid.

Analysis

The Arab League currently consists of 22 member states, of which Country M is one. The letter of credit required presentation of a certificate of origin approved by the Arab League Chamber of Commerce. In fact there is no "Arab League Chamber of Commerce", but there are chambers of commerce able to issue certificates of origin for exports to the 22 member states. In most countries, the organization is prefixed by "Arab-[country of export] Chamber of Commerce". For example, the Arab-British Chamber of Commerce issues certificates of origin in relation to UK exports to countries in the Arab League. In letter of credit terminology, legalization by the consulate of Country M is an act separate from a certification (or approval - as stated in the credit) by an Arab League Chamber of Commerce, for example, a certificate of origin certified by a chamber of commerce and legalized by X country consulate/ embassy.

The condition in the credit stipulating that where discrepancies exist the confirming bank must provide the issuing bank with an exhaustive list is fairly subjective in that it is dependent upon the views of the respective banks, except where unquestionable discrepancies exist, such as late shipment, etc. If the confirming bank finds the documents to be in compliance (even if the issuing bank may subsequently find one or more discrepancies that are proved to be valid), the clause has no effect based on its own examination and determination of compliance.

UCP 500 sub-articles 14 (d) (i) and (ii) read:

(i) "If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents, or to the Beneficiary, if it received the documents directly from him.

(ii) Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter."

UCP 500 sub-article 14 (e) reads: "If the Issuing Bank and/or Confirming Bank, if any, fails to act in accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or return them to the presenter, the Issuing Bank and/or Confirming Bank, if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the Credit."

Given the timeline in the query and absent any other information pertaining to the delivery of the documents, it must be presumed that the issuing bank did not provide a refusal by the close of the seventh banking day following the day of receipt of the documents.

Conclusion

A certificate of origin issued by the Country S Chamber of Commerce and legalized by the Country M Embassy was presented, whereas a certificate of origin approved by the Arab League Chamber of Commerce was required by the credit. It is not clear what was intended by the use of the word "approved" and, as mentioned under "Analysis", the Arab League is made up of 22 member states, each of which may issue, certify or legalize documents. It therefore follows that a document issued by the "Arab League" would not be possible. The beneficiary should have sought an amendment to reflect the form of document that it could present.

In any event, the requirements of sub-articles 14 (d) (i) and (ii) are quite specific, and it is clear from the timeline shown in the query that the issuing bank did not provide a notice of refusal by the close of the seventh banking day following the day of receipt of the documents. According to sub-article 14 (e), the issuing bank is therefore precluded from claiming that the documents are not in compliance, and it must effect settlement according to the terms and conditions of the credit.

UCP 600 sub-article 20 (a) (v)

Where a credit required presentation of a bill of lading marked "freight prepaid" but contained pre-printed wording that qualified any notation of "freight prepaid"

Query [TA 642rev]

We, as confirming bank, negotiated documents for our customers and sent the documents to the issuing bank. The credit required submission of a B/L marked freight prepaid. The issuing bank refused the documents due to a number of discrepancies. One of them being, "Data within B/L conflicting with regards to freight prepaid".

The bill of lading was marked with notation "freight prepaid" and also stated as one of the standard terms and conditions printed on the face of the B/L: "For freight prepaid bill of lading, delivery of cargo is subject to realization of cheque".

Our opinion was that, as bankers, we should be guided by what is there as a notation on the B/L regarding payment of freight and not ensure whether actual payment has been made or is subject to realization. Second, even in cases where the cheque for freight is dishonoured, it is a matter between the shipper and the shipping company, which is outside the purview of UCP.

We shall be grateful for the Opinion of the ICC Banking Commission on this matter.

Analysis and conclusion

The credit required presentation of a bill of lading marked "freight prepaid". The bill of lading was so marked, but contained pre-printed wording that provided qualification of any notation of "freight prepaid".

It should be noted that banks are not required to examine the terms and conditions of a bill of lading to determine compliance (sub-article 20 (a) (v)).

The bill of lading is not discrepant.

UCP 600 sub-article 24 (b) (i); UCP 500 article 28

Whether an international consignment note needed to bear wording or a marking indicating "copy for shipper"

Query [TA 656]

We shall appreciate your Opinion on the following issue under a credit subject to UCP 600. During determination of compliance of a presentation under a credit subject to UCP 600 calling for "International Consignment Note - Copy for Shipper", we had conflicting views as follows:

a. The presented document must bear the words or marking "Copy for shipper";

b. It is acceptable under sub-article 24 (b) (i), since it bears no marking indicating for whom it has been prepared.

For guidance we referred to the Opinions R 371 and R 467 covering identical credit requirements, but failed to find a clear solution for the matter at hand under the aforementioned sub-article. Therefore, we shall appreciate if you would kindly let us have your Opinion as to whether the presented document is acceptable without the marking "Copy for Shipper" under the above-mentioned credit term, without expressly requiring the document to be so marked.

Analysis

It should be noted that the requirements for road, rail and inland waterway transport documents have been modified in UCP 600. The positions taken in Opinions R 371 and R 467 reflected the fact that UCP 500 article 28 did not provide any requirements as to the form of document to be presented. As stated above, sub-article 24 (b) (i) now makes specific reference to the form of document required for presentation.

The credit required presentation of an "International Consignment Note - Copy for Shipper". This requirement presupposed that the document would be issued in a fanfold style that would provide a copy for the shipper. When the document is not issued in such a format, there would be no version marked "Copy for Shipper" or a need for the carrier or agent to annotate the document in such a manner.

Conclusion

On the basis that the document did not indicate that it was intended for a party or function other than for use by the shipper, the absence of an indication that the document was the one intended to serve as the "Copy for Shipper" does not create a discrepancy.

UCP 600 sub-article 38 (h)

Can a first beneficiary substitute its combined certificate of value and of origin for that of a second beneficiary?

Query [TA 653]

We would be grateful to receive the ICC experts' Opinion regarding article 38 "Transferable Credits" in UCP 600. Our country's exporters sell goods frequently, through an agent, to importers in Country N under transferable L/Cs issued by Country N banks.

As per sub-article 38 (h) of UCP 600, "The first beneficiary has the right to substitute its own invoice and draft ... ". However, the Country N banks' L/Cs require instead of an invoice a CCVO (Combined Certificate of Value and of Origin and Invoice of goods for exportation to Country N). Please find enclosed an example, which includes additional requirements and authorizations of the exporters' and exporter's country's institutions. Moreover, one of the CCVO's requirements is the name of the Country N importer.

Our query is whether a CCVO can be considered as a commercial invoice and, as such, to be replaced by the first beneficiary. Receipt of your Opinion is highly appreciated.

Analysis

As the heading suggests, the combined certificate of value and of origin serves a multiple purpose. Included within the content of the document are details that are synonymous with the structure of an invoice. For example, the beneficiary is required to provide data regarding the shipment - including goods description, amount, currency, country of origin, buyer, seller, etc.

Therefore, to all intents and purposes, the combined certificate of value and of origin serves the purpose, amongst others, of an invoice as described within the UCP.

Sub-article 38 (h) refers to the fact that the "first beneficiary has the right to substitute its own invoice and draft, if any, for those of a second beneficiary for an amount not in excess of that stipulated in the credit and, upon such substitution, the first beneficiary can draw under the credit for the difference, if any, between its invoice and the invoice of a second beneficiary."

Conclusion

For the purposes of UCP 600 sub-article 38 (h), a first beneficiary may substitute its combined certificate of value and of origin for that of a second beneficiary.

UCP 600 sub-articles 19 (a) (ii) and (iii)

Cases in which a dated on board notation is required to appear on a multimodal or combined transport document

Query [TA 650rev]

A letter of credit called for: "clean on board multimodal transport document consigned to the order of shipper, blank endorsed, notify applicant, marked freight prepaid". When the multimodal transport document was presented for examination, the document met all the conditions of the letter of credit. However, the on board notation on the transport document, which was added separately, did not include a date as part of the notation.

The L/C required shipment from USA Main Port to Huang Pu, China. The multimodal transport document showed:

Place of receipt: Memphis

Port of loading: Long Beach

Port of Discharge: Chiwan, China

Place of delivery: Huang Pu, China

The bank checking the documents felt that based on UCP 600 sub-article 19 (a) (ii), which includes:

"indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit by:

- a stamp or notation indicating the date on which the goods have been dispatched, taken in charge or shipped on board", that the document did not comply without a date included within the on board notation.

There were different opinions by our national committee as to whether the omission of a date was, in fact, a discrepancy. This brings up the following questions for ICC:

1. Is the intent of sub-article 19 (a) (ii) that if an on board notation is added to the document then the notation requires a date?

2. If a date is not required, should the bank consider the goods on board as of the date of the transport document?

3. Would the Opinion change if the letter of credit specifically called for an on board notation vs. a letter of credit requirement which strictly called for a multimodal transport document without calling for an on board notation?

Analysis

In addition to that stated above, subarticle 19 (a) (ii) also states: "The date of issuance of the transport document will be deemed to be the date of dispatch, taking in charge or shipped on board, and the date of shipment. However, if the transport document indicates, by stamp or notation, a date of dispatch, taking in charge or shipped on board, this date will be deemed to be the date of shipment." Sub-article 19 (a) (iii) includes: "indicate the place of dispatch, taking in charge or shipment, and the place of final destination stated in the credit, even if:

- the transport document states, in addition, a different place of dispatch, taking in charge or shipment or place of final destination, or

- The credit in question required shipment to be effected from a USA main port and the presentation of a "clean on board multimodal transport document..." The wording in article 19 caters for the various forms of transport that may be involved in a multimodal-type transport by reference to "dispatch", "taking in charge" and "shipped on board".

Conclusion

1. A dated on board notation is clearly required when the credit so requests. It is also required when the document evidences the first leg of the carriage as a sea shipment from the place stated in the credit.

2. Where a transport document is pre-printed shipped on board, the date of issuance would be deemed to be the date of shipment. When the document evidences the first leg of the carriage as a sea shipment from the place stated in the credit, there is a need for evidence of the date the goods were shipped on board, i.e., pre-printed or by notation.

3. No. See comments under 1 and 2 above.

UCP 600 Miscellaneous

Whether the requirement "all documents should be issued in English" applies to the language in which data on a document is completed, and/or also to the preprinted form of a CMR

Query [TA 647rev]

We, advising Bank C, have received an L/C under UCP 600 issued by Bank A and confirmed by Bank B, quoting as an additional condition: "All documents should be issued in English." A CMR is required among other documents.

After we presented the documents to Bank B, an advice of refusal was received stating only one discrepancy: "CMR-not pre-printed in English".

We argued that presented CMR complies with the L/C requirements, since all data was completed in the English language on a formal standardized form of international consignment note which is subject to the Convention on the Contract for the International Carriage of Goods by Road (CMR). The presented CMR had, on its face, fields described in the Croatian and French languages and, on the reverse, the CMR fields were described by field numbers in German, Italian and English.

According to practice, each standardized field on a CMR is usually defined on its face in French and the domestic language of the exporting country (which is not the UK in this case) and has translations in three other languages on the reverse, among them, English. Therefore, in our opinion a CMR can only be considered as a preprinted multilingual document. The question is whether the requirement "all documents should be issued in English" applies to the language in which data on a document is completed, or also to the pre-printed form of a CMR (which, in practice, cannot be in English unless they are pre-printed in the UK). We would appreciate your Opinion.

Analysis and conclusion

The CMR is pre-printed in dual languages with French being one of the languages. Although the other language in this case was Croatian, the document did provide the description of the fields in English on the reverse.

A previous ICC Opinion, R 564, addressed this same issue, i.e., the effect of a condition stating "all required documents must be issued in English" and, although issued in respect of a credit subject to UCP 500, the reasoning equally applies under UCP 600. The conclusion to that Opinion stated: "The stipulation in the credit that 'all required documents must be issued in English' relates to the data thereon that would evidence compliance with the terms of the credit and the relevant provision(s) of the UCP."

The data inserted in the respective fields of the CMR document was in English; there is no discrepancy.