Article

by Kim Christensen

ICC Opinions are answers given by the ICC Banking Commission to specific questions raised by practitioners. Since the implementation of the UCP 600, a number of these Opinions based on the new rules have been approved by the Commission. In reviewing them, I have noticed an interesting trend - namely, that while the conclusion reached often seems reasonable, the analysis, i.e., the arguments leading to the conclusion, seem to be, in many cases, vague. Below are summaries of three of the Opinions to illustrate my point.

TA 666rev (UCP 600) (Case A)

This case concerned an on board notation on a multimodal transport document. In this Opinion, the credit called for a multimodal transport document and the credit required shipment from X port to the inland place, M. The question was whether or not a dated on board notation from X port was required.

The analysis by the Banking Commission stated: " ... 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 ... ."

The conclusion to the Opinion says: "The transport document requires a dated on board notation." At first glance, this analysis and conclusion may well seem reasonable. However, when the credit calls for a multimodal transport document, the main source the Commission used for the examination of the document was UCP 600 article 19, which merely indicates that the document must "indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit". The "shipped on board" requirement is one of three options, and the very specific "on board" requirements one finds in article 20 are NOT to be found in article 19. Consequently although one may sympathize with the conclusion, it is hard to find any good UCP 600 arguments leading to that conclusion.

TA 675rev (UCP 600) - B/L Delivery Clauses

Opinion TA 675 (see "Queries and responses" in this issue) concerns a credit which includes the following clause: "BILLS OF LADING THAT ON THEIR FACE INDICATE THAT GOODS MAY BE RELEASED WITHOUT PRESENTATION OF AN ORIGINAL BILL OF LADING ARE NOT ACCEPTABLE."

The bill of lading was issued (in accordance with the terms of the credit) to order and blank endorsed. It did not include a separate delivery clause, but did include general pre-printed wording just above the carrier's signature, which included the following passage: "Where the bill of lading is non-negotiable, the Carrier may give delivery of the Goods to the named consignee upon reasonable proof of identity and without requiring surrender of an original bill of lading. Where the bill of lading is negotiable, the Merchant is obliged to surrender one original, duly endorsed, in exchange for the Goods."

The B/L was refused by the issuing bank, which stated, "B/L indicates that goods may be released without presentation of an original B/L."

The Banking Commission did not agree with the cited discrepancy; they found that the bill of lading complied and noted the following: "The wording appearing on this particular bill of lading ... commencing with "[W]here the bill of lading is non-negotiable, the carrier...." [this wording] is considered to be terms and conditions of carriage and will not be examined according to sub-article 20 (a) (v)."

The wording cited was taken out of a larger pre-printed text which also includes: "SHIPPED, as far as ascertained reasonable means of checking, in apparent good order and condition ...", which must be examined by the document checker, as it is such "pre-printed wording" that sub-article 20 (a) (ii) refers to. Other wording in the pre-printed text states: " ... IN WITNESS WHEREOF the number of original Bills of Lading stated on this side have been signed and wherever one original Bill of Lading has been surrendered any others shall be void." This text must also be examined by the document checker since, according to sub-article 20 (b) (iv), the checker has to determine in how many originals the document has been issued.

The conclusion to the Opinion seems correct and reasonable, but it does seem odd to indicate that some parts of a preprinted text will not be examined because they represent terms and conditions, while other parts of the same pre-printed text clearly must be examined to check compliance with article 20.

For the sake of good order, it should be noted that the ICC Opinion also states: "It should be noted that in accordance with the terms and conditions of the credit the bill of lading has been issued in a negotiable form."

TA 686rev (UCP 600) - language in documents

Opinion TA 686rev concerns a credit which requires a "copy of label printed both in English and Chinese". The documents were presented to and accepted by the nominated bank. When presented to the issuing bank the documents were refused. The bank cited the following discrepancy: "Wrong translation in copy label about size".

One of the boxes on the document stated in English: "under 2 kg per piece". After consulting a Chinese-speaking person, it was determined that the equivalent box on the document in the Chinese language read: "above 2 kg per piece".

The Banking Commission did not agree with the refusal and stated: "By requiring the copy of the label to be in both languages, the principal language for the examination of documents by the nominated bank and issuing bank would be English, in line with the language of the credit. The nominated bank would be entitled to accept the Chinese version on an 'as presented' basis without regard to its proper and consistent translation."

UCP 600 does not address the issue of language, but ISBP (2007) paragraph 23 includes the following: "...When a credit states that documents in two or more languages are acceptable, a nominated bank may, in its advice of the credit, limit the number of acceptable languages as a condition of its engagement in the credit."

The issue of a "principal language" appears to be a new concept, and it is unclear where it comes from. In addition, one can argue that when the credit is as specific as this one, stating: "printed both in English and Chinese", the nominated bank should have reacted if it were not in a position to examine the document in Chinese.

From a "Western" perspective, one can sympathize with the conclusion, which basically says that a Western bank does not have to examine documents in Chinese. In this case, however, it seems that the argumentation is vague and not in any way based on UCP 600. It is also incorrect, since there was a very precise requirement in the credit and in ISBP paragraph 23.

Conclusion

The above are examples showing specific situations in which the arguments used were not based on the UCP, but on outside reasoning that may or may not seem logical depending on where one comes from. The examples demonstrate that while the ISBP was revised after the implementation of UCP 600, there are a number of relevant issues that were either not addressed in the ISBP or where practice has changed.

UCP 600 has now been in force for more than two years, and it seems appropriate to consider initiating a revision of the ISBP, as Gary Collyer points out in this issue, in order to document the effect the revised UCP has had on international standard banking practice.

Kim Christensen is Head of Trade Products & Business Relations and Vice President of Nordea Trade Finance in Sweden. His e-mail is kim.christensen@nordea.com