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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Article
UCP 600 article 1
Was a clause in a credit containing language indicating that if any terms and conditions in the credit are contradictory to, or inconsistent with, that of UCP 600, "the relative UCP 600 provisions are deemed expressly modified and/or excluded" sufficient to modify or exclude the language of the UCP 600 articles?
Query [TA 704rev]
We received a freely available letter of credit, subject to UCP 600, containing the following condition: "Should any terms or conditions stipulated in this credit be contradictory to or inconsistent with that of the UCP 600, the relative UCP 600 provisions are deemed expressly modified and/or excluded."
We discussed the clause at length with the beneficiary as to the possibility of the clause giving rise to reasons for non-payment, and suggested that the clause be deleted. We did not advise the credit and notified the issuing bank accordingly.
Eventually, the beneficiary received the credit directly from the office of the issuing bank and, in June, presented the documents to us. We did not negotiate and merely forwarded same to the issuing bank.
Five days after transmitting the documents, the issuing bank notified us of its acceptance of the documents and the maturity date, and payment was received on the maturity date.
Question: Is the language in the credit, "Should any terms or conditions stipulated in this credit be contradictory to or inconsistent with that of the UCP 600, the relative UCP 600 provisions are deemed expressly modified and/or excluded" sufficient to conform with the last sentence of UCP 600 article 1: ("They are binding on all parties thereto unless expressly modified or excluded by the credit"), or must the credit explicitly identify which articles of UCP 600 are being modified or excluded?
National committee analysis and conclusion
It is the opinion of the national committee that the language in the credit is NOT sufficient to modify the articles of UCP 600 and that an issuing bank must be explicit in its modification or exclusion of one or more rules, for example by stating which article of UCP 600 is modified or excluded and specifying in what manner it is modified. Is the national committee position correct?
Analysis
Article 1 includes the following sentence: "[T]hey [UCP 600 rules] are binding on all parties thereto unless expressly modified or excluded by the credit."
The condition stated in the credit should be seen as an emphasis of the wording in article 1 and not one that detracts from, or implies a different approach from, the position envisaged by the article. In effect, the wording in the credit was not necessary to emphasize that the terms and conditions of the credit may modify or exclude one or more rules in the UCP.
The issue concerns the word "expressly" and whether or not this requires a bank to specifically indicate, in the credit, where a modification of the rules is being made and the extent to which it is being made. Ultimately, it is the examination of documents against the terms and conditions of the credit that will determine whether or not a presentation is complying. The rules contained in UCP 600 will apply to that credit to the extent that the credit does not contain one or more terms and conditions that modify one or more of those rules.
Modifications to the rules do not necessarily require a bank to specifically state the article that has been modified or the manner in which it has been modified. For example, the insertion of "15" in field 48 (Presentation Period) of an MT700 would modify the rule stated in subarticle 14 (c) that presentation must be made by or on behalf of the bene ficiary not later than 21 calendar days after the date of shipment. There is no explanation of the modification, but the insertion of "15" clearly creates a modified rule in respect of the presentation period.
It should be noted that when a rule is to be excluded, for whatever reason, there must be an express indication of this, by saying, for example, "Sub-article 14 (i) is excluded." In most cases when an exclusion occurs, the credit will need to contain a new rule replacing the language or article excluded. In respect of the exclusion of sub-article 14 (i), this would necessitate the credit stating the new conditions relating to the dating of documents.
Final conclusion
The wording in the credit is not recommended for use. The wording in article 1 is sufficient to explain that the terms and conditions of a credit may modify or exclude a rule. A modification of a rule may be made by the simple insertion of data that creates a situation different from that envisaged by the UCP. It should be recognized that there may be circumstances in which an issuing bank is required to modify a rule, due to the circumstances of a transaction, and this may require the issuing bank to provide more detailed wording to avoid the risk of ambiguity in the credit. In this respect, reference should be made to ISBP Publication No. 681 paragraph 2, which states: "[T]he applicant bears the risk of any ambiguity in its instructions to issue or amend a credit."
It is the recommendation of the ICC Banking Commission that modifications of, or exclusions to, the rules should be kept to a minimum.
UCP 600 sub-articles 14 (f) and 9 (b)
For the purposes of a clause such as "all documents must be issued in English", should a draft be considered as one of the required documents? Does such a clause relate only to the data that would evidence compliance with the terms of the credit and the relevant provision(s) of the UCP?
Query [TA 703rev]
Our national committee received the following inquiry from a financing company in our country, which asked for the opinion of the national committee's group of experts on documentary credits. Following a debate of the issues, we seek the ICC Banking Commission's opinion.
A brief synopsis of the case is as follows: in the additional conditions of the documentary credit the following clause was included: "ALL DOCUMENTS MUST BE PRESENTED IN ENGLISH, IF ANY DOCUMENT PRESENTED IS NOT IN ENGLISH WE SHALL FORWARD THE PRESENTATION TO ISSUING BANK ON APPROVAL BASIS."
The inquiry stated that the seller presented the required documents, attaching a bill of exchange with the text pre-printed in Spanish and the data for the amount, the maturity date, the number of the credit and the name of the drawee printed in English. The financing company considered the presentation of the documents to be acceptable and sent the documents to the confirming bank. The confirming bank said it did not find the presentation of the documents to be acceptable, because of the following discrepancy: "DRAFT PRESENTED IN FOREIGN LANGUAGE".
Questions to ICC Banking Commission:
1) Should we consider that the draft requested in the credit is in order to be paid by the confirming bank, as it is included as an extra document that must fulfil the requirements demanded of it by being issued in English?
2) Should or should not a draft be considered as "other documents" under UCP 600 sub-article 14 (f)?
3) In this specific case, the draft was completed in English, but the pre-printed form of the bill of exchange was obviously in Spanish because the draft document followed the standardized rules of the local legislation. Should we consider the discrepancy of the document not being issued in English to be correct, when the sections were filled out in English, but the parts not in the stated language were part of the pre-printed draft?
1. For the purposes of a clause such as "all documents must be issued in English", a draft is not to be considered as one of those required documents unless the credit requires the presentation of a draft drawn on the applicant under "documents required".
2. A draft is to be examined to the extent required by the terms and conditions of the credit, the UCP and applicable local law.
3. Previous ICC Opinions, R 564 and R 654, have addressed this same issue, i.e., the effect of a condition stating "all required documents must be issued [presented] in English". The conclusion to each of these Opinions 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."
4. The clause stated to appear in the additional conditions field of the credit would not appear to have been written by the issuing bank. If the confirming bank has altered or added the wording in conveying the text of the issuing bank's credit, it has not acted according to sub-article 9 (b) of UCP 600. In any event, the confirming bank must honour or negotiate if the documents are complying. The confirming bank may add conditions to its advice of confirmation, but not to the text of the credit as received from the issuing bank.
Conclusion
The draft was acceptable as issued and presented. In any event, the data inserted in the respective segments of the draft was in English; there is no discrepancy.
UCP 600 sub-article 19 (a) (ii)
Whether there is a requirement in the UCP or international standard banking practice for the country name to appear in addition to the stated city shown as the place of receipt, port of loading, port of discharge or place of delivery. Effect of a shipped on board notation dated after the latest shipment date where the goods were received within such date.
Query [TA 701rev]
We would like to seek an official opinion of the ICC Banking Commission on the following matters regarding multimodal transport documents (namely, multimodal transport bills of lading).
We received a documentary credit, subject to UCP 600, with the following details (respective SWIFT fields):
44A: PRAGUE, CZECH REPUBLIC
44E: HAMBURG, GERMANY
44F: ANY PORT IN CHINA
44C: 090331
46A: FULL SET OF MULTIMODAL TRANSPORT BILLS OF LADING...
The beneficiary presented documents, including a multimodal transport bill of lading with the following data:
Place of receipt: Prague
Port of loading: Hamburg, DE
Port of discharge: Shanghai
Received for shipment...
The multimodal transport document was dated March 31, 2009. In addition, it contained an on-board notation as follows: "Shipped on board vessel (x) in Hamburg on 04/04/2009".
We negotiated the documents, which we held to be in accordance with the terms and conditions of the credit. Nevertheless, we received the issuing bank's refusal notice stating:
"+ Late shipment
+ Transport route not per L/C ("Czech Republic" and "China" not stated, "DE" stated i/o "Germany").
We replied that field 44C must be read as the latest shipment date from the first place of the transport route required by the credit. The credit required a multimodal transport document evidencing transport from Prague, latest March 31, 2009, which was complied with (the transport document was dated March 31, 2009). As to the transport route itself, we held that the fact that a country is stated in the respective transport route field of the credit does not represent an express requirement that the country need also be stated in the transport document itself. It is apparent that the goods were taken in charge (received) and are to be unloaded at the places required by the credit. With respect to usage of "DE" instead of "Germany", we held that, notwithstanding the above, "DE" represents an ISO country code, which must be expected to be known by the banks. Usage of such a code, in our opinion, clearly indicates the country in question.
The issuing bank responded that, with respect to the date of shipment, sub-article 19 (a) (ii) of UCP 600 applies: "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", and with respect to the transport route that it still considers the discrepancy to be valid.
We again challenged the discrepancies but no further reply was received. We would like to have your opinion as to whether any of the alleged discrepancies are valid.
In addition to the extract of subarticle 19 (a) (ii) stated above, the rule also states: "indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit... " and "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."
The wording "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", as referred to by the issuing bank in its justification for the discrepancy, only applies when the notation is in respect of dispatch, taking in charge or shipped on board at the place or port named in the credit for the commencement of the carriage.
In this particular credit, the place for the commencement of carriage was Prague, the multimodal transport document evidenced received for shipment (in Prague) on 31 March 2009. The on board notation was given in respect of loading onto the vessel in Hamburg, an event that occurred after the receipt and carriage of goods from Prague. A multi modal transport document dated 31 March 2009 evidencing receipt of the goods in Prague for shipment to Shang hai via Hamburg would be acceptable under the credit and subarticle 19 (a) (ii).
There is no requirement in the UCP or international standard banking practice for the country name to appear in addition to the stated city shown as the place of receipt, port of loading, port of discharge or place of delivery. Absence of the words "Czech Republic" and "Germany" is not a reason for refusal, notwithstanding the fact that such words are stated in the credit. The requirement for the port of discharge to be "Any Port in China" is satisfied by the named port being one that is located in China; Shanghai is a port in China. Use of the ISO country code DE instead of Germany does not create a conflict of data.
The documents are compliant.
ISBP 681 paragraph 179
Requirement for an insurance document to be endorsed and use of "To Order" and "Bearer" in relation to the assured party
Query [TA 688rev]
We have recently come up with cases related to insurance documents where some banks required endorsements but the others did not. We would therefore appreciate an ICC official opinion.
Case 1 where the L/C required insurance document blank endorsed
The presented insurance policy without endorsement showed:
Assured: To bearer
Our opinion: This is acceptable according to ISBP Paragraph 179.
Case 2 where the L/C required insurance document blank endorsed
Assured: ABC Exporting Co Ltd To bearer
Case 3 where the L/C required insurance document blank endorsed
Assured: To order
Our opinion: This is acceptable because "to order" is, in effect, the same as "to bearer".
Case 4 where the L/C required insurance document blank endorsed The presented insurance policy without endorsement showed:
Assured: ABC Exporting Co Ltd
To order
Case 5 where the L/C required insurance document to be issued to order of XYZ Bank Ltd The presented insurance policy without endorsement showed:
Assured: To order of XYZ Bank Ltd
Our opinion: This is acceptable because the issuance policy was issued as required by the L/C.
Case 6 where the L/C required the insurance document to be issued to order of XYZ Bank Ltd The presented insurance policy without endorsement showed:
To order of XYZ Bank Ltd
Our opinion: This is also acceptable because the issuance policy was issued as required by the L/C. Please confirm whether our opinions are correct or incorrect.
Analysis and conclusion
Case 1: We agree with your opinion.
Case 2: We disagree with your opinion. The insurance document requires en dor sement by ABC Exporting Co. Ltd, which would remove the contradic tion between ABC Exporting Co. Ltd and "To Bearer". The addition of "[T]o bearer" does not change the fact that the assured is stated to be ABC Exporting Co. Ltd.
Case 3: In the context of an insurance document, we agree with your opinion.
Case 4: We disagree with your opinion. The insurance document requires endorsement by ABC Exporting Co. Ltd. The addition of "[T]o order" does not change the fact that the assured is stated to be ABC Exporting Co. Ltd.
Case 5: We agree with your opinion.
Case 6: We disagree with your opinion. The insurance document requires endorsement by ABC Exporting Co. Ltd. The addition of "[T]o order of XYZ Bank Ltd" does not change the fact that the assured is stated to be ABC Exporting Co. Ltd.
To avoid some of the issues identified in this query, insurance documents should not indicate or be required to indicate the assured as "To Order" or "To Bearer".
UCP 600 sub-article 24 (a) (i)
Whether a CMR showing a stamp and signature in field 23 complied with subarticle 24 (a) (i) of UCP 600 and whether field 16 must also be completed
Query [TA 693]
We would like to request your opinion on the following question concerning correct issuance of a CMR.
In the last few months, we have received several refusals of documents from banks located in the former countries of Country Y stating that box 16 of the CMR is empty and is in contradiction with box 23.
The text of the refusals:
"The carrier in field 16 is missing resp. in field 23 not indicated 'as carrier.'"
"Field 16 in CMR is not filled in and it is not in compliance with field 23."
"Presented CMR is signed and stamped in the field 23 but does not indicate the name of the carrier in field 16."
Our bank does not agree with the stated discrepancies; therefore, we tried to argue with the issuing banks as follows:
- Since field 16 of the CMR is not a mandatory field and the name of the field 23 is "signature and stamp of the carrier", this means that in field 23 the carrier was indicated;
- "We refuse to accept the above discrepancy due to the fact that field 23 of the CMR states: 'signature and stamp of the carrier'"; and
- "The presented CMR was correct and fulfils the requirements of UCP and ISBP as well, even if field 16 was empty."
Our interpretation of UCP 600 and ISBP 681, on the basis of which we maintain our belief, is that a CMR showing a stamp and signature in field 23 is duly complying with sub-article 24 (a)(i) of UCP 600 i.e., indicate the name of the carrier: ... and is signed and stamped by it (i.e., the carrier).
Much to our regret we were not able to convince the issuing banks that we are right. Nevertheless, they accepted and paid the documents, but stuck to their opinion that the documents were discrepant.
Please advise us whether our above suppositions are correct or not. If we are not correct, please give us guidance as to when the documents are to be considered complying.
Sub-article 24 (a) (i) of UCP 600 states: "indicate the name of the carrier and:
- be signed by the carrier or a named agent for or on behalf of the carrier, or
- indicate receipt of the goods by signature, stamp or notation by the carrier or a named agent for or on behalf of the carrier."
None of the presented CMR's evidenced the name and address of the carrier in field 16. However, field 23 was completed with a stamp and signature. The field tag states "Signature et timbre du transporteur", which translates as "Signature and stamp of the carrier". Each CMR bears the stamp and signature of a party purporting to be the carrier.
Your understanding is correct. The CMRs were compliant in identifying, by stamp, the name of the respective carrier, and the signature thereon was made in the name of that carrier. The CMRs were not discrepant for the reasons cited in the refusal notices.