Forgot your password?
Please enter your email & we will send your password to you:
Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
UCP 600 sub-articles 14 (e), (f) & (d)
Is there a requirement in UCP for a certificate of health to bear a description of the goods that corresponds with that given in the credit, or for any goods description shown to contain details such as grading, specifications or quality?
Query [TA 685rev]
We kindly ask your official opinion to the following question.
Issue: Goods description on documents other than the invoice - "Rose, A-Grade" not stated on the health certificate
On 9.9.08 we received and advised a documentary credit subject to UCP 600 issued by Bank P, Country K. The following documents were required:
- Signed commercial invoice in 3 copies
- Packing list in 3 copies
- Original health certificate
- Full set of insurance policy
- Full set of bills of lading ...
- Other document (s) ( if any)
There was no special requirement in respect of goods description to be stated on these documents. The credit stated the following under SWIFT field 45A (Description of goods):
- HS No. 0297.14-1020
- Fresh Frozen Chicken Wing (Rose, A-Grade)
- Packing: 2KG x 8Bags/carton
- Quantity: 72MT x USD ______
- Total amount: USD ____ CIF City B, Country K
- Terms of price: CIF
- Place of Terms of Price: City B Port
- Country of origin: Denmark
On 30.9.08, 6.10.08 and 14.10.08, our client presented three complete sets of documents. We examined the documents and found them to be in compliance with the credit.
The first of these three sets was duly paid by the issuing bank. ("Rose A-Grade" was not stated on the certificate of health pertaining to this first presentation.)
On 20.10.08 and 23.10.08, the issuing bank refused presentations 2 and 3, stating the following discrepancy: "The Certificate of Health not show A-Grade."
The invoice, insurance policy, bill of lading and packing list stated, among other details, "Fresh Frozen Chicken Wing (Rose, A-grade)". "Fresh Frozen Chicken Wing" was stated on each of the presented certificates of health as description of the goods.
One of the two certificates of health stated the following as additional information placed at the bottom of the document:
- (Rose, A-Grade), HS no. 0207.14-1020
- Packing: 2kg x 8 bags/carton
- Credit no. A1234567BC98765
The other certificate of health did not show "Rose, A-Grade".
We protested strongly to the issuing bank via several SWIFT messages (MT799s) as well as by a separate letter sent by courier, addressed to the General Manager of City S Business Operations. In addition, we referred the case to the issuing bank's head office by two letters sent by courier. We drew the bank's attention to UCP 600 subarticle 14 (e), which reads: "In documents other than the commercial invoice, the description of the goods, services or performances, if stated, may be in general terms not conflicting with their description in the credit." Our communication to the issuing included the following: "There is really no conflict. Your refusal is completely unjustified and not acceptable to us. The document would have been contradictory if it had shown for instance "Rose B-Grade". But [it is] certainly not contradictory because it is silent on this point. Therefore, if applicant has had the intention that the Certificate of Health should indicate specific information, the credit should have named such details specifically. Since this is not the case in this credit, we insist on immediate payment."
The issuing bank maintained the refusals of presentations 2 and 3 despite our protests. Please let us have your opinion on whether you endorse our views.
Sub-article 14 (e) states : "In documents other than the commercial invoice, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit."
There is no requirement in UCP for the certificate of health to bear a description of the goods that corresponds with that given in the credit, or for any goods description that is shown to contain details such as grading, specifications or quality.
From the text of the query it would seem that there was no requirement in the credit for the certificates of health to contain reference to "Rose, A-Grade". Sub-article 14 (f) is quite clear in stating that absent any required data content, the document will be accepted as presented provided it fulfils the function of the document and otherwise complies with sub-article 14 (d). The absence of reference to "Rose, A-Grade" on a certificate of health, despite being quoted on other stipulated documents, does not create a conflict as envisaged by sub-article 14 (d). It would seem, absent any refusal for this reason, that the certificates of health otherwise fulfilled the function of the document requested. It is noted that one of the certificates of health did make reference to "Rose, A-Grade", and the issuing bank still refused for absence of that data.
Sub-article 14 (f) states: "If a credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the document as presented if its content appears to fulfil the function of the required document and otherwise complies with sub-article 14 (d)."
It is noted that the H.S. number was mistyped on one of the health certificates.
Banks should avoid incorporating a condition
"Other documents (if any)" without being specific as to the document(s) required and, where appropriate, the name of the issuer and the required data content.
The certificates of health are compliant with the credit and the UCP. There is no discrepancy for either presentation
1. in 3 originals based on Certificate of Quality and Weight issued at loading port indicating the Contract No. ABC123456 and L/C No.
2. as per Field 47A (6), "95% of the Contract value will be settled at sight against the shipping documents required in 46A, which should be presented within 21 days after shipment date but within the validity of the credit ..."
UCP 600 article 16 and sub-article 14 (d)
Where the credit did not require the contract number to appear on the certified copy of the fax but the beneficiary inserted "contract number" and quoted a number that was not the contract number stated in the credit or the number appearing as the contract number on the invoice, was this a discrepancy?
Query [TA 722rev]
A documentary credit issued by Bank A required the following documents (only the documents which are relevant for this case are listed):
- Signed commercial invoice in 3 originals and 3 copies indicating L/C no. and contract no. 09ICDINTL0804A
- Beneficiary's certified copy of fax dispatched to the applicant within 10 working days after shipment advising name of vessel, shipment date, quantity, weight and value of shipment
There was no requirement for the contract number to appear on any other document except the invoice, nor was the number mentioned anywhere else in the L/C.
The beneficiary presented documents. The invoice showed "Contract no. 091CDINTL0804A". Additionally, all the documents that were issued by the beneficiary, such as invoice, packing list, certificate of quantity/weight, certificate of origin, beneficiary's certificate, etc., indicated "our ref. 746293-SEG" or simply "746293-SEG".
Only on the beneficiary's certified copy of the fax did this reference appear as "contract no. 746293-SEB". There was no requirement in the L/C for any contract or reference number to be mentioned in the fax.
The issuing bank refused payment as follows: "We refuse to honour according to UCP article 16 due to the following discrepancies:
1. contract no. on shipping advice differs from that on invoice. We are holding the documents until we receive a waiver from the applicant and agree to accept it, or receive your further instructions prior to agreeing to accept a waiver."
We rejected this refusal on the following grounds:
The L/C required that the contract no. of the applicant be shown in the invoice. This requirement was fulfilled. The fact that the other documents showed beneficiary's reference, which was named in the fax message as contract number, does not render the documents discrepant.
The issuing bank insisted that the documents were discrepant and refused to pay. Ultimately, the documents were accepted, but only at a reduced price.
We would appreciate receiving your opinion whether the mentioning of beneficiary's reference number as contract number is really a discrepancy or not.
Sub-article 14 (d) states: "[D]ata in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit."
It is recognized that the number shown on the certified copy of the fax was the same number that the beneficiary had inserted on other documents as "our ref" or merely by insertion of the number.
However, the credit did not require the contract number to appear on the certified copy of the fax. Nevertheless, the beneficiary inserted "contract number" and quoted a number that was not the contract number stated in the credit or the number appearing as the contract number on the invoice. By inserting data on a document, the beneficiary is inviting the bank to examine that data for compliance with the credit and the UCP. According to subarticle 14 (d), the data shown as the contract number is in conflict with that shown on the invoice and in the credit.
The refusal was correct.
UCP 600 sub-article 28 (f)
Whether for the purposes of determining the compliance of an insurance document a calculation to two decimal places represents international standard banking practice The alleged discrepancies below were the only discrepancy cited in each presentation, by the issuing bank:
Query [TA 687rev]]
USD 102,762.02 not covering 110 pct of invoice value USD 93,420.02. The correct insurance amount should be at least USD 102,762.022, which must not be rounded down from 3 places of decimals.
2. Insurance cert. No. yyy shows the amount USD 18,880.32 not covering 110 pct of invoice value USD 17,163.93. The correct insurance amount should be at least USD 18,880.323, which must not be rounded down from 3 places of decimals. Pls refer to UCP 600 sub art 28F and ICC Opinion R 468."
NOTE: The amount of the letter of credit is shown to two decimal places, and the terms and conditions of the credit do not mention the insurance coverage amount calculation methodology.
National committee analysis
ICC Opinion R 468 does not address this issue.
UCP 600 sub-article 28 (f) states, in part:
"(i) The insurance document must indicate the amount of insurance coverage and be in the same currency as the credit.
(ii) A requirement in the credit for insurance coverage to be for a percentage of the value of the goods, of the invoice value or similar is deemed to be the minimum amount of coverage required.
If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods."
It is not possible to pay a fraction of the smallest unit of currency. International standard banking practice is to calculate to two decimal places.
National committee conclusion
This is not a discrepancy.
Although ICC Opinion R 468 refers to the fact that the insurance document must be issued for a minimum of 110% of the CIF or CIP value, it does not address the issues raised in the refusal of the issuing bank, i.e., whether a calculation should be made to three decimal places.
It is insurance industry practice that insurance documents will evidence coverage to a maximum of two decimal places. This practice recognizes that in the event of a claim, the insurance company or its agent will not be in a position to effect payment that would include a currency unit that went to a third decimal point.
The minimum calculation in the examples shown would be:
Invoice value USD 93,420.02 + 10%, i.e., USD 9,342.00 = USD 102,762.02
Invoice value USD 17,163.93 + 10% i.e., USD 1,716.39 = USD18,880.32.
There is no discrepancy in respect of either presentation.
While it is recognized that some currencies, i.e., BHD, KWD, OMR and TND, are handled and quoted to three decimal places, for the purposes of determination of compliance of an insurance document, calculation to two decimal places represents international standard banking practice.
URC 522 sub-articles 26 (c) (1) and (2) and sub-article 21 (b)
Was the collecting bank entitled to deduct its "SWIFT charge", although all charges were for account of the drawee and were not allowed to be waived?
Query [TA 713]
We are repeatedly acting as a remitting bank under documentary collections "documents against acceptance" drawn by the same drawer, on the same drawee, and being subject to URC 522. The collections are sent through Bank B, Country G, acting both as collecting and presenting bank. Regarding payment of charges, the collection instructions expressly state the following: "Your charges and settlement charges of all banks involved are for drawee's account. These charges may not be waived, if refused, do not deliver documents."
The collection instructions also contain the following clause: "Please confirm acceptance of the bill by authenticated swift as soon as it is accepted." Following acceptance, a tracer repeated the request ("Pls inform us by return if a/m bills of exchange were accepted"), and we received acceptance by MT412 SWIFT.
Upon payment, the proceeds were subject to deduction of "SWIFT charge" GBP 15.00 (each collection). We demanded that the collecting bank refund the SWIFT charge, reminding it that the collection instruction expressly stated that all their charges were for account of drawee and they were not allowed to waive these charges. The collecting bank replied as follows: "You stated all our charges for drawee which we have. GBP 15.00 is your charge, as you requested a SWIFT reply when acceptance actioned. This incurred a charge of GBP 15.00 for the SWIFT. We will not be refunding this."
We replied that our collection was subject to URC 522 and under sub-article 26 (c) (ii) "The collecting bank must send without delay advice of acceptance to the bank from which the collection instruction was received." We argued consequently that sending an acceptance advice is a standard of collection processing under URC 522 and that we requested nothing beyond a requirement that is already contained in URC 522. We insisted that all charges under our collection were for the drawee's account and were not allowed to be waived; hence, all charges connected with standard processing of the collection must be claimed from the drawee, the deduction was not authorized and the amount must be returned.
The collecting bank replied, inter alia that "Under URC 522 this charge is for your account, not the drawee, we will therefore not be refunding the charges and our files remain closed."
URC 522 sub-article 26 (c) does not expressly require that these advices be sent by SWIFT; however, we expressly requested a SWIFT advice because we must consider this to be the most convenient, efficient and cheapest advising method in this case.
We would like to seek your opinion on the following question: was the collecting bank entitled to deduct its "SWIFT charge", although all charges were for account of the drawee and were not allowed to be waived, i.e., is the request for SWIFT advice of acceptance to be considered as a request by a remitting bank for an "additional" service chargeable to the remitting bank, although URC 522 expressly state that a collecting bank must send an advice of acceptance? This question would also apply to a payment advice - under URC 522 sub-article 26 (c) (i) where the collecting bank is also required to send a payment advice.
Sub-article 21 (b) of URC 522 states: "Where the collection instruction expressly states that charges and/or expenses may not be waived and the drawee refuses to pay such charges and/ or expenses, the presenting bank will not deliver documents and will not be responsible for any consequences arising out of any delay in the delivery of the document(s). When payment of collection charges and/or expenses has been refused the presenting bank must inform by telecommunication or, if that is not possible, by other expeditious means without delay the bank from which the collection instruction was received."
Sub-article 26 (c) (1) reads "The collecting bank must send without delay advice of payment to the bank from which the collection instruction was received, detailing the amount or amounts collected, charges and/or disbursements and/or expenses deducted, where appropriate, and method of disposal of the funds." Subarticle 26 (c) (2) states: "The collecting bank must send without delay advice of acceptance to the bank from which the collection instruction was received."
An advice of payment or acceptance of a collection is required to be sent according to sub-articles 26 (c) (1) or (2) of the rules. In most circumstances, the sending of this advice by SWIFT is the most common, efficient and costeffective manner.
Given the instructions to the collecting/presenting bank in relation to the charges, and the express indication that if charges were refused documents were not to be released, the collecting/presenting bank has a choice to charge the SWIFT fee to the drawee or advise the remitting bank that the charges are refused, and that the documents remain with the collecting/presenting bank pending further instructions.
Having released the documents to the importer, the collecting/presenting bank has indicated its willingness to comply with the instructions in the collection schedule and the rules contained in URC 522.
The SWIFT charge of GBP15.00 should not have been deducted from the proceeds.
The SWIFT charge of GBP15.00 should not have been deducted from the proceeds.