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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Article
UCP 600 sub-article 10 (b)
Whether a claim for the final amount due under a credit met the terms expressed in an amendment and whether the issuing bank was bound to honour the claim made by the beneficiary
Query [TA 757rev]
We kindly ask your opinion on an ongoing dispute between an issuing bank (IB) and a negotiating bank (NB) regarding payment of the final part of an L/C amount. The L/C was issued with the following payment terms: "USD XXX payable at sight against shipping documents and USD165,000 to be paid on receipt of original certificate issued by the applicant confirming the successful testing, commissioning and launching of XXX".
The L/C was later amended to read (in respect of the final payment): "An amount of USD165,000 - to be paid at sight under the L/C on receipt of original certificate issued by the applicant confirming the successful testing, commissioning and launching of XXX or maximum within 10 months from the date of the last dispatch. The final invoice of beneficiary shall describe this amended clause."
There were several drawings under the L/C, and the final presentation of shipping documents included many discrepancies that were correctly refused by the IB.
According to the beneficiary's instructions, the NB authorized the IB by a SWIFT message to release the shipping documents to the applicant against payment of a lesser amount on the condition that IB confirmed that the remaining USD165,000 (the final payment) would be paid at sight under the L/C on receipt of an original certificate issued by the applicant confirming the successful testing, commissioning and launching of XXX or maximum within 10 months from the date of the last dispatch (emphasis added). The NB never received any confirmation from the IB; however, it did receive settlement for the lesser amount.
A written claim for payment (invoice) for USD165,000 was presented to IB 10 months after the date of the last dispatch. IB refused the presentation due to:
- L/C overdrawn; and
- Certificate as per L/C terms not submitted.
The IB claimed that a certificate issued by the applicant is "mandatorily required to be submitted" and refused to pay. The NB argued that by transferring the lesser amount to it, the IB accepted it and its agreement to the terms for the release of the shipping documents to the applicant. The amended L/C and NB's condition stated that either a certificate issued by the applicant must be presented OR payment is to be made maximum within 10 months from the date from the last dispatch, for USD165,000.
The invoice was returned to the NB on 16 December 2010 in accordance with the instructions of the applicant, and the NB has since sent several SWIFT messages stating that if the IB intended that the applicant's certificate should be presented, the L/C should have been worded more precisely. Any ambiguous terms and conditions in the L/C were at the risk of the applicant and the IB. By inserting the word "OR", this meant either the first option OR the second option - and not both.
The IB stated in a SWIFT message of 18 April 2011 that as the L/C had expired the matter was closed, and it might be settled between the exporter and the importer. The last SWIFT message from the NB was sent on 18 May 2011, with no reply from the IB.
The NB's argument is that discrepant documents were released to the applicant for a lesser amount only on the condition that the final payment of USD165,000 should be effected either upon presentation of the applicant's certificate or at the latest 10 months from latest date of dispatch.
The discrepancy "L/C overdrawn" is not an issue, as shipping documents were to be released only if the IB agreed to the final payment of USD165,000 subject to the above conditions. The presentation that was refused included an invoice for a higher amount than that stated in the contract, which was the reason why the beneficiary and applicant agreed to release documents against a lesser amount. Consequently, the total amount claimed under the L/C, including the lesser amount, did not exceed the total L/C value.
We request an opinion from the ICC Banking Commission as to whether the NB's interpretation is correct and whether the IB has failed to fulfil its obligation to pay under the L/C.
Analysis
The release of documents against payment of a lesser amount was made subject to the issuing bank confirming to pay the sum of USD165,000 on presentation of an original certificate issued by the applicant in accordance with the terms of the amendment, or at a maximum within 10 months from the date of the last dispatch (again, in accordance with the terms of the amendment).
By releasing the documents to the applicant against payment of the lesser amount, the issuing bank is understood to have accepted the condition for the release of the documents, even without its issuing the requested confirmation, and it is bound to pay the sum of USD165,000 as described.
The claim of the issuing bank that presentation of a certificate issued by the applicant was mandatory has no foundation under the terms of the amendment. The amendment clearly provides an option of payment:
- upon presentation of a certificate issued by the applicant together with a final invoice of the beneficiary; or
- anytime within 10 months from the date of the last dispatch.
In accordance with UCP 600 sub-article 10 (b), the issuing bank was bound by the amendment as of the time it issued it. It should also be noted that the condition for release of the documents for the final shipment contained the same option as that given in the amendment.
There can be no doubt as to the interpretation of the payment condition. It should also be noted that by use of the word "within", the potential existed for the beneficiary to claim the final payment at any point after the date of the last dispatch, without the presentation of a certificate issued by the applicant. The condition was not necessarily for the beneficiary to wait until the 10 months had elapsed before claiming under the credit. It is an issuing bank's obligation to use precise wording in its credit and amendments thereto. In the context of the clause, as drafted, payment by the issuing bank of USD165,000 is to be effected with or without presentation of the certificate, within 10 months from the date of the last dispatch.
The issuing bank should have specifically stated any additional documentary requirements for the circumstance where no certificate of the applicant was to be presented.
By use of the word "within", the issuing bank must recognize that this allows for payment at any time following the date of the last dispatch and ending on a date that falls 10 months thereafter. If the intention was that settlement be made no earlier than 10 months after the date of the last dispatch, the credit (or amendment as in this case) should have stated that payment was due "10 months after the date of the last dispatch".
Such a condition, in respect of the final payment, offers comfort to the beneficiary that payment will still be effected even if the mentioned certificate is not available for presentation.
Conclusion
The discrepancies stated by the issuing bank are not valid.
UCP 600 sub-article 14 (d)
Whether reference in a packing list to "shipping date" necessarily relates to the date of loading on board of the goods on a named vessel at the port of loading as stated on the bill of lading
Query [TA 758rev]
We are writing to ask for an ICC official opinion as to whether a discrepancy quoted by an L/C issuing bank is valid or not. Documents required by the L/C included:
-bills of lading
-packing list
The presented bills of lading show "SHIPPED ON BOARD DATE: 14 SEP 2011". The presented packing list shows "SHIPPING DATE 13.09.2011".
The L/C issuing bank raised the discrepancy "packing list showing inconsistent shipping date with bills of lading".
We do not agree based on the following reasons:
(1) The on board date and the shipping date may refer to two different things and should not be compared for consistency or conflict. These two dates are independent and have their own meaning.
(2) The L/C did not require the packing list to show SHIPPING DATE at all. It was therefore additional information.
As pointed out in the query, the packing list need not have quoted a SHIPPING DATE at all because of the absence of such a requirement in the credit. It is noted that the nominated bank considered the indication of a SHIPPING DATE to be "additional information", but neither the UCP nor ISBP refers to such description of data. It is a requirement of UCP 600 sub-article 14 (d) that any data mentioned in a document, even if such data are not required by the credit, must not be in conflict with any data shown in that document, any other stipulated documents or the credit.
Reference in a packing list to "shipping date" does not necessarily relate to the date of loading on board of the goods on a named vessel at the port of loading as stated on the bill of lading. It can be in respect of the date of shipment (shipping) from the premises of the exporter, or the date of taking in charge by the carrier at the place of receipt. For these reasons, reference to shipping date in the packing list is not seen as a conflict of data.
The discrepancy is not valid.
UCP 600 sub-articles 17 (d), 14 (e), 16 (b) and 16 (c) (iii) (a) and (b); ISBP 681 paragraphs 165 and 11
Were there discrepancies when a photocopy of an invoice instead of a copy was presented; where a description of the goods stated on the CMR was supposedly not as per the L/C and invoice; where there was supposedly no authenticated correction on the CMR?
Query [TA 755rev]
We would like to ask your kind opinion about thefollowing dispute between an issuing and advising bank.
A letter of credit, subject to UCP 600, was issued and included the following terms and conditions:
L/C available with issuing bank by payment Partial shipments: Allowed Description of goods: "LADICAR" "ORMARIC DONJIORMARIC VISECIVRATA KUPAONICEVRATA KLIZNAORMARIC LADICAROGLEDALA MIRROR POLISHED INOX TAPICIRANI DJELOVI KLUPE I VRATA ORMARKOMODEPODLOGE POSTELJE 12 KOM, POLICE,ORMARIC(CABIN DECK)SJENILA-ZALUZIJA KOZAROLO SJENILATUS KABINE I TUS VRATAOGLEDALA ZA KUPATILA"
(In addition to the description of goods, we also point out that each item has its specific measurement, for example "LADICAR" 1400X260X410).
(Note: An English translation of this list, subsequently provided by the initiator, indicates that the items are types of blinds, mirror, padded parts of bench and doors, chest of drawers, cabinets, wardrobe, commodes, bed bases and shelves.)
Documents required:
1. SIGNED COMMERCIAL INVOICE - ORIGINAL AND COPY
2. ROADWAY BILL (CMR) - COPY FOR SENDER
3. PACKING LIST
(No additional conditions were stipulated.)
The following documents were presented to the issuing bank (under first presentation) through the advising bank:
INVOICE No. 100301 in one original and one photocopy (stating description of goods exactly according to L/C terms);
PACKING LIST in one original (stating description of goods exactly as stated on invoice);
CMR -Copy for sender, stating description of goods as: 1 PALETA, 53 KOLI, 932kgSENCILATAPICIRANI DELI KLOPI IN VRATOGLEDALA (POLISHED INOX)LESENO POHISTVO.
Among other data on CMR, field 5 (entitled: Documents Annexes) is the indication: "Dobavnica, Faktura 100301".
(Note: An English translation of the items listed on the CMR, subsequently provided by the initiator, indicates them to be blinds, padded parts of bench and doors, mirrors and, for "Leseno Pohistvo", "wooden furniture".)
The invoice and packing list showed Paleta: 1,Koli: 53 and weight: 932kg.
The issuing bank has identified the following discrepancies:
1. Photocopy of invoice instead of copy is presented.
2. Description of goods stated on CMR not as per L/C and invoice (cannot be related to the description of goods stated on invoice, and that stipulated in the L/C).
3. No authenticated correction on the CMR was made (specifically, in field 5 one figure constituting the invoice number has been reconstructed).
The issuing bank has based its opinion on:
1. UCP 600 sub-article 17 (d), which states: "If a credit requires presentation of copies of documents, presentation of either originals or copies is permitted." In our opinion presentation of a photostat copy of a document does not comply with the L/C term regarding presentation of the stated document.
2. Although we are aware of UCP 600 sub-article 14 (e) and ISBP 681 paragraph 165, which concern description of goods, and which state that the description of goods on documents (other than commercial invoice) need not be identical with those stated in the L/C, and may be in general terms not conflicting with the description in the credit, from the description provided in the CMR we are unable to establish compatibility and are unable to determine if the wording stated in the CMR conflicts with that provided in the invoice (and in the packing list).
3. ISBP paragraph 9 clearly and undoubtedly states that documents which are not issued by the beneficiary itself, must appear to be authenticated by the party who issued the document(s) or by a party authorized by the issuer to do so.
The advising bank disputes the issuing bank's views with the following statements:
1. Documents could be considered as original or copies. Furthermore, a photocopy of a document is considered as a copy document according to worldwide banking practice.
2. The description of goods on the CMR is in general terms, not conflicting (referring to UCP 600 sub-article 14 (e)), which also points out that the issuing bank should be able to translate a few general terms from Country S language to Country C language.
3. A correction on the CMR was not made: "On CMR there is no correction which should be authenticated. The issuer just wrote '0' (in the invoice number) in a bolder manner. It can be checked via the original that there is no other number under '0'. Please also check paragraph 11 of ISBP."
An extract from the CMR is given below:
The issuing bank has stated that it is acting according to UCP 600 sub-article 16 (b). Upon determination of a non-complying presentation, the applicant was approached for a waiver of the discrepancies.
Furthermore, according to sub-article 16 (c) (iii) (a) and (b), the issuing bank has advised each discrepancy in respect of which the bank refuses to honour, and that it is holding the documents pending further instructions from the presenter.
The applicant, until now, has not waived the discrepancies, and the issuing bank has maintained its viewpoint, whilst holding the documents discrepant because of the above, and in spite of the advising bank's multiple expressions of disapproval and its insisting that payment be effected.
Due to the necessity to solve this matter, please provide us with your opinion as to whether the stated discrepancies represent a valid reason for refusal of documents.
Discrepancy 1 - Photocopy of invoice instead of copy is presented
The credit required: "signed commercial invoice in original and in copy". Under international standard banking practice, a "copy" is understood to mean a "non-original".
The ICC Decision "The determination of an 'original' document in the context of UCP 500 sub-article 20(b)", approved by the ICC Commission on Banking Technique and Practice and published on 12 July 1999, which appears as an Appendix to ISBP Publication No. 681, in relation to credits issued subject to UCP 600 states: "Banks treat as non-original any document that appears to be a photocopy of another document."
Unless a credit specifies the type of copy that is acceptable or not, any type of copy (non-original) is acceptable, including "a photocopy".
Discrepancy 2 - Description of goods stated on CMR not as per L/C and invoice (cannot be related with description of goods stated on invoice, and that stipulated in L/C)
UCP 600 sub-article 14 (d) states: "Data 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."
UCP 600 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."
The credit, as issued, did not specify the language of the required documents. The description of the goods in the credit was apparently made in the language of Country C (the language of the issuing bank). The presented invoice showed the description in the Country C language, whereas the CMR was apparently made in the language of the beneficiary (Country S).
Absent any indication of a required language to be used in the documents, the issuing bank must examine the description of goods in the CMR made in the Country S language (the language of the beneficiary) in order to establish whether there is any conflict between the relevant data.
The CMR also clearly relates to the goods described in the invoice and packing list as it shows that the shipment consisted of: "1 paleta, 53 koli, 932 kgs", which are all in compliance with the data in the invoice and packing list. It also shows "invoice 100301", which is the number of the presented invoice.
Discrepancy 3 - No authenticated correction on CMR was made (specifically: in field 5 one figure constituting invoice number has been reconstructed)
The CMR shows :"FAKTURA 100301" in field 5, which is designed for mentioning attached documents, if any. The CMR has been completed in the same handwriting. It seems that the issuer made the first "0" in the invoice number in a bolder manner, which does not in itself create any correction or alteration which would require authentication.
The discrepancies are not valid.
UCP 600 sub-articles 18 (c) and14 (e); ISBP 681 paragraph 51
Whether the addition of the words "second hand" in the invoice, which were not in the L/C, made the document discrepant
Query [TA 756]
We are acting as the intermediary between the confirming bank and the beneficiary's bankers and would like to have the opinion of the ICC Banking Commission on a particular case.
A letter of credit stipulated the delivery of the following goods as per field 45A:
HYDRAULIC DRILLING RIG ABI 12/14300VIBRATOR VRZ 700 GL, AUGER DRIVEEBG - 3000CONTRACT W/N DD 04.05.2011, ANNEX NO.1CIP ... Country B (INCOTERMS 2010)
1. INVOICE - 1 ORIGINAL AND 1 COPY
2. CERTIFICATE OF QUALITY - 1 ORIGINAL
The documents presented by the beneficiary showed the general goods description as
"HYDRAULIC DRILLING RIG ABI 12/14300, VIBRATOR VRZ 700 GL, AUGER DRIVE EBG - 3000. CONTRACT W/N DD 04.05.2011, ANNEX NO.1CIP... Country B (INCOTERMS 2010)", and in the detailed description of goods under item 1 "SECOND HAND HYDRAULIC DRILLING RIG ABI 12/14300".
These documents were delivered on 2 August 2011 at the counters of the confirming bank. On 3 August 2011, the confirming bank refused the documents claiming: "Invoice, Packing list and Cert. of Quality are showing that a second hand hydraulic drilling rig has been delivered, which is not as per L/C terms."
Insisting on the fact that we disagree with this discrepancy, we authorized the confirming bank to contact the issuing bank for a waiver, but the issuing bank is also not ready to take up the documents.
We disagree with the confirming bank and the issuing bank in this regard, since the description of goods is according to the one required in the credit and is as required by UCP 600 sub-article 18 (c). Neither the description of goods nor any document in the letter of credit requires the shipment of a brand-new machine. Therefore, we believe the wording "second hand" is only an addition and not in contradiction with sub-article 18 (c) or paragraph 58 of ISBP Publication 681.
The certificate of quality required in the letter of credit confirmed the merchandise was made of best materials and was in accordance with the contract no. W/N dd. 04.05.2011, Annex no. 1.
We have explained our point of view and the relevant articles of UCP 600 and ISBP Publication 681. However, the confirming bank and also the issuing bank are insisting that the wording "second hand" has changed the original description of goods stated in the letter of credit.
We would appreciate if the ICC Banking Commission would give an opinion whether what the confirming bank and issuing bank claim to be a discrepancy is valid or not.
Sub-article 18 (c) states: "The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit."
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."
It is normal that the invoice and other documents will show details that are in addition to the description stated in the credit, or in addition to what can be considered as a general description of the goods.
The requirement of sub-article 18 (c) is quite clear, i.e., that the description of the goods must correspond with that in the credit. The addition of the words "second hand" is not part of the description of the goods in the credit. The words "second hand" indicate a different category or classification of the goods, which is not apparent in the goods description in the credit. The addition of the words "second hand" is grounds for refusal on the basis that the goods description in the invoice does not correspond with that in the credit.
For the same reason, the description appearing in the packing list and certificate of quality, whilst only required to appear in general terms, conflicts with the description in the credit.
The discrepancy is valid.