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China

If the credit calls for a bill of lading stipulating shipment from "Any port in China" or "Any Chinese port", would shipment from Hong Kong comply with the terms and conditions of the credit? Since the analysis and conclusion of ICC draft opinion TA770 says "No", it has aroused intense debate once again on this longdisputed issue inside and outside of China. There is no unanimous agreement on this even within ICC China; that's why the draft opinion was postponed at the latest ICC Banking Commission meeting in Mexico.

Even before ICC Denmark asked for an "official" opinion on this issue from the Banking Commission, most banks accepted this kind of bill of lading in practice; some, on the other hand, did not. However, if the Banking Commission is going to issue an "official" opinion, it must be very careful.

Just as the analysis of draft opinion TA770 reports, the main reason for those who deem Hong Kong not to be a port of China for a credit transaction is that Hong Kong is a "Special Administrative Region" (SAR) and a separate customs territory. Under the "One Country, Two Systems" policy, Hong Kong has a different economy, taxation, administration and legal system than mainland China.

But consider some voices on the other side:

1. ISBP 681 paragraph 100 clearly provides that "if a credit gives a geographical area or range of ports of loading and/or discharge (e.g. 'Any European Port'), the bill of lading must indicate the actual port of loading and/ or discharge, which must be within the geographical area or range stated in the credit." Geographically, Hong Kong is no doubt a port in China.

2. What if the bill of lading shows the port of loading as "Hong Kong, China"?

3. What's the definition for "country" in UCP 600 sub-article 14 (j)? What if the beneficiary's name and address stated in the credit is "ABC CO., X ROAD, GUANGZHOU, CHINA", but it shows "ABC CO., Y ROAD, HONG KONG" or "ABC CO., Y ROAD, HONGKONG, CHINA" on the commercial invoice?

4. Why do people focus only on "Two Systems" while ignoring the phrase "One Country" in front of it? All of the special policies currently conducted in Hong Kong SAR are granted by the Chinese central government; this does not alter the fact that Hong Kong is a port of China.

5. If this case is appealed to People's Supreme Court of China, what kind of decision do you think the Chinese judge will render on this issue?

6. During the course of examining the documents at issue, checkers in a bank can easily find the result "Hong Kong is a port of China" at www.wikipedia.org (http://en.wikipedia.org/wiki/List_of_ports_in_China#Hong_Kong) or other resources online. Otherwise, in addition to having common knowledge and exercising reasonable care, should document checkers also be experts in history, politics, economics, taxation, customs clearance and legal systems? How far does the document checker have to go beyond the independence principle of a credit transaction?

7. Of course, it is the responsibility of the applicant and issuing bank to use clear instructions in the wording of their L/Cs. If the LC states shipment from "Any Chinese port", it should be explicitly stated whether this excludes Hong Kong or any other SAR. If it is not stated, then shipment from any port in mainland China and/or Hong Kong is acceptable. In other words, the applicant and issuing bank bear the risk of any ambiguity in their credits or amendments.

To make things simple and to uphold the autonomy of the letter of credit, why not leave politics to politics and credits to credits?

Wang Shanlun is Associate Professor at Jiangxi University of Finance and Economics, China. His e-mail: wangshanlun@gmail.com