Article

Spain

Alter three long years, the ISBP revision was finally adopted during the Lisbon Banking Commission meeting. That's an important step for document checkers.

The job of a document checker job is very hard one, since there are often conflicts. As stated in UCP article 5, banks deal with documents and not with goods and, as in a football match, in the same situation and having the same rules, referees react differently. In the case of a credit having the same conditions, one document checker may consider a document to be compliant, another may find it discrepant. How can we manage this conflict?

I believe there are three ways to improve consistency among document checkers. First, we have to give them all kinds of support by providing them with guidelines and opinions in order to help them interpret the rules. That's the goal of the ISBP.

The second depends on checkers applying common sense. But unfortunately, common sense is not an ICC publication.

Third is proper educational training for our clients. Unfortunately, some clients consider that the rules are only for banks. If we help applicants and beneficiaries to understand the rules, the document checker's life would be much more comfortable.

In Spain, some banks organize seminars for clients with these principles in mind. With the ISBP in hand, we analyze some important points, either by stressing the ISBP principles or by offering common sense alternatives to them.

Consider paragraph iv. in the preliminaries to ISBP 745: "The applicant and beneficiary should carefully consider the documents required for presentation, by whom they are to be issued, their data content and the time frame in which they are to be presented." During the contract phase of an L/C transaction, sellers often discuss prices, delivery dates, discounts, payment terms, etc., but documents are often not mentioned. The parties would do well to take note of paragraph iv.; this would avoid a lot of conflicts.

Another strategic point concerns the applicant. Sometimes banks, in order to avoid complicated instructions, ask applicants to simplify. And while simplification can be useful, if taken to extremes it opens the door to ambiguity and conflict. Applicants need to be specific and concrete.

Consider the question of corrections in documents. As per paragraph A7 a i. of ISBP 745, any correction of data in a document issued by the beneficiary, except drafts, need not be authenticated. If you wish avoid conflicts, don't modify the document. Issue a new one.

Or consider paragraph A 39. The revised ISBP states that documents may be titled as called for in the credit, bear a similar title or be untitled. Again, in order to avoid conflict, instruct beneficiaries to write the required title.

ISBP paragraph C 10 states that an invoice need not be signed. Whether commercial invoices should be signed or not is a long standing dispute. Many banks require only an invoice, but they expect it to be signed. But to avoid discussions, instruct beneficiaries to sign - always. It is free.

The weakest points for document checkers are transport and insurance documents. Knowing that, perhaps banks should prepare special training for document checkers covering these topics.

The ISBP are useful guidelines, but common sense is also required. Well-prepared document checkers and well-prepared clients are the best ways to avoid conflicts.

And perhaps, one day, ICC will publish some rules on common sense.

Xavier Fornt,
Professor at High School for International Trade,
Barcelona
E-mail: xavier.fornt@prof.esci.upf.edu

Switzerland

Having re-read the Banking Commission Opinion TA 726 (reproduced in Vol. 18 No. 4 of DCInsight) a couple of times, I feel compelled to take issue with some of the points discussed therein. There should/ need be only one on board notation, and this would relate to the date at which the full quantum stated in the bill of lading had indeed been loaded on board. Assuming the buyer/applicant had good reason for having goods shipped at two specific ports (and had thus made this a term of the L/C), a separate notation stating the prior port of loading would suffice to evidence compliance.

Regarding the second part of the rationale, viz: "that all parts of the shipment have been completed within the time limits stipulated in the L/C", one needs to be reminded that the owner or master would be acting ultra vires in issuing a B/L for the taking on board of goods prior to this event having taken place1. Carver states2 that: "A 'shipped' bill is one which states that goods have been shipped, i.e., put on board the carrying ship." In view of the above, the statement in the Analysis of TA 726, viz: "Whilst it is conceivable that the shipping company would only issue and/or add a dated on board notation... once the final shipment had been completed..." imputes the possibility that another course of action were permissible. This could only be the case if the issuer were acting illegally.

It is open to the shipper/beneficiary to present two separate B/Ls, one for each cargo shipped3 at each respective port of loading. However, if only one B/L were furnished, then a reference to the ports of loading stipulated in the L/C would suffice, as the (final) quantity stated therein must, in aggregate, have been taken on board by the master/owner at the time the B/L was issued or at the date of superimposing a separate on board notation. This would achieve parity with the logic of UCP 600 sub-article 31 (b) with regard to defining both the final quantum shipped and also the applicable date of shipment. n

Peter Sproston LL.M, BSc (Hons), ACIB, MIEx (Grad)
Senior Trade Finance Specialist
Kolmar Group AG
Switzerland.
E-mail: sproston@bluewin.ch

1. The Hague Rules 1924, Art. III, Clause 7. "After the goods are loaded...." which clausing is reiterated in the Carriage of Goods by Sea Act 1971 at Article III, Item 7. and the Carriage of Goods by Sea Act 1992 in Clause 4. (a) viz "represents goods to have been shipped on board a vessel... shall, in favour of a person who has become the lawful holder of the bill, be conclusive evidence against the carrier of the shipment of the goods...".

2. Carver on Bills of Lading, 2nd ed. (London, Sweet & Maxwell) 2005 at para 1-010 pp 8.

3. Subject to compliance with the relevant UCP 600 article.

Vietnam

L/Cs remain among the most favourable modes of international payment in Vietnam, especially for large companies. They are often used as a tool to hedge risks in high-value transactions. Around 40% of export and 80% of import transactions are supported by L/Cs. For small companies, the percentage is somewhat less, but it is still considerably higher than for other payment methods.

In terms of export products, L/Cs are the predominant payment method for seafood and rice, accounting for 60% and 40% of total export transaction values respectively. With regard to imports, L/Cs are preferred for high-value goods such as machines parts, components or high-risk items, including raw materials for agriculture such as fertilizers, chemicals and seafood. L/C usage makes up approximately 70% of the total transaction values for machine parts and components, around 60% for chemicals and over 80% for seafood

Despite its being the most favourable payment method in Vietnam, the L/C is gradually losing its dominant position. In fact, though L/Cs are considered to be the safest and most popular mode of payment, T/T (telegraphic transfer) has become an important option for many Vietnam enterprises.

In 2007, around 65% of international trade transactions were covered by L/Cs. The number has now fallen to less than 50%. In addition to T/T's advantages as a rapid, convenient and economical payment method, an important factor contributing to this trend has been the development of trade relations between Vietnam and foreign enterprises.

Although economic instability in the country has resulted in higher short-term risks, Vietnam's economic development is likely to decrease mid- and long-term ones. When sellers and buyers have established good relationships with each other, T/T seems to have become the best option for payment.

Credit growth in Vietnam's commercial banks has been weak in recent years, badly affecting the trade finance sector, thereby reducing the revenue of transactions processed via L/Cs. However, for transactions of high value, it is undeniable that L/Cs are the first choice as an effective method of payment. Moreover, because the credit growth of Vietnam's commercial banks is expected to rise to 20% per annum in the long run this, along with feasible solutions to improve and enhance the advertising and sales promotion of trade finance products, means that L/Cs will remain an important mode of international payment for enterprises in the country.

Phan Thi Thanh Nhan (Ms)
SVP, Head of Trade Operation Center
Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), H.O.
Hanoi
E-mail: nhanpt@bidv.com.vn