Parties

Initiator: Company P

Respondent: Bank B

Summary of the representations

1) An irrevocable documentary credit (L/C) was issued by Bank B's office in Country K (Respondent) on 6 November 1997 via SWIFT MT 700 under reference M123 on behalf of Company S, Country K in favour of Company P, Country C (Initiator). The L/C was advised through Bank D in Country C and available with any bank for negotiation at sight, subject to UCP 500 with reimbursement subject to URR 525.

2) The L/C was acknowledged by Bank D on 10 November 1997 via SWIFT MT 799 with a request for clarification of the content of field 47a (Additional Conditions) which stated: "Shipment to be made on Mr A: 5-678 Attn.: Mr. X only".

3) Subsequently, on 12 November 1997, a SWIFT MT 799 was received by Bank D from Bank B stating: "Pls note additional conditions 47a clause you mentioned means the goods should be shipped by Mr A only."

4) An amendment to the L/C was issued by Bank B on 13 November 1997 and received via SWIFT MT 707 by Bank D on 15 November 1997 stating: "Partial shipments are now prohibited". An explanation for the reasons for this amendment stated, in essence, that the attachment tests with the Initiator's sample had resulted in failure to pass the qualification on three occasions

5) Amendment refused by Company P on 16 December 1997. Bank D passed on this refusal to Bank B via SWIFT MT 799 on 16 December 1997.

6) Documents for the full amount of the L/C, i.e. US$ 82,998.00, forwarded to Bank B by Bank D on 23 December 1997 for payment.

7) SWIFT MT 799 sent by Bank B to Bank D on 29 December 1997, stating that the applicant did not consent to beneficiary's refusal of the amendment referred to above.

8) SWIFT MT 799 sent by Bank D to Bank B on 30 December 1997, advising that the beneficiary still refused the amendment as per UCP 500 sub-Articles 9(d)(i) and 9(d)(iii).

9) SWIFT MT 799 sent by Bank D to Bank B on 31 December 1997, requesting fate of the documents.

10) SWIFT MT 734 (Advice of Refusal) sent by Bank B to Bank D on 5 January 1998, noting the discrepancies below and stating that documents were being held at the disposal of Bank D pending further instructions:

- different beneficiary's address on invoice and AWB

- missed weight on packing list

- notify details on AWB are different from L/C terms

- carrier details on AWB are different from L/C terms

11) SWIFT MT 799 sent by Bank D to Bank B on 5 January 1998, stating their disagreement with the discrepancies and outlining specific reasons. Payment again requested.

12) SWIFT MT 799 sent by Bank B to Bank D on 9 January 1998, refuting the reasons given by Bank D and outlining specific reasons. Re-confirmation that documents were still being held at the disposal of Bank D pending further instructions.

13) SWIFT MT 799 sent by Bank D to Bank B on 13 January 1998, stating that Bank D still considered discrepancies invalid but were in contact with the beneficiary, Company P, on the matter.

14) SWIFT MT 799 sent by Bank B to Bank D on 19 January 1998, informing that Bank B still considered the discrepancies as valid. Further advised that goods were now in a customs warehouse and that documents still held under Bank D liability.

15) SWIFT MT 799 sent by Bank D to Bank B on 27 January 1998, requesting fate of documents.

16) Further chaser sent on 28 January 1998.

17) Further SWIFT MT 799 sent by Bank D to Bank B on 30 January 1998, reiterating the fact that although a commercial dispute existed between the parties, the discrepancies were considered as not valid. A further outline of specific reasons was provided.

18) Final SWIFT MT 799 chaser sent by Bank D to Bank B on 5 February 1998, requesting response regarding:

- status of merchandise

- warehousing and insurance

- waiver of discrepancies

- date of payment.

19) Documents returned by mail on 3 February 1998 by Bank B to Bank D, stating that applicant refused the documents.

20) SWIFT MT 799 sent by Bank D to Bank B on 20 February 1998, acknowledging receipt of the documents.

Determination of the issues with reasons

  • All advices / responses would appear to have been provided in a timely fashion in accordance with UCP 500, bearing in mind the circumstances of the matter.

  • Bank B SWIFT MT 799 dated 13 December 1997 - the statement re attachment tests is irrelevant in the context of the amendment and the L/C.

  • Bank B SWIFT MT 799 dated 19 January 1998 section B) - statement re beneficiary's promise is outside the terms of the L/C and therefore not relevant to this matter.

  • Bank B stated in its response, dated 7 May 1998, that discrepancy no. 2 is not considered as an obvious discrepancy.

Discrepancy no. 1: Different beneficiary's address on invoice and AWB

Invoice and AWB state St. Blass, whereas L/C states St. Glass. The remainder of the address, including street name and number, town and country, and zip / postal code is correct as per L/C details. This is an obvious typographical error in the L/C and makes no material difference to the documentation.

In this respect, reference can be made to ICC Publication No. 565, Opinions of the ICC Banking Commission 1995-1996, page 32, Query 209 concerning Invoice and AWB reproduced below:

"Sub-Article 13(a) R 209

Typographical errors under sub-Article 13(a)

Please advise whether the following minor typographical errors can be deemed as discrepancies in the light of Article 13(a) of UCP 500:

a) Invoice shows the postal district code under beneficiary's address as '0256' instead of '2056'.

b) AWB shows the surname of an 'Attention Party' named in the AWB as 'Chai' instead of 'Chan'.

c) AWB Shows beneficiary's address as 'Industrial Parl' instead of 'Industrial Park'. Can the said invoice and AWB be rejected as discrepant documents?

Issue

The issue is whether the following typographical errors can be deemed as discrepancies in the light of UCP 500 sub-Article 13(a) and be a reason for documents to be rejected.

a) Invoice shows the postal district code under beneficiary's address as '0256' instead of '2056';

b) AWB shows the surname of an 'Attention Party' named in the AWB as 'Chai' instead of 'Chan';

c) AWB shows beneficiary's address as 'Industrial Parl' instead of 'Industrial Park'.

Analysis

Item a) a postal district code, being for postal use only, under these conditions (reference as to who has issued the invoice) should not be a reason for rejection of the invoice.

Item b) a surname, with the understanding that indeed there might be someone else with exactly this name ("Chai"), even at the same address, can be deemed a reason for rejection of the AWB.

Item c) as there is no danger of an address actually reading 'Industrial Parl', this obvious typing error should not be treated as a discrepancy and be a reason for rejection of the AWB.

Conclusion

Given that this conclusion is only applicable to this specific query, under UCP 500 sub-Article 13(a), items a) and c) cannot be considered as discrepancies. Item b) can be deemed as a discrepancy. The AWB should be rejected for discrepancy in item b)."

Although it is mentioned that the conclusion is only applicable to the specific query, the logic applied to query c) in R209 above clearly has relevance to the DOCDEX case under consideration. Sub-Article 37(a)(i) of UCP 500 states that:

"Commercial Invoices are Unless otherwise stipulated in the Credit, commercial invoices; i. must appear on their face to be issued by the Beneficiary named in the Credit (except as provided in Article 48) " Obvious typographical errors can not be interpreted as valid reasons for refusal.

Discrepancy no. 2

Missed weight on packing list There is no requirement either in the L/C, in UCP 500, or in the packing list document itself for the "weight" to appear. The requirement for insertion of this data is not in compliance with nor consistent with "international standard banking practice". Article 21 UCP 500 is quite clear in this regard, as follows: "Unspecified Issuers or Contents of Documents

When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom such documents are to be issued and their wording or data content. If the Credit does not so stipulate, banks will accept such documents as presented, provided that their data content is not inconsistent with any other stipulated document presented." (emphasis added)

Additionally, reference can be made to ICC Publication no. 565 Opinions of the ICC Banking Commission 1995-1996, page 41, Query 218 reproduced below: "Article 21 and miscellaneous R 218 Weight units on packing list and B/L; rounding up/down of gross weight on B/L; difference in number of containers between B/L and packing list

Query

Documents were presented under Issuing Bank D/C (I/B) on 19/7/95 and rejected by I/B for the following reasons:

* packing list and B/L do not mention weight units (kilos). Negotiating bank (N/B) argued that all the amounts tied in with the other documents and were consistent with each other when compared. D/C did not call for weight units to be mentioned.

* Gross weight differs in B/L from other documents. N/B argued that the B/L rounded off the weight and that the B/L was not a statement of weight but rather evidence of shipment.

* B/L shows goods packed in one container, P/L shows goods packed in three containers.

N/B argued that the B/L stated 'packed in three containers' and provided three container numbers.

Issue 1

Packing list and bill of lading do not mention the weight units (kilos). Analysis There is nothing in the UCP 500 that would substantiate the position of the issuing bank that the packing list and the bill of lading need to indicate the weight as required. In the absence of any requirement in the credit or inconsistency amongst the documents, then UCP Article 21 applies.

Conclusion

The fact that the packing list and bill of lading do not mention the weight units is not a discrepancy unless the documentary credit required such information to appear on the documents.

Issue 2

Second gross weight differs in B/L from other documents.

Conclusion

Rounding-off the gross weight in this case (bill of lading showing gross weight 44.595 and other documents showing 44,595.2) cannot be considered as an inconsistency amongst the documents.

Issue 3

The bill of lading shows goods packed in one container; the packing shows goods packed in three containers.

Analysis

The bill of lading presented showed three separate container numbers but the shipping company placed the combined weight against only one of them. The fact that three container numbers were shown on the bill of lading provides conformity with the container numbers shown on the packing list.

Conclusion

The issue cannot be considered a discrepancy." Issue 1 is quite clear in its conclusion that inclusion of the weight units is not required unless specified by the L/C.

Discrepancy no. 3

Notify details on AWB are different from L/C terms Requirement of L/C is for AWB marked "Notify Accountee". AWB actually states "Notify Accountee: Company S".

Therefore, the only difference is the addition of the precise name of the Accountee, i.e. Company S. In view of the fact that the Accountee name is correct, and that the extra text actually enhances the information rather than detracts from it, this cannot be regarded as a material fact for refusing documents. The L/C and the AWB are not inconsistent with each other.

Discrepancy no. 4

Analysis No. 1

Carrier details on AWB are different from L/C terms L/C field 47a states: "Shipment to be made on Mr A: 5-678 Attn: Mr. X only."

Following representation from Bank D, this was clarified by Bank B as follows: "Pls note additional conditions 47a clause you mentioned means the goods should be shipped by Mr A only."

The AWB clearly evidences that shipment has been effected through Mr A as agents for Airline Z and is signed in this respect. This is totally in accordance with Bank B clarification of 12 November 1997.

Additionally, the other documents are not inconsistent with this information, as the invoice actually includes the stated telephone number and contact name, and the packing list states the telephone number.

There is no evidence that this document is inconsistent with the L/C requirements. The non-inclusion of the telephone number and contact name is not material - this information is purely for the information of the beneficiary in order to arrange appropriate shipment.

Analysis No. 2

The omission of the details is a discrepancy justifying rejection.

i) The clarification provided on 12 November 1997 by the issuing bank to the request by the advising bank dated 10 November 1997 cannot be considered, as contended by the advising bank, as an amendment to the L/C. To accept otherwise would be in violation of UCP sub-Article 9(d)(i) and its internationally accepted interpretation, as reflected in ICC Publication no. 511 UCP 500 & 400 Compared, page 25, which outlines that agreement to amendments should be clear and precise. Accordingly, the L/C should be considered as valid in accordance with its original terms.

ii) As pointed out in ICC Position Paper No. 3 dated 1 September 1994, a condition is not deemed to be a non-documentary condition if the condition can be clearly linked to a document stipulated in the credit. In this dispute, the L/C required the presentation of an AWB and indicated the name of the carrier, which is undisputed among the parties. The "Additional Conditions" added to the name of the carrier was to give precision as to the name of the person to be contacted and his telephone number. This additional precision can undoubtedly be linked to the AWB and cannot be considered as a non-documentary condition.

iii) Finally, the contention of the advising bank that once the shipment is made through the designated carrier that the "Additional Condition" no longer serves any purpose contradicts the basic fundamentals of L/C law and practice as reflected in UCP, and in particular, UCP 500 Article 4.

Analysis No. 3

The Additional Condition in the Letter of Credit required "Shipment to be made Mr A: 5-678 attn: Mr X only" without stating the document(s) to be presented in compliance therewith. Furthermore, in its clarification to the advising bank's inquiry, the issuing bank stated that the shipment should be made by the named carrier only, without stating further details.

The above circumstance indicated clearly that the only concern of the issuing bank was that the named carrier was to be used, while the telephone number and the attention person were to facilitate contacting of that carrier. We believe that to satisfy a requirement in an L/C does not necessarily mean that such a requirement should be copied word-by-word on the related documents. For instance, if a L/C requires that the goods be of German origin, the certificate of origin can attest that the goods are made in Germany. There is no need for the wording "The goods are of German origin" to appear on a document.

In this case, to indicate that the shipment has been effected through Mr A adequately satisfies the requirement of the L/C. Therefore, it is not necessary in the AWB to show the telephone number of the name of the attention party.

Conclusion and decisions

Discrepancy no. 1: invalid

Discrepancy no. 2: invalid

Discrepancy no. 3: invalid

Discrepancy no. 4: majority decision invalid

The documents are therefore not considered to be discrepant, and payment should have been effected upon presentation to the issuing bank.