Parties

Initiator: Company N

Respondent: Bank I and C

Summary of representations

Bank I and C issued an irrevocable documentary credit no. LC123456 ("credit") in favour of Company N for USD507,000 covering shipment of a Company N product

The credit was payable at sight and called for the following documents:

- Drafts at sight on Bank I and C

- Signed commercial invoice in 3 copies

Packing list in 3 copies

- Cargo receipt issued and signed by authorized person(s) of Company F certifying that the goods [had] been received in good order and condition upon trust for account and/or on behalf of the Bank I and C, F Branch stating the value and quantity of goods and mentioning the credit number

Company N presented documents to Bank I and C through a presenting bank for payment

Bank I and C refused the documents claiming discrepancies, and the documents remain unpaid today

Company N disputed the discrepancies raised and claimed that the documents were in compliance with the terms and conditions of the credit. It also claimed that Bank I and C's refusal notice was not sent in accordance with sub-Article 13(b) and 14(d)(i) of UCP 500

Bank I and C insisted on the validity of the discrepancies and claimed that the refusal notice was sent in accordance with the provisions of UCP 500

Bank I and C advised that the applicant refused to waive the discrepancies because neither Company F nor the applicant received the goods. The applicant also alleged that the two cargo receipts were forged.

Issues to be determined

1. Were the documents presented by Company N discrepant under UCP 500?

2. Was the refusal notice sent by Bank I and C in compliance with the provisions of sub-Articles 13(b) and 14(d)(i) of UCP 500?

3. Is Company N entitled to payment under the credit by Bank I and C?

Determination of issue No. 1

Analysis of the alleged discrepancies raised by Bank I and C:

Invoice and packing list not showing "original" as per sub-Articles 20(b) and (c) of UCP 500:

The invoice and packing list presented by Company N were printed on the original stationery of Company N and were also manually signed by it. These documents are obvious originals and do not require any marking on their face as "original". This opinion is in line with the ICC policy statement on the determination of an "original" document in the context of UCP 500 sub-Article 20(b). (For the text of this policy statement, see the ICC web site www.iccwbo.org under "Banking".) Accordingly, the discrepancy raised by Bank I and C is not valid.

Cargo receipt not showing place of delivery:

Compliance of the cargo receipt is to be determined by the terms and conditions of the credit and Article 21 of UCP 500. Article 21 states "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."

There was no requirement in the credit for the cargo receipt to show a place of delivery. Accordingly, the discrepancy raised by Bank I and C is not valid.

The chop of Company F in the cargo receipt showing deletion without authentication:

The alleged discrepancy was not clear to the panel of experts based on presentations from the Initiator and the Respondent. To be able to render a DOCDEX decision, the panel of experts requested the Respondent to submit the original cargo receipts and clarify the discrepancy.

Two original cargo receipts were submitted for examination by the panel of experts. The panel of experts cannot identify any deletion in the chop of Company F on cargo receipt no. ABC4567B dated 28th September 1998. Regarding cargo receipt no. ABC4567B dated 26th September 1998, the panel of experts noticed a trace of correction fluid after the word "System" in the signing chop of Company F. Bank I and C alleged that the letter "S" after the word "System" in the signing chop was erased with correction fluid without authentication.

UCP is silent on the requirements of corrections on documents. There is, however, one ICC Opinion which dealt with corrections on transport documents (ICC publication no. 469, Opinion R174). Since a cargo receipt is not a transport document, Opinion R174 cannot be used to interpret the alleged discrepancy.

The name of the issuer of the cargo receipt, Company F, appears to be consistent on the face of the document, i.e., at the top of the cargo receipt, in the signing chop and in the round chop authenticating the correction made to the letter of credit number. If in fact there was a letter "S" after the word "System" in the signing chop and it was erased, the panel of experts found that the signature of the General Manager sufficient authentication for the deletion. Therefore, the panel of experts has found the discrepancy raised by Bank I and C not valid.

Cargo receipt showing alteration without bearing an initial on the correction chop:

The credit required that the credit number LC455123418 to be mentioned on the cargo receipt. The last digit of the credit number was amended from "7" to "8" with a round chop of Company F stamped beside the correction.

UCP 500 is silent on how corrections are to be made on documents. ICC's Opinion on the correction of transport documents which requires authentication by a correction stamp, as well as a signature or initial, cannot be used to interpret the correction made on the cargo receipt, as the cargo receipt is not a transport document. It is clear on the face of the cargo receipts that the correction was made by the issuer, Company F. This is in line with the ICC Opinion in the autumn issue of the Documentary Credits Insight newsletter regarding corrections on documents issued by a party other than the beneficiary. As such, the discrepancy raised by Bank I and C is not valid.

Draft and invoice showing issuing bank's name differ from L/C

The credit showed the name of the issuing bank inconsistently as the "Bank I and C, City F, City F Branch"; "Bank I and C, F City Branch"; and "Bank I and C, F Branch"; and "Bank I and C, F Br".

The draft was made out in the name of Bank I & C, Country C. There is no inconsistency between the word "and" and "&" and the panel of experts found the discrepancy raised by Bank I and C not valid.

The invoice showed the name of the issuing bank as Bank I and C of Country C, F (F City Branch), which is consistent with the description of the issuing bank's name in the credit. Accordingly, the discrepancy alleged by Bank I and C is not valid.

The beneficiary's telephone no. in invoice differ from L/C

The credit showed the beneficiary's telephone number as 123-4567-0335, whereas the invoice showed beneficiary's telephone number as 123-4567-0355. This is an obvious typographical error, and the discrepancy raised by Bank I and C is therefore not valid.

Determination of issue No. 2

Bank I and C was closed from October 1 to October 4, 1998 due to the National Day holiday and Saturday and Sunday. Documents were therefore received by Bank I and C on October 5, 1998. Bank I and C examined the documents and found them to be discrepant and dispatched a refusal notice to the presenting bank on October 9, 1998, the 4th banking day following receipt of the documents.

Sub-Article 13(b) states "The Issuing Bank, the Confirming Bank, if any, or a Nominated Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly."

Sub-Article 14(d)(i) states "If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents...."

Sub-Articles 13(b) and (d)(i) do not provide the issuing bank, confirming bank or the nominated bank a period of seven banking days to examine the documents and to advise of rejection. Rather, each of these banks shall have a reasonable time to examine the documents and decide to take up or refuse them subject to a maximum of seven banking days following receipt of the documents. The seven banking day rule is intended to be the maximum timeline, and it must not be interpreted to be the time allowed by UCP. Reasonable time must be determined upon the circumstances of each case. A very complex credit requiring examination of hundreds of documents could consume the entire seven-day period, whereas a simple statement of indebtedness under a standby credit may require only a few hours.

The panel of experts has reviewed the circumstances of the presentation and the type of documents required and found that the refusal notice sent by Bank I and C was not in accordance with sub-Article 13(b) and sub-Article 14(d)(i) of UCP.

Determination of issue No.3

Company N is entitled to payment under the credit by Bank I and C.

The fraud allegation raised by Bank I and C

UCP 500 has no provisions to deal with a fraud situation. Accordingly, any fraud allegations are outside the scope of a DOCDEX decision. In the dispute between Company N and Bank I and C, Bank I and C did not raise the fraud allegation at the time of document refusal, an indication that forgery was not apparent to Bank I and C on the face of the documents.