Parties

Initiator: Bank C

Respondent: Bank A

Beneficiary: Company M

Summary of representations

- The Respondent issued an irrevocable documentary credit no. LC123456 ("credit") in favour of Company M for USD 178,500 covering shipment of sunflower seed.

- The credit was issued subject to UCP 500, available with any bank by negotiation and was advised to Company M through the Initiator.

- The credit called for various documents including the following:

(i) Drafts at sight for full invoice value drawn on the Respondent;

(ii) Signed commercial invoice in 3 copies indicating the L/C no. and contract no.;

(iii) Packing list/weight memo in 3 copies indicating quantity, gross and net weight of each package;

(iv) Fumigation certificate in one original plus one copy issued by competent authority.

- The Initiator remitted documents for USD 90,683.71 to the Respondent for payment, stating it had taken up the documents.

- Following examination, the Respondent refused the documents claiming three discrepancies.

- The Initiator disputed the discrepancies raised and claimed that the documents were in compliance with the terms and conditions of the credit. It also claimed that the Respondent had failed to return the drafts to the Initiator at the same time it returned the other documents and that the Respondent was not entitled to raise discrepancies that it accepted in a subsequent drawing.

Issues to be determined

- Were the discrepancies raised by the Respondent valid under UCP 500?

- Did the Respondent's payment of a subsequent drawing under the same L/C invalidate the same discrepancies raised in the above-mentioned drawing?

- Did the Respondent incur any liability by returning the sight drafts to the Initiator separately and after the return of other documents presented?

- Did the Initiator's submission of a certificate issued by Company S rectify the discrepancy with the fumigation certificate?

Determination of issue No. 1

Analysis of the discrepancies:

a) Invoices are not marked "commercial invoice" as per L/C terms.

The L/C called for signed commercial invoice in 3 copies indicating the L/C no. and contract no.123. The invoice presented shows "Invoice No. 369", L/C number 123456, Contract no.123 and bears a signature. In addition, it was issued by Company M, beneficiary of the L/C and made out to Company Y, the L/C applicant. Accordingly, the invoice meets the terms of the L/C and complies with Article 37 of the UCP. The fact that the invoice does not expressly indicate it is a commercial invoice does not render the invoice discrepant. This is supported by paragraph no. 59 of "International Standard Banking Practice" (ISBP), ICC publication no. 645. Therefore, the invoice is not discrepant.

b) Unit of quantity omitted in packing lists

The L/C called for packing list/weight memo in 3 copies indicating quantity, gross and net weight of each package. The packing list/weight memo presented shows the quantity as 152.4096 net weight and 155.570 gross weight. It also shows the gross and net weight of each container in kilos. If one adds up the gross and net weight for each of the eight containers, gross weight would equal to 155,570 kilos and net weight would equal to 152,409.60 kilos. The Respondent alleges that the net and gross weight shown in the Quantity column is not consistent with the gross and net weight shown for each container. The Panel of Experts finds no confusion in this respect, because it is very clear from the invoice that the quantity of the goods was expressed in metric tons which when converted into kilos are consistent with the gross and net weight expressed in kilos for the containers. Omission of the unit of quantity in this particular case is not a discrepancy, as the unit of quantity can be ascertained from the invoice.

c) Alterations on the certificate of fumigation less authentication

The L/C called for a fumigation certificate in one original plus one copy issued by a competent authority. The fumigation certificate presented meets the terms and conditions of the L/C and the UCP, except that a correction made to one of the container numbers does not show that the correction was authenticated by the issuer of the document. This is a valid discrepancy based on the following:

(i) ICC Opinion R217 - Query 4 where the ICC decided a quality certificate may be refused if alterations to the quality certificate are not authorized/approved by the issuer.

(ii) "Documentary Credits Insight" newsletter (Volume 4 No. 4 Autumn 1998) - "Queries and Responses"- "The necessity to authenticate corrections on documents", where the ICC decided corrections on documents issued by a party other than the beneficiary must indicate who has made the correction. In cases where the correction is made by a party other than the issuer (i.e., agent), the party must state its capacity in relation to the issuer.

(iii) "International Standard Banking Practice" (ISBP) - Paragraph no. 9 states "Corrections and alterations of information or data in documents, other than documents created by the beneficiary, must appear to be authenticated by the party who issued the document or by a party authorized by the issuer to do so. Corrections and alterations in documents which have been legalized, visaed, or the like, must appear to be authenticated by the party who legalized, visaed, etc., the document. The authentication must show by whom the authentication has been made and include that party's signature or initials. If the authentication appears to have been made by a party other than the issuer of the document, the authentication must clearly show in which capacity that party has authenticated the correction or alteration."

Determination of issue No. 2

Following refusal of the drawing noted above, the Respondent received another drawing under the same L/C containing discrepancy (a) and (b) mentioned above. The Respondent paid this drawing to the Initiator following the Respondent's receipt of the applicant's waiver of the discrepancies. Does the Respondent's action invalidate discrepancy (a) and (b) raised in the drawing now in dispute?

Each presentation is independent of another, and this principle is supported by ICC Banking Commission Opinion R332, which states the fact that a bank may have previously accepted discrepant documents, with or without an applicant waiver, does not bind that bank to accepting a similar discrepancy(ies) on any future drawing(s) unless local law states otherwise. The same concept should apply when a subsequent drawing with the same discrepancy(ies) is paid while a previous drawing is refused.

Determination of issue No.3

Did the Respondent incur any liability by returning the sight drafts to the Initiator separately following return of other documents presented?

This is not an issue relating to the UCP. From a practical perspective, the Respondent's action did no harm to the Initiator or the beneficiary.

Determination of issue No. 4

Did the Initiator's submission of a certificate issued by Company S rectify the discrepancy with the fumigation certificate?

The supplementary certificate to the fumigation certificate, which re-stated the container numbers, does not rectify the discrepancy with the fumigation certificate, as this document was presented to the Respondent after the L/C expiry date.

This Decision is a unanimous Decision by the Panel of Experts.