Parties

Initiator (negotiating bank): Bank D, Country G

Respondent (issuing bank): Bank A, Country P

Background and documents

The Experts have studied a Request for a DOCDEX decision received from the Initiator and correspondence received from the Respondent regarding a dispute over a presentation of documents made by the Initiator under a letter of credit, subject to UCP 500, issued by the Respondent on 17 December 2004. The expiry date was 5 February 2005.

Although the Respondent declared that it did not want to take any part in the DOCDEX proceedings, it has submitted some information on the background of the transaction.

The Experts have made their decision based on the Request and on the correspondence received from the Respondent, a copy of the letter of credit in question, copies of amendments to the letter of credit, copies of the documents in dispute and copies of the correspondence between Initiator and Respondent regarding the case.

The Respondent's refusal of the documents dated 27 January

After having received the Initiator's presentation on 24 January 2005, the Respondent sent a SWIFT MT799 to the Initiator on 27 January stating that the following discrepancies had been found:

1. "CONDITION NO. 8 UNDER FIELD 48A IS NOT COMPLIED.

2. CONDITION NO. 10 UNDER FIELD 46A IS NOT COMPLIED.

3. CERTIFICATE OF ORIGIN ISSUED BY MINISTRY OF INDUSTRY INSTEAD OF CHAMBER OF COMMERCE.

4. SPECIFICATION ON DESCRIPTION OF GOODS DIFFER IN INVOICE FROM L/C.

5. CONDITION NO. 6 UNDER FIELD 46A IS NOT COMPLIED."

Under point 1. the Respondent refers to "field 48A", but a "field 48A" does not exist. After having read the letter of credit, it seems likely that the Respondent meant "field 46A". The Experts consider this to be a simple typing error which does not change the validity of the claim of discrepancies.

In its advice of refusal the Respondent says: "PLS NOTE WE HAVE NOT RECEIVED THE MESSAGE OF REFUSAL OF OUR AMENDMENT NO. 6. ADVISE THE REASON."

It is not required that a beneficiary who decides to refuse to accept an amendment must inform the advising bank or anyone else of its decision. And it is not required of a nominated bank, which is informed by a beneficiary of its decision to reject an amendment, that it pass on that information to the issuing bank or to anyone else. As there was not a requirement for such an advice in this letter of credit, the statement by the Respondent may be ignored.

Requirements in the letter of credit relevant to the five alleged discrepancies

(Please note that the statements under 1, 2, 3 and 5 are quotes from the letter of credit - under 4 it is the Experts' description of the contents of field 45A.)

1. (46A/8) TWO ORIGINAL AND TWO COPIES OF CERTIFICATE OF SAMPLING AND ANALYSIS COVERING THE WHOLE SHIPMENT ISSUED BY INDEPENDENT SURVEYOR CERTIFYING THE TOTAL MOISTURE, INHERENT MOISTURE, ASH, CONTENTS, VOLATILE MATTER, TOTAL SULPHUR, GROSS CALORIFIC VALUE AND HGI.

2. (46A/l0) BENEFICIARY MUST CERTIFY THAT DOCUMENTS HAVE BEEN DRAWN IN ACCORDANCE WITH THE TERMS OF THIS L/C.

3. (46A/5) CERTIFICATE OF ORIGIN ISSUED BY CHAMBER OF COMMERCE.

4. (45A) GOODS DESCRIPTION OF 23350 M/TONS LOW SULPHUR INDONESIAN STEAM COAL WITH REFERENCE TO A PROFORMA INVOICE AND WITH A SPECIFICATION OF CONTENTS OF MOISTURE, ASH, VOLATILE MATTER, CARBON, SULPHUR, CALORIFIC VALUE, HGI AND A SIZE (STATED TO BE 0-50 MM).

5. (46A/6) TWO ORIGINAL AND TWO COPIES OF CERTIFICATE OF WEIGHT COVERING THE WHOLE SHIPMENT ISSUED BY INDEPENDENT SURVEYORS CERTIFYING THE WEIGHT OF SHIPMENT OF COAL DETERMINED TO THE NEAREST TON AT THE LOAD PORT BY A DRAUGHT SURVEY.

Respondent's advice of refusal is insufficient in that under points 1, 2 and 5 there is no indication whatsoever of which part(s) of the requirements of field 46A, points 8, 10 and 6, respectively, have not been complied with in the view of the Respondent.

In later correspondence the Respondent mentioned an alleged discrepancy which could refer to points 1 and 5. That is, the port of loading was stated as "Teluk Bayur, Pedang" whereas in the letter of credit the name of this port is stated as "PELINDO TELUK BAYUR PADANG", so that the word, "PELINDO" seemed to be missing. However, in its amendment no. 1 the Respondent changed the requirement from "PELINDO TELUK BAYUR PADANG" to "ANY INDONESIAN SEAPORT". There is no discrepancy.

Also in later correspondence the Respondent mentioned that (each set of) some of the documents were required to be presented in two originals and two copies but was presented as one certificate only. The Initiator contested this allegation, and as all documents - including the Initiator's cover letters - indicate that the required documents were in fact presented in the required number of originals and copies, the Experts have agreed that there seems to be no discrepancy.

Point 2 of the Respondent's advice of refusal

This point has been contested by the Initiator, who claims that the certificate was one of the documents sent to the Respondent on 17 January, and a copy of the Initiator's cover letter indicates that this certificate was enclosed in the presentation. As a copy of the certificate was one of the documents submitted to the Centre for Expertise by the Respondent itself, indicating that these were copies of documents presented under the letter of credit, the Experts believe that the certificate was in fact presented under the letter of credit. There is no discrepancy.

Point 3 of the Respondent's advice of refusal

This is a valid reason for refusal; however, in a SWIFT message of 27 January the Initiator informed the Respondent that the beneficiary had presented a correct certificate of origin together with the other documents, thus within the 21 day period allowed for presentation. But by a mistake on the part of the Initiator this certificate was only forwarded to the Respondent by courier the previous day, i.e., on 26 January.

In a SWIFT message dated 2 February, the Respondent claimed that the new certificate of origin, which it received on 29 January, was not issued by a chamber of commerce. A copy of the document shows that the certificate was printed on stationery headed "Chamber of Commerce and Industry" and was signed for "Chamber of Commerce and Industry". The Experts have agreed that this certificate fulfils the requirement for presentation of a certificate of origin issued by a chamber of commerce.

The Respondent further claimed that it would not accept the certificate because it was not included in the original presentation and arrived much later than the rest of the documents. As it is not a requirement that all documents be presented at the same time, and considering that the correct certificate was dispatched the day before the Respondent sent out its advice of refusal, and that it arrived only two days thereafter, the corrected certificate of origin must be accepted as a valid replacement for the document that was in its possession.

It may be added that it is quite normal and not objectionable that documents are received by an issuing bank from a nominated bank as late as 21 days after shipment, plus the time it takes the nominated bank to check and handle the documents, plus the time it takes to have documents transported from the nominated to the issuing bank. There is no discrepancy.

Point 4 of the Respondent's advice of refusal

In its SWIFT message of 2 February, the Respondent explained that "THE WORD SIZE 0.50 MM IS MISSING ON INVOICE". This allegation must have been made because the Respondent has overlooked the fact that according to its amendment no. 1 of 21 December 2004, this part of the specification, stating the size, was deleted. There is no discrepancy.

Also in its SWIFT message of 2 February the Respondent claimed that "DOCUMENTS RECEIVED NOT IN 5 SEPARATE SET". According to Article 14 of the UCP, only one advice of refusal for each set of documents may be issued and taken into consideration. This second refusal will be ignored.

Based on the above, the Experts have unanimously decided that the presentation made by the Initiator is acceptable.