Parties

Initiator: Bank S (letter of credit issuing and processing agent of the Respondent)

Respondent: Bank R (instructing bank for the letter of credit which is the subject of this dispute)

Background and transaction

As a result of an agreement between the Initiator and the Respondent, the Initiator is the appointed processing agent of the Respondent for the issuance of letters of credit in the name of the Respondent as well as the resultant examination and processing of the documents presented under the relevant letters of credit.

The Experts have studied a Request for a DOCDEX-decision received from the Initiator and an Answer received from the Respondent regarding a dispute over a presentation of documents under a letter of credit subject to UCP 500 issued by the Initiator on behalf of the Respondent.

The Experts have made their decision based on the Request and the Answer, a copy of the letter of credit in question and copies of the following documents: Certificate of Actual Test Results, Positive Release (microbiological), bill of lading, health certificate, certificate of origin and Generalized System of Preferences Certificate of Origin.

Chronology of relevant events

When documents were received under this credit, the Initiator found that they were discrepant due to late shipment. The applicant waived this discrepancy and the Respondent agreed on 15 July 2006. [Note: The Group of Experts is unable to ascertain, from the documents presented for Decision, when the documents were received by the Initiator and when the presented documents were taken up by it.]

- 3 August 2006: the applicant under the letter of credit issued subject to the agreement between the Respondent and the Initiator wrote a letter to the Respondent refusing to accept the documents presented under the letter of credit as it considered the bill of lading to be unclean because it was furnished with a notation stating that the cargo was delivered to the carrier at 11.7 degrees celsius. (discrepancy no. 1)

- 11 August 2006: The applicant sent a further letter to the Respondent alleging that the Positive Release (microbiological) was also a discrepant document on the grounds that the "production date" on the document showed "20/21 June 2006" with a date of issue as "18 June 2006". (discrepancy no. 2)

Correspondence ensued between the Initiator and the Respondent culminating in the Respondent raising the following two additional discrepancies sometime after 30 March 2007:

1. The "production date" (20/21 June 2006) and "best before date" (19/20 June 2008) stated in the Positive Release (microbiological), and the "production date" (20/21 April 2006) and "end of use date" (19/20 April 2008) stated in the Certificate of Actual Test Results create an inconsistency under sub-article 13(a) of UCP 500 (discrepancy no. 3).

2. The temperature requirement in the health certificate (which showed as follows: "Requisite storage and transport temperature UNDER -18 C") created an inconsistency with the additional information stated in the bill of lading pursuant to sub-article 13(a) of UCP 500, thus rendering the bill of lading discrepant (discrepancy no. 4). [Note: The Group of Experts is unable to ascertain, from the documents presented for Decision, the precise date the additional discrepancies were raised. It must also be noted that there were three notices of discrepancies given by the Respondent over a period of eight months. There was an underlying agreement between the Initiator and the Respondent on matters relating to the issuance of credits and examination of documents, of which the Group of Experts has no knowledge. The Initiator neither raised the question of multiple advices of discrepancies in its submission for a decision nor sought a decision on this issue. The Group of Experts, therefore, have not considered this issue in their decision.]

Issues

The Initiator has requested a DOCDEX Decision on the following issues and asks:

1. whether the bill of lading is unclean as:

a) it contravenes the requirement of article 32 due to the additional information stated in the bill of lading (i.e., alleged discrepancy #1); or

b) the inconsistency between the additional information stated in the bill of lading and the temperature requirement stated in the health certificate (i.e., alleged discrepancy #4) violates sub-article 13(b) of UCP 500.

2. whether the fact that the Positive Release (microbiological) dated (18 June 2006) prior to the production date stated therein (20/21 June 2006) would render the Positive Release (microbiological) a discrepant document under the credit (i.e., alleged Discrepancy #2)

3. whether the different "production date" and "best before date" stated in the Positive Release (microbiological) and the "production date" and "end of use date" stated in the Certificate of Actual Test Results create an inconsistency under sub-article 13(a) of UCP 500 (i.e., alleged discrepancy #3).

Analysis and conclusion:

Re 1a)

The bill of lading presented showed the following notation: "The cargo was delivered to the carrier at -11.7 degrees celsius with vent opening closed. The cargo is stuffed at shipper's load, stow and count, and the reefer container is loaded aboard vessel with -7 degrees celsius of cargo temperature at the shipper's request and risk, which differed from the shipper's designated temperature. Carrier is not responsible for the consequences of the condition of said cargo on outturn and shall not accept any claim on this account. Operational Temperature: -25 C closed".

The issue is whether the above notation in the bill of lading contravenes the requirement of article 32 of UCP 500.

Sub-article 32(a) defines a clean transport document in this way: "A clean transport document is one which bears no clause or notation which expressly declares a defective condition of the goods and/or the packaging."

The bill of lading merely mentions the temperature of the goods at the time they were received and at the time they were loaded on board. The notation does not "expressly declare a defective condition of the goods and/or the packaging" as per sub-article 32(a) of UCP 500, and consequently the bill of lading is not unclean.

Re 1b)

The health certificate states: "Requisite storage and transport temperature: UNDER -18 degrees C".

There is no requirement in the credit for any statement in this document about the goods' temperature, including the goods' temperature during storage and transport.

A "statement" or "clause" included in a document presented under a letter of credit does not create a requirement under the letter of credit - not unless there is such a "clause"or "requirement" stated in the credit. Therefore, the fact that the health certificate states "Requisite storage and transport temperature: UNDER -18 degrees C" does not in any way create an inconsistency with the notation on the bill of lading that the goods' temperature at the time they were received and the time they were loaded was -7 and -11 degrees respectively.

The different statements regarding temperature as shown in the bill of lading and in the health certificate are not an inconsistency in terms of sub-article 13(a).

Re 2

The Positive Release (microbiological) document is required to include various statements relating to the goods "on all production dates". The document, however, appears to have been issued two days prior to the earlier of two production dates mentioned in the document itself. As it is not possible to make statements about something which has not yet taken place - or, as in this case, has not yet been produced - the document is discrepant. The fact that the Positive Release (microbiological) document is dated 18 June 2006 and covers production dates 20/21 June 2006 is not, in the view of the majority of the Experts for this case, a typing error in terms of paragraph 28 of the International Standard Banking Practice (ISBP), ICC Publication No. 645.

Re 3

In the Positive Release (microbiological), the beneficiary has stated that the production took place on 20/21 June 2006 and that the "best before date" is 19/20 June 2008, thuscontradicting information in the Certificate of Actual Test Results in which the production dates are stated to be 20/21 April 2006 and "end of use date" stated to be 19/20 April 2008.

In its request for this DOCDEX Decision, the Initiator states that in its opinion the dates stated in the Positive Release (microbiological) document are the result of typing errors as described in paragraph 28 of International Standard Banking Practice (ISBP), ICC Publication No. 645 and are acceptable according to that paragraph.

The Experts do not agree that this is a typing error as described in paragraph 28. To write June 2006 when it should be April 2006 (or vice versa) is a definite mistake or error and has nothing to do with typing errors as described in paragraph 28.There is nothing in ISBP or other official ICC publications which would suggest that documents with mistakes such as these are acceptable, and it has not been international standard banking practice to accept documents with such mistakes or errors.

The inconsistent information falls under sub-article 13(a) of UCP 500, which states: "Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the credit."

Therefore, the Positive Release (microbiological) is discrepant.

Conclusion

This DOCDEX Decision is a majority decision.