Parties

Initiator: Bank W

Respondent: Bank C

Background and transaction

The Respondent issued an irrevocable letter of credit ("L/C") on 13 October 2008 for an amount of USD2,332,500.00 with an acceptable tolerance of 10% more or less. The L/C was subject to UCP 600 and available with any bank by negotiation against drafts drawn at 90 days after sight for 100% invoice value. Partial shipment and transhipment were allowed. In field 44A, the place of taking in charge is shown as "BUSAN, KOREA" and in field 44B, the place of final destination is shown as "QINGDAO, CHINA". The following documents were required by the L/C:

1. signed commercial invoice in three originals and three copies indicating the L/C no. and contract no. ABC123;

2. full set 3/3 (including three originals and two non-negotiable copies) of clean on board ocean bills of lading marked "freight prepaid" made out to order and blank endorsed notifying applicant with its full name and address.

3. packing list/weight memo in three originals and three copies issued by beneficiary indicating quantity/gross and net weights.

4. certificate of quality in one original and one copy issued by Mr X with the copy of his passport;

5. certificate of origin in one original and one copy issued by Country R or Country K;

6. health certificate issued by Country R or Country K authority.

Documents for USD831,952.99 were presented by the Initiator to the Respondent. These documents were refused by the Respondent. In its notice of refusal dated 11 November 2008, the Respondent stated the following: "PORT OF LOADING AND FINAL DESTINATION OF INVOICE/PACKING LIST/CERTIFICATE OF QUALITY DIFFER FROM LETTER OF CREDIT"

"HOLDING DOCUMENTS AT YOUR DISPOSAL PENDING INSTRUCTIONS"

The commercial invoice and packing list both show the port of loading as "Qingdao, China" and the final destination as "Busan, Korea". The certificate of quality shows the loading port as "Qingdao, China". These statements are evidently in conflict with the L/C terms

The Initiator rebutted by sending a SWIFT message on 13 November 2008 on the grounds that the error in the commercial invoice, packing list and certificate of quality could only be described as a typographical error. It could not be regarded as a discrepancy. Its argument was based on the data in the commercial invoice that the price term quoted was "CNF QINGDAO, CHINA" and the bill of lading. It also quoted ISBP (ICC Publication No. 645 [sic]) paragraph 25 stating that "a misspelling or typing error that does not affect the meaning of a word or the sentence in which it occurs, does not make a document discrepant."

The Respondent replied by SWIFT on 14 November 2008 to reiterate its position that the documents were discrepant.

Issues

The Initiator submitted that the documents were not discrepant. It claimed that the conflicting data in the commercial invoice, packing list and certificate of quality were merely typographical errors and had no bearing on the overall content of the documents.

The Respondent rejected the documents, as it claimed that the port of loading and the port of destination appearing on the commercial invoice, packing list and certificate of quality were not in compliance with the L/C terms. It was a material discrepancy instead of a misspelling or typing error.

Is the error in the commercial invoice, packing list and certificate of quality a typing error and do the documents comply with the applicable provisions of sub-article 14 (d) of UCP 600 and paragraph 25 of ISBP (2007 Revision)?

Documents submitted by the parties

Documents submitted by the Initiator

(i) SWIFT MT700 from the Respondent dated 13 October 2008;
(ii) photocopy of the commercial invoice;
(iii) photocopy of the non-negotiable bill of lading;
(iv) photocopy of the packing list/weight memo;
(v) photocopy of the certificate of quality;
(vi) photocopy of Mr X's passport issued by Country K;
(vii) photocopy of the certificate of origin;
(viii) photocopy of the health certificate.

Documents submitted by the Respondent

(i) SWIFT MT700 from the Respondent dated 13 October 2008;
(ii) photocopy of the covering schedule from the Initiator dated 31 October 2008;
(iii) photocopy of the bill of exchange for USD831,952.99;
(ix) photocopy of the commercial invoice;
(x) photocopy of the original bill of lading;
(xi) photocopy of the packing list/weight memo;
(xii) Photocopy of the certificate of quality;
(xiii) photocopy of Mr X's passport issued by Country K;
(xiv) photocopy of the certificate of origin;
(iv) photocopy of the health certificate;
(v) a SWIFT MT734 message (Advice of Refusal) from the Respondent to the Initiator dated 11 November, 2008 rejecting the presentation made by the Initiator due to the alleged discrepancy;
(vi) a SWIFT MT799 message from the Initiator to the Respondent dated 13 October 2008 claiming that the alleged discrepancy was merely a typing error and requesting the Respondent to withdraw the discrepancy;
(vii) a SWIFT MT799 message from the Respondent to the Initiator dated 14 November 2008 reiterating that the documents were discrepant;
(viii) a SWIFT MT799 message from the Initiator to the Respondent dated 17 November 2008 claiming that a positive answer regarding this matter had been given by the ICC Banking Commission's Technical Adviser;
(ix) a SWIFT MT799 message from the Initiator to the Respondent dated 20 November 2008 checking the status as to whether the documents had been accepted;
(x) a SWIFT MT799 message from the Respondent to the Initiator dated 20 November 2008 reiterating that the documents were discrepant and claiming that the bill of lading was false in accordance with the shipping company. It further indicated that the documents were to be returned if the instructions were not received within three calendar days;
(xi) a SWIFT MT799 message from the Initiator to the Respondent dated 21 November 2008 claiming that the documents were not discrepant and asking for immediate payment;
(xii) a SWIFT MT799 message from the Respondent to the Initiator dated 27 November 2008 indicating that a stop payment order had been granted by Qingdao Maritime Court;
(xiii) five other SWIFT MT799 correspondences between the two parties dated 1 December 2008, 5 December 2008, 10 December 2008, 11 December 2008 and 19 December 2008 respectively;
(xiv) photocopy of the Court Order issued by the Qingdao maritime Court dated 26 November 2008 (in Chinese);
(xv) photocopy of a statement from the shipping company dated 7 November 2008 stating that the bill of lading was not false.

Analysis

The questions were whether the error in the commercial invoice, packing list and certificate of quality could be accepted as a typing error and whether these documents complied with the applicable provisions of sub-article 14 (d) of UCP 600 and paragraph 25 of ISBP (2007 Revision)?

The L/C called for the goods to be dispatched from Busan, Korea for transportation to Qingdao, China. However, on the face of the documents, the commercial invoice and packing list both show the port of loading (pre-printed field) as "Qingdao, China" and the final destination (pre-printed field) as "Busan, Korea". The certificate of quality shows the loading port as "Qingdao, China". These are evidently conflicting with the L/C. The error constitutes a reversal of the order of the route of shipment covered by the L/C.

Sub-article 14 (d) of UCP 600 states: "Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit."

It could be argued that the transport document, bill of lading, has correctly shown the route of the shipment as required in the L/C and that, accordingly, this blatant error should be disregarded. Moreover, it is not a requirement for the commercial invoice and packing list to show the route of the shipment. As claimed by the Initiator, the commercial invoice has also correctly shown the price term as CNF[CFR] Qingdao, China, and the error has no bearing on the overall content of the documents. The Initiator further claimed that the error is merely a typing error as it does not affect the meaning of a word or sentence.

Is the error in the commercial invoice conflicting with the terms and conditions of the L/C? The Initiator argued that though the port of loading was shown as Qingdao, China and the final destination as Busan, Korea, the price term was correctly quoted in the commercial invoice as "CNF[CFR] QINGDAO, CHINA". As stated in sub-article 14 (d) of UCP 600, data in a document need not be identical to but must not conflict with data in that document and the L/C. The commercial invoice shows the port of loading (pre-printed field) as Qingdao and final destination (pre-printed field) as Busan.

The route of shipment need not be shown in the commercial invoice, but if it is shown, it should not be conflicting with data in the L/C. Obviously, the route of shipment shown in the commercial invoice is conflicting with the trade term, CNF[CFR] Qingdao. But in addition to the commercial invoice, the packing list and the certificate of quality also evidence the route of shipment, which conflicts with that in the L/C. The certificate of quality shows the loading port as Qingdao China instead of Busan Korea.

Is the error of a "typographical" nature? Paragraph 25 of ISBP (2007 Revision) states: "A misspelling or typing error that does not affect the meaning of a word or the sentence in which it occurs does not make a document discrepant. For example, a description of the merchandise as 'mashine' instead of 'machine', 'fountan pen' instead of 'fountain pen' or 'modle' instead of 'model' would not make the document discrepant. However, a description as 'model 123' instead of 'model 321' would not be regarded as a typing error and would constitute a discrepancy."

A dictionary description of "typography" is "printing as an art" or "the style and appearance of printed matter". It therefore seems that it does not cover the "substance" or "meaning" of words. ISBP (2007 Revision) has addressed the issue. It stresses that the meaning of the word in question must be clear and could not be understood to mean something else. For example, one could not accept "Lisbon" for "London" but possibly "Londn" for "London".

It might be argued that the makers of the documents typed the ports/places in the wrong place as a result of lack of concentration, negligence or poor professionalism. But the question we need to address is whether document examiners should be expected or even required to ask themselves whether this was indeed the case and whether the makers of the documents really intended to quote the correct places. This would require them to guess or speculate about the maker's intention. It seems that this approach could open a can of worms beyond what we might be prepared to concede in this caseand beyond the spirit and letter of Paragraph 25 of ISBP (2007 Revision).

There is no doubt in this case that the port of loading and final destination in question are totally different ports and are places which do exist, and it could not be argued that the difference in the words was caused by a misspelling or typing error. As far as the reference to "typing" error being involved, it could only be argued that the typing error consisted of typing the correct word in the wrong place. This would seem to stretch the scope of Paragraph 25 to cover a situation which may not have been intended. If the point were conceded, it could create a precedent, which may prove to have far-reaching and, possibly, undesirable consequences and ramifications. Furthermore, the error here does change the meaning of the sentence. Accordingly, it is difficult to rely on Paragraph 25 of ISBP (2007 Revision) in support or justification of the acceptance of the documents in question.

Conclusion

The Initiator claimed that the error was a typing error and it did not make the documents discrepant. We disagree.

As analyzed above, it is clear that the error in the commercial invoice, packing list and the certificate ofqualityconstitutes an inconsistency with the terms and conditions of theL/C. It is of course recognized that the Respondent's notice of refusal refers to the relevant documents differing from the letter of credit only, but it is evident that such a material and clear inconsistency constitutes a discrepancy which entitled the Respondent to refuse the documents in accordance with the above-mentioned sub-article 14 (d) of UCP 600.

It is generally acknowledged banking practice for document examiners to be responsible only for examining documents to determine whether they are in conformity with the terms and conditions of the relevant L/C. As stated in UCP 600 sub-article 14 (a):

"A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation."

The document examiners are not expected to investigate a problem beyond the evidence available to them in the form of the documents presented to them. Any information in respect of the shipment of the goods from the exporting country to the importing country is naturally important, and the identity of the ports in question is therefore crucial.

In conclusion, the documents are not in compliance with the terms of the L/C as provided by the provisions of sub-article 14(d) of UCP 600 and ISBP (2007) Revision.

The discrepancy cited by the Respondent is valid.

The Decision is unanimous.