Parties

Initiator: Bank K

Respondent: Bank M

Background and transaction

1. The Respondent issued a letter of credit for USD178,931.70 which was available by negotiation with any bank in Initiator's country.

2. The Initiator negotiated the documents for USD178,931.70 and forwarded them to the Respondent.

3. The Respondent refused the documents in a timely manner stating, in all, six discrepancies.

4. The Initiator disagreed with the discrepancies but sent replacement documents received by it, within the validity and presentation period, to the Respondent.

5. The Respondent refused the documents and returned them to the Initiator.

6. The Initiator returned the documents to the Respondent, disagreeing with the discrepancies raised by the Respondent.

7. The Respondent returned the documents once again.

8. The Initiator, once more, returned the documents to the Respondent with a detailed cover letter explaining why it disagreed.

9. The Respondent returned the documents once again which, upon receipt, were sent back by the Initiator.

10. A number of exchanges of correspondence (including a SWIFT MT799 message dated 7 September 2009 from the Respondent discussed below in more detail) occurred between the Respondent and the Initiator between 24 June 2009 (the date of first rejection) and 16 September 2009, the date of the last communication from the Initiator, which is included in the dossier submitted to DOCDEX for a decision.

11. The result of these exchanges mentioned in 10 above was that six discrepancies had been reduced to one.

12. The outstanding discrepancy was (as described by the Respondent in its first rejection message): "On Board notation in the B/L not authenticated with stamp and signature by the issuer".

13. The Initiator not only disagrees with the outstanding discrepancy, as noted in 12 above, but also claims the refusal notice was not in accordance with UCP 600 requirements and that the Respondent must pay. The Initiator seeks a DOCDEX decision on the issues stated below.

Issues for which the DOCDEX decision is required

1. Whether the on board notation shown on the bill of lading meets the L/C condition: "Shipped on board date and actual date of dispatch bearing the name of vessel and port of shipment must be evidenced by a separate notation on bills of lading and this must be authenticated under stamp and signature of the issuer."

2. Whether the SWIFT MT799 sent by the Respondent on 7 September 2009 is a new discrepancy raised by the Respondent's second (or third) notice, and is therefore in violation of UCP 600 sub-article 16 (c) which allows the issuing bank to give a single notice only.

3. Whether the first refusal notice is valid when the Respondent did not state one of the four options regarding the disposal of documents as required by UCP 600 sub-article 16 (c).

Analysis of issues and decisions

Issue No. 1

Whether the on board notation shown on the bill of lading meets the L/C condition: "Shipped on board date and actual date of dispatch bearing the name of the vessel and port of shipment must be evidenced by a separate notation on bills of lading and this must be authenticated under stamp and signature of the issuer."

As per this condition, the bill of lading should contain:

(a) a separate "on board" notation showing actual date of dispatch and the name of the vessel and the port of shipment,
(b) stamp of the issuer, and
(c) signature of the issuer

The discrepancy raised read: "On board notation in the B/L not authenticated with stamp and signature by the issuer".

A plain reading of the above discrepancy is that the bill of lading contains an on board notation, but it is not authenticated with a stamp of the issuer and not authenticated with a signature of the issuer. In other words, the missing data is:-

1.stamp of issuer
2.signature of issuer

Therefore, in reading the discrepancy noted by the Respondent, the expectation of the Experts is that each of these elements is missing in the bill of lading.

Referring to the copy of the bill of lading, the Experts note that the document consisted of the bill of lading itself and an attachment called "rider". The bill of lading shows:

LADEN ON BOARD
THE VESSEL
DATE 10 JUN2009
BY MR X

The attached rider shows:

SHIPPED ON BOARD DATE: JUN. 10, 2009
ACTUAL DATE OF DISPATCH: JUN. 10, 2009
THE NAME OF THE VESSEL: VESSEL H
PORT OF SHIPMENT: CITY B, COUNTRY K

[Stamp of Issuer]

The condition in the letter of credit explicitly required that a separate on board notation was to appear and that it was to be authenticated by a stamp and a signature of the issuer.

The information given on the first page of the bill of lading, in respect of the on board data, is incomplete and cannot be taken into consideration.

The information given on the rider meets the requirements of the letter of credit in respect of the data that is to be shown. In respect of whether it is signed by the issuer, one has to consider that the notation shows something that is handwritten (a symbol, which maybe a signature). It is only by looking at the first page of the bill of lading that one might determine that the symbol appears to be the signature appearing on the bill of lading. However, the required stamp is clearly missing.

Due to the specific wording of the credit, the Experts conclude that even if one considers the last sentence of paragraph 39 of ISBP, ICC publication 681,"a requirement for a document to be 'signed and stamped', or a similar requirement, is also fulfilled by a signature and the name of the party typed or stamped, or handwritten, etc.", one element is missing, namely the name of the party.

Therefore, the discrepancy is valid.

Issue No. 2

Whether the SWIFT MT799 sent by Respondent on 7 September 2009 creates a new discrepancy raised by the Respondent's second (or third) notice, and therefore is in violation of UCP 600 sub-article 16 (c), which requires the issuing bank to give a single notice.

In the Experts' view, the relevant portion from a lengthy SWIFT MT799 that Respondent sent on 07 September 2009, requiring the Experts' opinion is as quoted below:

"WHEN A DOCUMENT REQUIRED TO BE 'SIGNED AND STAMPED', THEN IT MUST BE FULFILLED TWO FUNCTIONS I.E. ONE IS DULY SIGNED (WHICH CAN BE CONSIDERED TO HAVE DULY BEEN COMPLIED IN THIS CASE) AND ANOTHER ONE STAMP, TYPE OR HANDWRITTEN OF THE ISSUER (WHICH IS NOT APPEARED ALONG WITH SIGNATURE AND SO COULD BE CONSIDERED AS NOT COMPLIED)"

The fact that Respondent had originally refused the documents, correctly by using a SWIFT MT 734 message, and thereafter used an MT 799 in the arguments, does not constitute a second or third refusal notice. Even if the Respondent, in that message, eventually admits that there was a signature, one can argue that it was not clear whose signature it was. The fact remains that the stamp was missing. A discrepancy can be disputed, but it does not invalidate the refusal notice if one aspect of the discrepancy is correctly stated.

Issue No. 3

Whether the first refusal notice is valid when the Respondent does not state one of the four options regarding the disposal of documents as required by UCP 600 sub-article 16 (c).

Respondent had used a SWIFT MT734 message. In Field 77J, a list of discrepancies is given and also a statement reading: "As per article-16 of UCPDC (2007 Rev.) ICC PUB-600 we refuse the documents at this stage." In field 77B: a statement reads: "Meantime, Documents are held with us at your disposal."

The relevant UCP 600 rule against which Issue No. 3 is subject, is sub-article 16 (c) reading: "The notice must (emphasis added) state: i. that the bank is refusing to honour or negotiate; and ii. each discrepancy in respect of which the bank refuses to honour or negotiate; and iii. (a). that the bank is holding the documents pending further instructions from the presenter; or (b). that the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives further instructions from the presenter prior to agreeing to accept a waiver, or (c). that the bank is returning the documents; or (d) that the bank is acting in accordance with instructions previously received from the presenter."

Respondent had used a SWIFT MT734, and hence it is a refusal message and the experts do not consider the addition of the sentence reading "we refuse the documents at this stage" as changing the correctness of the MT734.

With regard to the statement that "Meantime, Documents are held with us at your disposal", it is to be noted that the Respondent declares that it is holding the documents, but qualifies the manner in which it holds them. There is nothing in UCP 600 that prohibits a bank from qualifying the manner in which it holds the documents. The way the Respondent formulated it is not desirable. It will have to obtain the presenter's authorization if the applicant wants to pay and the Respondent is happy to accept such a waiver and deliver the documents to the applicant.

This Experts' view is supported by ICC official Opinion R774 (470/TA.699rev dated 3 December 2009).

Conclusion

The discrepancy raised is valid and the refusal notice has been made in accordance with the requirements of UCP 600 article 16. Respondent acted correctly.

This decision is a unanimous decision by the DOCDEX Panel of Experts.