Parties

Initiator: Company B

Respondent: Bank M

A summary of the representations relevant to the issues to be determined

Respondent issued an irrevocable documentary credit in favour of the Initiator on 12 December 2007 (credit no. ABC765). This credit was made available with Bank Z, Country S by payment and was governed by UCP 600. The credit was made fully operative by an authenticated SWIFT MT799 dated 27 December 2007.

The credit requested presentation of, among others, the following documents which are the subject of this Decision:

• Full set clean on board FIATA multimodal transport B/L marked freight prepaid issued or endorsed to the Respondent's order in 3 originals and 3 non-negotiable copies evidencing shipment effected by Country I truck ...(field 46A, (A))

• Certificate of origin issued by a local chamber of commerce or any official trade organization confirming that goods are new brand and first hand and originated in Country S plus 3 copies (field 46A, (C)).

Documents were presented to Bank Z, Country S and then forwarded to the issuing bank (the Respondent). The Respondent refused the documents by SWIFT MT734 (Advice of Refusal) dated 13 November 2008, stating two discrepancies:

• in certificate of origin the phrase "we herewith confirm that goods are new brand and first hand" not evidencing that certified by local chamber of commerce

• in B/L the phrase "freight payable at" has not been omitted.

There is a dispute between the parties whether the presented documents constitute a complying presentation in the context of UCP 600 (i.e., whether the discrepancies claimed by the Respondent are valid or not).

Documents submitted by the parties

A. Documents submitted by the Initiator

Annex 4: Respondent's SWIFT message dated 13 December 2007;

Annex 5: Respondent's SWIFT message dated 27 December 200;

Annex 6: Respondent's SWIFT message dated 20 February 2008;

Annex 7: Initiator's letter to the nominated bank dated 4 November 2008;

Annex 8: Bill of lading dated 28 October 2008;

Annex 9: Certificate of origin dated 30 October 2008;

Annex 10: SGS inspection certificate dated 30 October 2008;

Annex 11: Commercial invoice dated 27 October 2008;

Annex 12: Freight invoices dated 28 October 2008

Annex 13: Shipping company certificate dated 28 October 2008;

Annex 14: Packing list dated 27 October 2008;

Annex 15: Respondent's SWIFT message dated 13 November 2008; and

Annex 16: Respondent's SWIFT message dated 16 November 2008.

B. Documents submitted by the Respondent

The Respondent has not filed an answer or submitted any documents.

Questions submitted by the Initiator

1) Did the certificate of origin constitute a "complying presentation" in the sense of article 8 of UCP 600?

2) Did the bill of lading constitute a "complying presentation" in the sense of article 8 of UCP 600?

Analysis

Question No. 1: "Did the certificate of origin constitute a "complying presentation" in the sense of article 8 of UCP 600?"

The dispute concerns whether the phrase appearing on the back side of the certificate of origin: "we herewith confirm that goods are new brand and first hand and originated in Country S", which is certified by the beneficiary, must also be certified by the issuer of the certificate of origin, namely the City Z Chamber of Commerce.

The credit required: "Certificate of origin issued by a local chamber of commerce or any official trade organization confirming that goods are new brand and first hand and originated in Country S plus 3 copies".

The certificate of origin appears to have been issued on the standard form used by chambers of commerce in Country S (Country S Confederation). It certified the origin of goods as Country S, was dated, and stamped by the City Z Chamber of Commerce on its front side.

However, there is no mention of "goods are new brand and first hand" on the front side of the certificate of origin. Instead, there is a confirmation signed by the beneficiary (with indication of its name) on its back, stating that: "we herewith confirm that goods are new brand and first hand and originated in Country S".

The confirmation appearing on the back side of the document was apparently made by the beneficiary (Initiator) in order to meet the requirement of the credit. However, this data appears to be an addition to the data inserted on the certificate of origin by the City Z Chamber of Commerce. The data appears on the back side of the certificate of origin (otherwise blank) and was certified only by the beneficiary and not by the City Z Chamber of Commerce, the issuer of the certificate of origin.

The Initiator quotes part of paragraph 27 of ISBP Publication 681 in support of its position: "a signature may appear anywhere on a document unless the credit or the document itself indicates where the signature is to appear."

Paragraph 27 reads: "If a signature or endorsement is required to be on a document consisting of more than one page, the signature is normally placed on the first or last page of the document, but unless the credit or the document itself indicates where a signature or endorsement is to appear, the signature or endorsement may appear anywhere on the document."

Certainly, the above mentioned provision must be interpreted according to individual circumstances. It is one of two paragraphs under the heading: "Multiple pages and attachments or riders". This provision deals with the situation where a document consists of more than one page (in this context the page means "a list", i.e., one piece of paper, not one side of a list of a paper). This provision does not state where the signature is to appear on the document in relation to data that is to be certified by its issuer.

The Initiator also claims that because neither the credit nor the certificate of origin itself prescribes where the signature has to appear on the certificate of origin, the statement: "We herewith confirm that goods are new brand and first hand and originated in Country S" and the signature of the City Z Chamber of Commerce do not necessarily have to be placed on the same side of the certificate of origin. Therefore, the signature of City Z Chamber of Commerce on the front side of the document must clearly be considered to relate also to the phrase on the back side of the document.

This argument, in the context of this particular case, is not supported by the Experts. The credit clearly requested: "Certificate of origin issued by a local chamber of commerce or any official trade organization confirming that goods are new brand and first hand and originated in Country S", which clearly means that the data stating: "goods are new brand and first hand" is to appear to be certified by the issuer of the certificate of origin.

The phrase: "We herewith confirm that goods are new brand and first hand and originated in Country S" was apparently made by the beneficiary who certified it by its own signature. It is not international standard banking practice, in all cases, to consider a signature on one side of the page to relate to the data on the other side of that document unless its relevance is evident from the document itself: for instance, if the document so states or the data on one side (back side) constitutes continuance of the data provided on the other side (front side).

The data requested by the credit was to be confirmed on the certificate of the origin by its issuer, i.e., a local chamber of commerce or any official trade organization. The data requested was apparently made and certified only by the beneficiary and is additional to the data certified by the issuer on the front side of the document.

In the view of the Experts, the provision of the additional data on the back side of the certificate of origin constitutes an alteration of the information (data) in the certificate of origin. In line with paragraph 9 of ISBP Publication 681, the additional data made on the back side of the certificate of origin should have been authenticated by the issuer, i.e., the City Z Chamber of Commerce, or by a party authorized by the issuer to do so as to make the document compliant and acceptable under international standard banking practice. The confirmation made on the back side of the certificate was signed only by the beneficiary without showing in which capacity the authentication has been completed.

It is to be noted that the certificate of origin shows the description of goods as: "New packaging systems ... " (which fully corresponds with the description of the goods stated in the credit) on its front side and certified by the City Z Chamber of Commerce. However, the Experts are of the opinion that this description of the goods, on its own, does not satisfy the requirement for "confirming that goods are new brand and first hand".

As a part of the same presentation, an SGS inspection certificate was also presented. The certificate, among other things, confirms "that goods are brand new and first hand". The certificate is signed by the SGS inspection company, and it also evidences confirmation by the City Z Chamber of Commerce that it has seen it. However, such a confirmation, with the stamp and signature of the City Z Chamber of Commerce, appearing in another document (i.e., a certificate of inspection) which indicates the same (requested) data, does not make the requirement for the certificate of origin to show the same data redundant.

Conclusion: the manner of issuance of the certificate of origin does not provide an indication that the data added to the back side of the document was apparent at the time of certification by the City Z Chamber of Commerce. The lack of certification to the data on the back side of the document constitutes a valid discrepancy, which can be raised by the Respondent in refusing the presented documents.

Question No. 2: "Did the bill of lading constitute a 'complying presentation' in the sense of article 8 of UCP 600?"

The dispute is whether the phrase "Freight payable at" had to be omitted or not.

The credit required the bill of lading to be marked "freight prepaid". The bill of lading presented clearly indicates "freight prepaid" in the field entitled "Freight payable at" and also in the centre of the document.

The discrepancy is not well described; however, it appears that the Respondent claims that the box with pre-printed text "Freight payable at" should have been left blank (or even deleted). The logic behind this claim might have been an argument that the box is to be completed only in case the freight is to be payable at destination. However, there is no indication of such a requirement in the document itself (multimodal bill of lading), UCP 600 or international standard banking practice.

Conclusion: such pre-printed wording does not constitute any conflict with or cause any doubt concerning the statement "freight prepaid". Therefore, in the context of sub-article 14 (d) the existence of "freight prepaid" in the field entitled "freight payable at" is not a valid discrepancy on which the Respondent could rely in refusing the presented documents.

Additional comments

Complying presentation in the sense of article 8

The two questions posed by the Initiator were stated to relate to UCP 600 article 8, i.e., whether the certificate of origin and bill of lading were compliant in the sense of UCP 600 article 8.

UCP 600 article 8 covers the confirming bank's undertaking. As the credit in question was not confirmed, the article is irrelevant to the case. We understand that what is actually requested here is to answer questions about whether the above-mentioned documents were complying with the credit terms and conditions, UCP 600 and international standard banking practice, and whether the issuing bank, according to UCP 600 article 7, must honour the presentation.

Late return of refused documents

The Initiator claims that the presented documents were returned by the Respondent only in August 2009, i.e., more than nine months after their presentation to it. It is evident from the Advice of Refusal, (SWIFT MT734) that the documents were held as per the option given in UCP 600 sub-article 16 (c) (iii) (b): "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". Field 77B of the MT734 gave the following information: Disposal of documents stated: /NOTIFY/.)

From the papers available to the Experts, it is not known whether the Initiator requested the return of the refused documents earlier, or if there had been any other communication regarding the disposal of the refused documents.

If there was no clear instruction regarding the disposal of the refused documents from the presenter after they were refused, the issuing bank could return the documents to the presenter at any time. UCP 600 sub-article 16 (e) states: "A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time."

Decision

1) With respect to the first question, the discrepancy raised by the Respondent is valid.

2) With respect to the second question, the discrepancy raised by the Respondent is invalid.

The Decision of the DOCDEX Panel of Experts is unanimous.