Article

Factual Summary: Bank issued three LCs in favor of Beneficiary. Following presentation, Issuer refused documents under all three LCs, claiming that one LC required a transport document that had not been presented. Under the other two LCs, Issuer cited discrepancies in the quality certificate and packing list. Claiming wrongful dishonor, Beneficiary sued Issuer. Finding that Beneficiary failed to produce enough evidence to support its claim, the trial court entered judgment in favor of Issuer. On appeal, affirmed.

Legal Analysis:

1. Documents of Notarization; Genuine Evidence; Effective Evidence; Relative Evidence; Regulations on Evidence in Civil Judgment: Seeking to prove that documents presented to Issuer were in compliance with the terms and conditions of the LCs, Beneficiary supplied evidence accompanied by two documents of notarization. However, the documents of notarization merely confirmed the genuineness of the stamp on the evidence. Neither notarization document addressed the authenticity or genuineness of the actual evidence. According to PRC Supreme People's Court regulations on evidence in civil judgment, the genuineness of the evidence produced by Beneficiary was not confirmed. Furthermore, Beneficiary provided additional documents to support its claim for loss. After questioning during litigation however, the documents were deemed neither genuine nor relevant and were legally ineffective.

2. Cause of Action; Causal Link: When Issuer cited discrepancies and refused the documents presented by Beneficiary, Beneficiary was convinced that it had suffered loss. Pursuant to the law of China and international practice, Beneficiary had cause of action and was entitled to sue. Issuer argued cause of action was unreasonable and unacceptable.

3. UCP500 Article 13, Seven Banking Days: Beneficiary contended that Issuer failed to state the discrepancies on which the referral was based within seven banking days, and accordingly, was precluded from claiming that the documents were discrepant. According to UCP500 Article 13(b), the Issuing Bank shall have "a reasonable time, not to exceed seven banking days from the day of presentation following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly." On the basis of evidence as stated in the appellate court opinion, Issuer received documents on 10 June 1998 and gave notice of referral on 19 June 1998. Two days during that time span were non-banking days, so Issuer had examined the documents within a seven-banking day period and the appellate court rejected Beneficiary's claim.

4. UCP500 Article13(a); UCP500 Article 15; UCP500 Article 21: According to UCP500 Article13(a), "Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit." An issuer is under no obligation to examine documents beyond the terms and conditions of a credit. In this case, the latter two LCs did not state that the packing list must indicate the date of issuance and therefore the packing list which bore no indication of an issuance date did not constitute a discrepancy.

UCP500 Article 21 provides: "When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate ... their wording or data content. If the Credit does not so stipulate, banks will accept such documents as presented, provided that their data content is not inconsistent with any other stipulated document presented." In addition, according to UCP500 Article 15, an issuer assumes no liability or responsibility for the quality of the goods represented by any documents. In this case, the quality certificate was a required document but the latter two LCs failed to stipulate any wording or data content for it. Since the "substandard" indication on the quality certificate did not contradict with the LCs, there was no discrepancy in the quality certificate.

[JS/ec]

* JIN Saibo is a partner of Tongshang Law Firm, assisted by FAN Conghui of Zhonglun Law Firm.

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