Forgot your password?
Please enter your email & we will send your password to you:
My Account:
Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
2016 LC CASE SUMMARIES
Civil Judgment (2005) Wei Min Er Chu Zi No.16 Weihai Intermediate People’s Court, Shandong Province [China]
Abstracted by BAI Shuhai
Topics:
Negotiation of LC；Dishonor；Discrepancy; UCP500.
Type of Lawsuit:
Beneficiary sued issuing bank for wrongful dishonor.
Parties: Defendant/Issuing Bank-- Shinhan Bank, Seoul Korea (“Shinhan Bank”)
Plaintiff/Beneficiary -- Shandong Huiquan Industry Co., Ltd (“Huiquan”)
Underlying Transaction: Purchase of clothing.
LC: LC for USD 82,332, subject to UCP500.
Decision:
Weihai Intermediate People’s Court ruled that the two discrepancies raised by defendant are invalid and defendant should pay the amount under Letter of Credit.
Rationale: One issue of this case is whether the rejection notice sent by the defendant exceeds reasonable time to examine documents. The “reasonable time” to examine documents is stipulated in Article 13(b) of UCP500: “The issuing bank, the confirming bank, if any, or a nominated bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt to 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.” The plaintiff’s argument is that the defendant’s rejection notice was invalid because it was sent out after the period of 7 banking days for document examination provided in Article 13 of UCP500. Shinhan Bank objected the claim and argued that it spent 7 days on examining the documents and three legal holidays shouldn’t be calculated. Shinhan Bank received the documents on 4 December 2003, and the rejection notice was sent on 14 December 2003, which was the seventh banking day following the day of receipt of the documents. The trial Court supported the defendant’s argument and cited Article 45 of UCP500: “ Banks are under no obligation to accept presentation of documents outside their banking hours.”
The Trial Court held that the two discrepancies raised by Shinhan Bank are invalid and Huiquan should be paid under the LC. As to the first discrepancy, Shinhan Bank regarded 1200K as 1,200,000, which is not an idiomatic English expression. Shinhan Bank was fully aware of the number of men’s wearing in that the total amount of the LC issued by Shinhan Bank is USD 82,332. The letter “K” in “1200K” can hardly lead misunderstanding, therefore there is no valid discrepancy. Another discrepancy raised by the defendant is that there is no authorized signature besides the proofread seal. The court cited Article 20 (d) of UCP500: “ Unless otherwise stipulated in the Credit, a condition under a Credit calling for a document to be authenticated, validated, legalized, visaed, certified or indication a similar requirement, will be satisfied by any signature, mark, seal or label on such document that on its face appears to satisfy the above condition.” The court held that proofread seal on B/L could show the seal belongs to TONGDAINT’ LFORWARDING CO.LTD and it was TONGDAINT’ LFORWARDING CO.LTD who made the correction. The discrepancy is invalid because the proofread seal met the requirement of Article 20(d) of UCP500. The defendant should pay the amount under Letter of Credit.
Article
Factual Summary: On 20 July 2003, Shinhan Bank issued an irrevocable LC in favor of Huiquan. The LC provided that it expired on 30 November 2003, was available by negotiation with any bank and required presentation of: Signed Commercial Invoice, Picking list, Full set of Clean On Board B/L, The Original Inspection Certification signed by JDAHN from applicant—IVY Trading Co., Ltd. Both parties to this LC have expressly adopted UCP500.
On 1 December 2003, the plaintiff shipped the goods to the purchaser and presented all the documents required by the LC to the defendant by DHL Courier through Agricultural Bank of China, Weihai Branch (Weihai Bank). The goods are 800 pieces of men’s clothing (NFD-JP2065) and 1200 pieces of men’s clothing (NFD-JP2062). The carrier (TONGDAINT’ LFORWARDING CO.LTD) corrected the carrier column on B/L with a proofread seal on it. Shinhan Bank received the documents on December 4th 2003.
On 14 December 2003, the defendant gave the plaintiff advice of refusal through Weihai Bank. Reasons are as follows: 1. No authorized signature besides the proofread seal. 2. The number of men’s clothing (NFD-JP2062) shown on the commercial invoice is 1200K, which equals to 1200000. So the price of 1200000 pieces of men’s clothing should be USD 30,204,000 rather than USD 30,204. It is therefore clear that there is a conflict between the number in the commercial invoice and LC amount, such that there is a discrepancy.
The plaintiff requests the defendant to pay all the amounts under Letter of Credit and argued that the defendant failed to give the plaintiff advice of refusal within reasonable examination period.
COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.