Hi there
A credit stipulates:
AN EXTRA COPY OF DOCUMENTS IS REQUIRED FOR OUR RECORDS
It is stated in "Additional conditions" (SWIFT field 47a).
Do you consider it a valid discrepancy, if this extra copy for the issuing bank is not presented?
Thanks in advance
Kim
Extra copy of docs for issuing bank
-
KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Extra copy of docs for issuing bank
My personal opinion is that this should not be considered as a discrepancy as the copies are not material to the operation of the credit and are indeed only required for the bank's own records.
(The bank could simply photocopy the docs for their records.)
Although not quite the same issue it may be interesting for you to read DOCDEX Decision 235.
The following is extracted from DOCDEX Decision No. 235:
"Was it justified for the issuing bank to refuse payment when two copies of the certificate of quality, quantity/weight called for in the credit were not presented?"..
"Analysis
The Credit originally called for a certificate of quality,
quantity/weight in 3 copies issued by the Apparel Industry
Association of country K. The Credit was amended to call
for the same certificate to be issued by the manufacturer
without changing the number of copies required for the
certificate.
As per sub-Article 20(c)(ii) of the UCP, credits that require
multiple document(s), such as "duplicate", "two fold", "two copies" and the like, will be satisfied by the presentation of one original and the remaining number in copies except where the document itself indicates otherwise.
Paragraph 33 b) of the ISBP states "Invoice in 4 copies" will be satisfied by the presentation of at least one original and the remaining number as copies of an invoice. This interpretation should
be applied to documents other than invoices.
Based on the exchange of communication between Bank I and Bank R, Bank R did not dispute the requirement for the presentation of the 2
copies of the certificate of quality, quantity/weight. Rather, it claimed initially the copies were sent, and later said even if the copies were not sent they were not material for payment by Bank I.
In reaching their conclusion, the Panel of Experts took the following into consideration:
- It is not the experts' role to speculate whether Bank I had,
in fact, received the 2 copies of the certificate of quality,
quantity/weight in addition to the original.
- Based on the DOCDEX procedures, the experts are required to render their decision impartially and exclusively on the basis of the Request from Bank I, the Answer from Bank R if provided, and supplementary information if requested by the Centre, the Credit and the UCP.
- Bank R had changed its argument from its initial claim that it had sent one original and two copies of the Certificate of quality,
quantity/weight to Bank I to claim that copies are not important
documents.
- The document remittance letter of Bank R listed the exact number of copies of each document presented under the Credit. Under the column
CERT, Bank R indicated that 3 certificates were enclosed with the document remittance letter, which supported Bank I's claim that it received 3 certificates, one original certificate of quality, quantity/weight, one beneficiary's certificate of shipment advice and one beneficiary's certificate confirming acceptance of the
amendment.
- As per Article 2 of the UCP, Bank I, as issuing bank, is to make payment against stipulated document(s).
- As per Article 9, the liability of an issuing bank arises when stipulated documents are presented to the nominated bank or to the issuing bank.
- It is not a bank's role to determine whether copies of documents are material for the presentation if they are not presented. Bank R's argument would mean that it is not necessary to present copies
of any documents when multiple documents are called for in a letter of credit. However, in this particular situation, an issuing bank could decide to use its discretion to make two photocopies of the original certificate of quality, quantity/weight although it has no obligation to do so.
Decision
The discrepancy raised by Bank I is valid within the framework of UCP, and the refusal is justified.
This decision is a unanimous decision by the Panel of Experts."
(The bank could simply photocopy the docs for their records.)
Although not quite the same issue it may be interesting for you to read DOCDEX Decision 235.
The following is extracted from DOCDEX Decision No. 235:
"Was it justified for the issuing bank to refuse payment when two copies of the certificate of quality, quantity/weight called for in the credit were not presented?"..
"Analysis
The Credit originally called for a certificate of quality,
quantity/weight in 3 copies issued by the Apparel Industry
Association of country K. The Credit was amended to call
for the same certificate to be issued by the manufacturer
without changing the number of copies required for the
certificate.
As per sub-Article 20(c)(ii) of the UCP, credits that require
multiple document(s), such as "duplicate", "two fold", "two copies" and the like, will be satisfied by the presentation of one original and the remaining number in copies except where the document itself indicates otherwise.
Paragraph 33 b) of the ISBP states "Invoice in 4 copies" will be satisfied by the presentation of at least one original and the remaining number as copies of an invoice. This interpretation should
be applied to documents other than invoices.
Based on the exchange of communication between Bank I and Bank R, Bank R did not dispute the requirement for the presentation of the 2
copies of the certificate of quality, quantity/weight. Rather, it claimed initially the copies were sent, and later said even if the copies were not sent they were not material for payment by Bank I.
In reaching their conclusion, the Panel of Experts took the following into consideration:
- It is not the experts' role to speculate whether Bank I had,
in fact, received the 2 copies of the certificate of quality,
quantity/weight in addition to the original.
- Based on the DOCDEX procedures, the experts are required to render their decision impartially and exclusively on the basis of the Request from Bank I, the Answer from Bank R if provided, and supplementary information if requested by the Centre, the Credit and the UCP.
- Bank R had changed its argument from its initial claim that it had sent one original and two copies of the Certificate of quality,
quantity/weight to Bank I to claim that copies are not important
documents.
- The document remittance letter of Bank R listed the exact number of copies of each document presented under the Credit. Under the column
CERT, Bank R indicated that 3 certificates were enclosed with the document remittance letter, which supported Bank I's claim that it received 3 certificates, one original certificate of quality, quantity/weight, one beneficiary's certificate of shipment advice and one beneficiary's certificate confirming acceptance of the
amendment.
- As per Article 2 of the UCP, Bank I, as issuing bank, is to make payment against stipulated document(s).
- As per Article 9, the liability of an issuing bank arises when stipulated documents are presented to the nominated bank or to the issuing bank.
- It is not a bank's role to determine whether copies of documents are material for the presentation if they are not presented. Bank R's argument would mean that it is not necessary to present copies
of any documents when multiple documents are called for in a letter of credit. However, in this particular situation, an issuing bank could decide to use its discretion to make two photocopies of the original certificate of quality, quantity/weight although it has no obligation to do so.
Decision
The discrepancy raised by Bank I is valid within the framework of UCP, and the refusal is justified.
This decision is a unanimous decision by the Panel of Experts."
Extra copy of docs for issuing bank
I have seen these type of stipulations in exports credits, in addition to this wording, it says that otherweise we shall deduct usd,eur.... from the proceeds as the cost of extra copies.
I agree with Leo ,the ground of refusal cannot be justified under UCP or the conditions of the credit.
The issuing bank may solve the problem deducting the cost of extra copies from the proceeds.
Yahya,
I agree with Leo ,the ground of refusal cannot be justified under UCP or the conditions of the credit.
The issuing bank may solve the problem deducting the cost of extra copies from the proceeds.
Yahya,
Extra copy of docs for issuing bank
Kim,
While, in law, there must be a simple ‘yes/no’ answer to your question I would not like to say what it is, particularly as it could vary from jurisdiction to jurisdiction.
I can see two arguments:
1. Field 47A is ‘further conditions of the documentary credit’. This being so failure by the beneficiary to provide extra copies is therefore automatically a breach of a condition of the credit and thus the documents are non-compliant in line with sub-Art 13a.
2. The requirement for extra copies is clearly not a stipulation of the applicant and it is obvious the extra copies will not be passed to the applicant. It is also a simple matter for the issuing bank to photocopy the documents. Therefore, non-adherence to this ‘condition’ cannot be considered non-compliance with the credit terms and conditions.
While I strongly deprecate the practice you describe (yet another example of issuing banks trying to get other parties to do their work for them) I -as a nominated bank- would operate on the basis 1. above was the position.
Regards, Jeremy
While, in law, there must be a simple ‘yes/no’ answer to your question I would not like to say what it is, particularly as it could vary from jurisdiction to jurisdiction.
I can see two arguments:
1. Field 47A is ‘further conditions of the documentary credit’. This being so failure by the beneficiary to provide extra copies is therefore automatically a breach of a condition of the credit and thus the documents are non-compliant in line with sub-Art 13a.
2. The requirement for extra copies is clearly not a stipulation of the applicant and it is obvious the extra copies will not be passed to the applicant. It is also a simple matter for the issuing bank to photocopy the documents. Therefore, non-adherence to this ‘condition’ cannot be considered non-compliance with the credit terms and conditions.
While I strongly deprecate the practice you describe (yet another example of issuing banks trying to get other parties to do their work for them) I -as a nominated bank- would operate on the basis 1. above was the position.
Regards, Jeremy
-
KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Extra copy of docs for issuing bank
Dear Leo, Yehya and Jeremy,
I thank you for your views on this issue. They are highly appreciated!
Best regards
Kim
I thank you for your views on this issue. They are highly appreciated!
Best regards
Kim
Extra copy of docs for issuing bank
This post reminded me "the famous discrepancy" - L/C ref. is missing on docs "
The ICC has always said this would not constitute a discrepancy.
I would be really interested to have your opinion of this.
Yahya
The ICC has always said this would not constitute a discrepancy.
I would be really interested to have your opinion of this.
Yahya
-
KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Extra copy of docs for issuing bank
Dear Yahya,
I have actually been thinking about this one as well.
1) On one hand I think it is an odd and dangerous way to go: If such requirement is in the credit, it is most likely there for a reason – and the issuing bank will expect it to be reflected in the documents!
2) On the other, I do think that the basic argument behind this is ok: That this is a requirement inserted by the bank for the bank – not related to the agreement between the buyer and seller.
As you may have guessed this posting arises from an actual case, and I used argument 2 here
At first I was really against “the famous discrepancy” (as you so eloquently call it) – but I am not that sure any more: I accept the reasoning behind it.
Best regards
Kim
I have actually been thinking about this one as well.
1) On one hand I think it is an odd and dangerous way to go: If such requirement is in the credit, it is most likely there for a reason – and the issuing bank will expect it to be reflected in the documents!
2) On the other, I do think that the basic argument behind this is ok: That this is a requirement inserted by the bank for the bank – not related to the agreement between the buyer and seller.
As you may have guessed this posting arises from an actual case, and I used argument 2 here
At first I was really against “the famous discrepancy” (as you so eloquently call it) – but I am not that sure any more: I accept the reasoning behind it.
Best regards
Kim