Referring to sub-article 34-f-ii.
L/c terms: Full set of insurance policy
issued in duplicate for 110
percent of CIF-value
Documents amount: JPY10,818,000.-
Amount insured : JPY11,900,000.-
A.m. documents presented to us and we sent them to issuing bank.
They informed us that insured amount was discrepant due to I/P shows an amount more than 110 percent of CIF invoice value.
Then we had objected that covering insurance more than 110 percent of CIF amount is not prohibilted by article 34-f-ii.
However they pointed out again its discrepancy. They said an insurance covering more than 110 percent is acceptable unless otherwise stipulated in the credit and in this case L/c stated insurance to be issued for 110 percent, i.e., JPY11,899,800.-
Please let us have your opinion.
Sub-article 34-f-ii
-
IgarashiYoshie
- Posts: 2
- Joined: Fri Apr 05, 2019 5:30 pm
Sub-article 34-f-ii
This sub Article only requires a minimum amount for CIF plus 10%. It does not prohibit a JPY 200 (the price of a can of Coca Cola from a coin operated vendor machine when I visited Tokyo in the nineties) more to round up the CIF plus 10% amount.
Bernard Wheble, the late father of letter of credit, once said that document checkers should check documents with simple common sense. Over insurance for a negligible amount has no material impact on the underlying transaction and it does not affect claims where the claim will be paid based on the value of the goods at the time of distress rather than the sum insured. The seller would pay "more" (theorectically for such a small amount) premium without charging more to the buyer. We are glad to help you.
We are from experts@tolee.com.
[edited 2/2/02 7:44:45 PM]
Bernard Wheble, the late father of letter of credit, once said that document checkers should check documents with simple common sense. Over insurance for a negligible amount has no material impact on the underlying transaction and it does not affect claims where the claim will be paid based on the value of the goods at the time of distress rather than the sum insured. The seller would pay "more" (theorectically for such a small amount) premium without charging more to the buyer. We are glad to help you.
We are from experts@tolee.com.
[edited 2/2/02 7:44:45 PM]
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Sub-article 34-f-ii
This general issue was discussed at the recent Banking Commission conference in Paris. There was much debate about it with some learned practitioners such T. O. Lee favouring acceptance of a minimum 110% in such cases. Although there is much practical sense in adopting this for minor differences, I opposed this view because it allows an unlimited insurance value to be placed on the goods which could lead to insurance fraud.
I also opposed it on the grounds that if we permit a specific instruction (in this case insurance value to be 110% of invoice value) to be ignored for insurance, what is to prevent an argument for variability on other issues such as payment dates due ?
However the opinion was carried which permits an instruction of 110% to mean a minimum of 110%. Time (or the courts)will tell if it was a sound opinion, but other ICC opinions which I opposed have been reversed, so I content myself with waiting for that .
Laurence A. J. Bacon
I also opposed it on the grounds that if we permit a specific instruction (in this case insurance value to be 110% of invoice value) to be ignored for insurance, what is to prevent an argument for variability on other issues such as payment dates due ?
However the opinion was carried which permits an instruction of 110% to mean a minimum of 110%. Time (or the courts)will tell if it was a sound opinion, but other ICC opinions which I opposed have been reversed, so I content myself with waiting for that .
Laurence A. J. Bacon
Sub-article 34-f-ii
I am glad to have met Mr. Bacon in the Paris ICC Banking Commission meetings in May 2001.
How about making a new rule in the "UCP 600" that there is a 5% tolerance for sum insured? That would ease the worries of my friend Mr. Bacon on "to what extent we are going to allow this sum insured to float?"
In practice, as I have already explained in my previous comments appearing above, a 5% variance has no material impact on the underlying transaction. If the parties try to cheat, they would not cheat for such a small sum. For commodities, the market price fluctuations may be much more than 5%, like the NASDAQ nowadays, which really worries me!
I am leaving for Hong Kong on the 1st June to present workshops with Hong Kong Institute of Bankers and Hong Kong General Chamber of Commerce and will come back to my office in Toronto "within reasonable time but no later than the 10th June". Until then bye bye everyone here!
We are from www.tolee.com
[edited 2/2/02 7:41:54 PM]
How about making a new rule in the "UCP 600" that there is a 5% tolerance for sum insured? That would ease the worries of my friend Mr. Bacon on "to what extent we are going to allow this sum insured to float?"
In practice, as I have already explained in my previous comments appearing above, a 5% variance has no material impact on the underlying transaction. If the parties try to cheat, they would not cheat for such a small sum. For commodities, the market price fluctuations may be much more than 5%, like the NASDAQ nowadays, which really worries me!
I am leaving for Hong Kong on the 1st June to present workshops with Hong Kong Institute of Bankers and Hong Kong General Chamber of Commerce and will come back to my office in Toronto "within reasonable time but no later than the 10th June". Until then bye bye everyone here!
We are from www.tolee.com
[edited 2/2/02 7:41:54 PM]
-
IgarashiYoshie
- Posts: 2
- Joined: Fri Apr 05, 2019 5:30 pm
Sub-article 34-f-ii
I appreciated your advice of both.
I think it is more necessary to
regulate the insurred amount as
Mr T.O.Lee said on 31Ma01, even though simple common sense we have.
I think it is more necessary to
regulate the insurred amount as
Mr T.O.Lee said on 31Ma01, even though simple common sense we have.
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Sub-article 34-f-ii
I think that Mr. T. O. Lee's suggestion of a 5% tolerance for a future UCP is excellent, assuming that this is plus 5% only and applies regardless of percentage requested in the credit.
Laurence A. J. Bacon
Laurence A. J. Bacon
Sub-article 34-f-ii
As Bernard Wheble, the late father of letter of credit, once said that document checkers should check documents with simple common sense. Problem is that our common sense probably tents to differ. My common sense suggests that if the insurance sum is obviously rounded up, it is acceptable. This is also not only my common sense but also international banking practice. On the other hand I think that Mr. T. O. Lee's suggestion of a plus 5% tolerance for a future UCP would just add to the confusion. It is better to understand the practical application of rules rather than suggest unnecessary changes.
Pavel Andrle
Pavel Andrle
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Sub-article 34-f-ii
Mr Andrle's comment suggesting that rounding up is standard international banking practice does not agree with my experience. Many banks continue to apply the "strict compliance" rule to the percentage allowed.
If one simply "rounds up" to the currency unit used in the L/C, this will be inconsistent in value terms when compared with another L/C of identical total value, but opened in a different currency.
However this topic is now somewhat academic as the May Banking Commission meeting in Paris took the view that a minimum 110% would be acceptable in place of the 110% stated in the L/C.
[edited 8/17/01 9:53:51 AM]
If one simply "rounds up" to the currency unit used in the L/C, this will be inconsistent in value terms when compared with another L/C of identical total value, but opened in a different currency.
However this topic is now somewhat academic as the May Banking Commission meeting in Paris took the view that a minimum 110% would be acceptable in place of the 110% stated in the L/C.
[edited 8/17/01 9:53:51 AM]
Sub-article 34-f-ii
IDEALISM WOULD NOT CURE
While we agree with Mr. Pavel Andrle that more education efforts to enable users of letters of credit to understand the UCP 500 Article is the most ideal approach, but as a provider of DC training, we understand that we can never change this world. No matter what we do, somebody are going to misinterpret the UCP 500 anyway.
MOST BANKS SPEND NOT ENOUGH ON TRAINING
Take the banks as an example, they are glad to spend on advertisements in the media, personal banking and other marketing activities, but do not wish to spend enough on DC training.
Even a senior manager from one of the biggest banks, active in ICC & IFSA activities, would ask for a free workshop on maritime transport documents quietly in a coffee break, although he knows very well that it is good for his bank and our fees are also reasonable. Take Hong Kong as an example, our workhsop fees are now 50% of that 5 years ago, before the recession.
For a two-day workshop, it is a practice for some banks to send different staff members each day to save the budget. Then they exchange notes and learn from each other afterwards.
What more can we do to save the world? My wife always complains that I have entered a wrong profession. It is only my interest in DC that keeps me in this profession. For those who know me, my lifestyle is supported by other investments but unfortunately not from DC services.
A COMMON SENSE AND PRAGMATIC APPROACH FOR RESULTS
That is the background based on which we suggest to change the insurance articles to allow a headroom of 5%. This is a common sense approach, instead of talking loftly for a task we can never achieve. Why not we take a more practical and achievable approach?
We are from http://www.tolee.com
[edited 2/2/02 7:39:40 PM]
While we agree with Mr. Pavel Andrle that more education efforts to enable users of letters of credit to understand the UCP 500 Article is the most ideal approach, but as a provider of DC training, we understand that we can never change this world. No matter what we do, somebody are going to misinterpret the UCP 500 anyway.
MOST BANKS SPEND NOT ENOUGH ON TRAINING
Take the banks as an example, they are glad to spend on advertisements in the media, personal banking and other marketing activities, but do not wish to spend enough on DC training.
Even a senior manager from one of the biggest banks, active in ICC & IFSA activities, would ask for a free workshop on maritime transport documents quietly in a coffee break, although he knows very well that it is good for his bank and our fees are also reasonable. Take Hong Kong as an example, our workhsop fees are now 50% of that 5 years ago, before the recession.
For a two-day workshop, it is a practice for some banks to send different staff members each day to save the budget. Then they exchange notes and learn from each other afterwards.
What more can we do to save the world? My wife always complains that I have entered a wrong profession. It is only my interest in DC that keeps me in this profession. For those who know me, my lifestyle is supported by other investments but unfortunately not from DC services.
A COMMON SENSE AND PRAGMATIC APPROACH FOR RESULTS
That is the background based on which we suggest to change the insurance articles to allow a headroom of 5%. This is a common sense approach, instead of talking loftly for a task we can never achieve. Why not we take a more practical and achievable approach?
We are from http://www.tolee.com
[edited 2/2/02 7:39:40 PM]