The First beneficiary wanted to substitute documents other than the Invoice and draft under a transfer credit. Is it allowed under UCP 500 ? If yes, what are the documents that the first beneficiary can substitute. If no, what are the reasons and which sub-article covers this aspect in UCP 500.
Krishnakumar.....Dubai, United Arab Emirates.
P S : Thanks to all regular members for their contribution in "Tenor of Draft".....makes interesting reading !!
Substitution of documents by First beneficiary
Substitution of documents by First beneficiary
On my opinion, following the UCP 500, the only documents that may be substituted are the draft and the invoice.
Of course, sometimes, the first beneficiaries also presents other documents like weight list, packing list, bearing his own letterhead.
As far as we are concerned we do not accept this practice. First of all to strictly follow the UCP and why should other documents be substituted since openers, by authorizing his bank to issue a transferable documentary credit, already know that documents may be presented showing as exporter another trade name that first beneficiaries'one.
Should also for any reason whatsoever happened something with opening bank and the case land into legal procedure it would be difficult for the bank to explain the reason why other documents than those forseen under the UCP have been subsituted.
Of course, sometimes, the first beneficiaries also presents other documents like weight list, packing list, bearing his own letterhead.
As far as we are concerned we do not accept this practice. First of all to strictly follow the UCP and why should other documents be substituted since openers, by authorizing his bank to issue a transferable documentary credit, already know that documents may be presented showing as exporter another trade name that first beneficiaries'one.
Should also for any reason whatsoever happened something with opening bank and the case land into legal procedure it would be difficult for the bank to explain the reason why other documents than those forseen under the UCP have been subsituted.
Substitution of documents by First beneficiary
Sub-Article 48i.
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JudithAutié
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- Joined: Fri Apr 05, 2019 5:20 pm
Substitution of documents by First beneficiary
Article 48i states that the first beneficiary has the right to substitute his own invoices and drafts. It makes no provision for substituting any other documents. So if the second beneficiary presents packing lists etc on their letterhead, the final buyer will learn the name of the actual supplier -- and eventually short circuit him the next time around. This is one of the reasons many traders prefer back to back credits instead of transfers.
What do others think about the transferring bank adding supplementary clauses to the original credit during a transfer, such as "no document except the invoice must show (2nd) beneficiary's name / address nor any value of the goods"?
What do others think about the transferring bank adding supplementary clauses to the original credit during a transfer, such as "no document except the invoice must show (2nd) beneficiary's name / address nor any value of the goods"?
Substitution of documents by First beneficiary
Thanks for the points raised here.....very interesting and strong statements made by members......however I would like to wait for a while and look at opinions of other few members what they think on this issue......and let this discussion flower. I would also draw attention of all members to ICC Publication No 511 with respect to sub-article 48 (i).
Will come back soon.
Rgds
Krishnakumar.....Dubai, United Arab Emirates
Will come back soon.
Rgds
Krishnakumar.....Dubai, United Arab Emirates
Substitution of documents by First beneficiary
NOT ALL DOCUMENTS CAN BE SUBSTITUTED
When the first beneficiary wishes to substitute documents further than the invoice and the draft, for the purpose of hiding the identity of the second beneficiary to the applicant, he has to care about the nature of those other documents that he is about to substitute.
Under the UCP 500, he is authorized to substitute only two documents, the invoice and the draft (treating the drat as a documents called for in the DC at this moment).
If he wishes to substitute further documents, then he cannot substitute the transport and insurance documents as well as the certificate of origin or inspection because these documents can only be issued by a carrier, an insurer or its agent (under local transport and insurance legislations) and a local chamber of commerce and inspecting agency under local government by laws (for the certificates of origin and inspection).
For the packing list, the issuer is the second beneficiary and this document may be considered for substitution in the UCP 600 Working Party, since it is of the same nature as the invoice.
Another point is that the title of a document is not as important as its data content.
For safety sake, it is safer to stick to the UCP 500 Articles until it has been changed in the future revision.
www.tolee.com
[edited 4/8/02 5:55:32 PM]
When the first beneficiary wishes to substitute documents further than the invoice and the draft, for the purpose of hiding the identity of the second beneficiary to the applicant, he has to care about the nature of those other documents that he is about to substitute.
Under the UCP 500, he is authorized to substitute only two documents, the invoice and the draft (treating the drat as a documents called for in the DC at this moment).
If he wishes to substitute further documents, then he cannot substitute the transport and insurance documents as well as the certificate of origin or inspection because these documents can only be issued by a carrier, an insurer or its agent (under local transport and insurance legislations) and a local chamber of commerce and inspecting agency under local government by laws (for the certificates of origin and inspection).
For the packing list, the issuer is the second beneficiary and this document may be considered for substitution in the UCP 600 Working Party, since it is of the same nature as the invoice.
Another point is that the title of a document is not as important as its data content.
For safety sake, it is safer to stick to the UCP 500 Articles until it has been changed in the future revision.
www.tolee.com
[edited 4/8/02 5:55:32 PM]
Substitution of documents by First beneficiary
Hi TOLee....what is this UCP 600 you are talking about......has the ICC already working on it.....is UCP 600 being drafted....how does ICC go about this publication......what kind of NCs have been set up for these......is a WC already in place......please give us a brief update on this.
Thanks....& Regards
Krishnakumar.....Dubai, United Arab Emirates
Thanks....& Regards
Krishnakumar.....Dubai, United Arab Emirates
Substitution of documents by First beneficiary
Krishnakumar,
I would observe Opinion R375, unsurprisingly, states:
“Sub-Article 48(i) refers to the substitution of invoices and draft(s). While a bank may determine under its own internal policies to permit the substitution of further documents, this is at its own risk. It is not a practice supported by UCP.”
Overall -from a bank operational perspective- I regard the transferable credit, operated within the provisions of UCP (let alone where deviating from UCP), as being a singularly unattractive instrument and were it possible to get rid of them in the next UCP revision I would more than welcome this (although I am not in the slightest way optimistic on this point).
Judith,
In reply to your question, and taking the above quote as a model, my view is that sub-Article 48(h) refers to the curtailment or reduction of the amount of the Credit, any unit price stated therein, the expiry date etc; the percentage for which insurance cover must be effected; and the substitution of the name of the First Beneficiary for that of the Applicant. While a bank may determine under its own internal policies to permit the inclusion of additional provisions in the transfer, this is at its own risk. It is not a practice supported by UCP.
One question I would pose is: if a transferring bank does allow the inclusion of additional provisions, e.g. presentation of additional documents, in the transfer, is it entitled to treat breaches of the additional conditions as ‘discrepancies’, e.g. per sub-Article 13a, given the terms of the credit itself have not been breached?
Jeremy
I would observe Opinion R375, unsurprisingly, states:
“Sub-Article 48(i) refers to the substitution of invoices and draft(s). While a bank may determine under its own internal policies to permit the substitution of further documents, this is at its own risk. It is not a practice supported by UCP.”
Overall -from a bank operational perspective- I regard the transferable credit, operated within the provisions of UCP (let alone where deviating from UCP), as being a singularly unattractive instrument and were it possible to get rid of them in the next UCP revision I would more than welcome this (although I am not in the slightest way optimistic on this point).
Judith,
In reply to your question, and taking the above quote as a model, my view is that sub-Article 48(h) refers to the curtailment or reduction of the amount of the Credit, any unit price stated therein, the expiry date etc; the percentage for which insurance cover must be effected; and the substitution of the name of the First Beneficiary for that of the Applicant. While a bank may determine under its own internal policies to permit the inclusion of additional provisions in the transfer, this is at its own risk. It is not a practice supported by UCP.
One question I would pose is: if a transferring bank does allow the inclusion of additional provisions, e.g. presentation of additional documents, in the transfer, is it entitled to treat breaches of the additional conditions as ‘discrepancies’, e.g. per sub-Article 13a, given the terms of the credit itself have not been breached?
Jeremy
Substitution of documents by First beneficiary
I agree with other participants on this issue. The first beneficiary has the right to substitute his invoice and draft only. I am not aware of any bank, which would allow „ under its own internal policies to permit the substitution of further documents“.
Pavel Andrle
Pavel Andrle
Substitution of documents by First beneficiary
Dear VinodR,
MEANING OF UCP 600
When we refer to “UCP 600”, we mean only “a future revision of the UCP 500” and nothing more. It may be named “UCP 700” or “UCP XYZ”. Because UCP 600 was already used by some fraudsters on a few occasions, ICC has to freeze this publication number. That is what we heard from cocktail parties. There is no official announcement and this news remains only gossips. So as what the future revision of UCP 500 would be named, nobody is certain yet.
REVISION OF UCP 500
Now in the forthcoming ICC Banking Commission meeting at the end of this month in Paris, agenda No. 13 is “Report of the Task Force set up to devise a strategy for a new UCP revision”.
From ICC Document 470/975, it is said that the Task Force comprises of representatives of Europe (France, Russia, Germany and UK) USA and Hong Kong. Chairman is Gary Collyer of Citibank UK. In fact Gary has already stated collecting suggestions amongst bankers and consultants in many forums a couple of years ago by asking us for “the ten picks of UCP 600”.
For your interest, we would like to quote some of the statements in this document as under:
“This is now the right time to start the process of reviewing the UCP”.
“At appropriate times, the Task Force will present their findings to the Banking Commission in the form of a draft document”.
Besides updating members here for ICC news in the Discussion Forum upon request, it is also our practice to update participants in our workshops held from time to time during the year so that those who cannot afford the DC Pro would also hear some update news from the "kitchen".
www.tolee.com
[edited 4/9/02 7:02:51 PM]
MEANING OF UCP 600
When we refer to “UCP 600”, we mean only “a future revision of the UCP 500” and nothing more. It may be named “UCP 700” or “UCP XYZ”. Because UCP 600 was already used by some fraudsters on a few occasions, ICC has to freeze this publication number. That is what we heard from cocktail parties. There is no official announcement and this news remains only gossips. So as what the future revision of UCP 500 would be named, nobody is certain yet.
REVISION OF UCP 500
Now in the forthcoming ICC Banking Commission meeting at the end of this month in Paris, agenda No. 13 is “Report of the Task Force set up to devise a strategy for a new UCP revision”.
From ICC Document 470/975, it is said that the Task Force comprises of representatives of Europe (France, Russia, Germany and UK) USA and Hong Kong. Chairman is Gary Collyer of Citibank UK. In fact Gary has already stated collecting suggestions amongst bankers and consultants in many forums a couple of years ago by asking us for “the ten picks of UCP 600”.
For your interest, we would like to quote some of the statements in this document as under:
“This is now the right time to start the process of reviewing the UCP”.
“At appropriate times, the Task Force will present their findings to the Banking Commission in the form of a draft document”.
Besides updating members here for ICC news in the Discussion Forum upon request, it is also our practice to update participants in our workshops held from time to time during the year so that those who cannot afford the DC Pro would also hear some update news from the "kitchen".
www.tolee.com
[edited 4/9/02 7:02:51 PM]