Dear Abdul Kader,
We must make a distinction between terms & conditions.International law recognizes a distinction between future & uncertain events (conditions)and events that are certain to take place (terms). Accordingly as long as a given calender is in force the date of presentaion or expiration or shipment of the credit constitutes terms and not conditions.
regards, Khalid Iftikhar
NON-DOCUMENTARY CONDITIONS
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
NON-DOCUMENTARY CONDITIONS
Agree for date of expiry it is a term and not a condition. Thanks
[edited 11/23/01 11:57:21 AM]
[edited 11/23/01 11:57:21 AM]
NON-DOCUMENTARY CONDITIONS
I would like to thank every one for their contributions. When this query was referred to me, on a credit we had confirmed, many of the thoughts expressed above went through my mind and I made my final decision without any feeling of certainty. Afterwards I carried out a review of the question and my conclusions, given here without any responsibility/liability on my part, are as follows:
When it comes to how non-documentary conditions must be treated, sub-Article 13c seems to be unequivocal. It states that 'banks will deem such conditions as not stated and will disregard them.' In other words, per sub-Article 13c there is no choice; non-documentary conditions must be disregarded i.e. even if the documents evidence the non-documentary condition has been ‘breached’ they cannot be treated as being discrepant.
Position Paper No. 3 states:
'Sometimes, however, a condition appears in a documentary credit which can be clearly linked to a document stipulated in that documentary credit. Such a condition is not then deemed to be a non-documentary condition.'
To me logic suggests that if a condition is not a non-documentary condition it must be a documentary condition. Therefore, the document -to which the 'clear link' can be made- must evidence the documentary condition has been complied with. In other words, absence of evidence of breach of, or lack of inconsistency with, the condition (‘negative compliance’ as some above have described it)-or even evidence of compliance in a document with which the condition in question cannot be 'clearly linked'- does not result in compliance.
I did not regard the additional condition as something that could not be broken down in to two elements; to me full container and no consolidation were ‘two sides of the same coin’.
Therefore, based on the above, in the example I gave:
1. If the additional condition was a non-documentary condition, having confirmed the credit, we would have been obliged -per sub-Article 13c- to take up the documents if they evidenced the goods had been consolidated with others.
2. If the additional condition was a not non-documentary condition, but a 'documentary condition' linked to the bills of lading, then the bills of lading (alone) would have had to evidence positively that the goods had been packed in a 'full' container &/or not consolidated.
The problem of deciding whether or not a condition is a documentary or non-documentary condition is -to me- complicated by ICC Opinion R212. With Position Paper No 3, the example of 'a condition which can be clearly linked to a document stipulated in [a] documentary credit' is that of a credit stipulating the country of origin of the goods and presentation of a certificate of origin. Given the nature of the document, I believe one can take the view that a certificate of origin must state -by definition- the country of origin of the goods. Therefore, merely by calling for such a document (non-) compliance with a credit provision regarding origin of the goods will AUTOMATICALLY occur. Hence the link can be made without doubt between this condition and a document stipulated in the credit.
However, in Opinion R212 the ICC Banking Commission states -I believe- that a clear link can be made with a document which would not AUTOMATICALLY evidence (non-) compliance with a condition. This, to me, increases the scope for disagreement with issuing banks and beneficiaries as to whether or not a particular condition is non-documentary or documentary.
As to whether the additional condition was a non-documentary or documentary condition, I can see arguments both ways. It is common for bills of lading that cover container shipments to show ‘FCL’ or ‘LCL’. Therefore, the additional condition can be clearly linked to a document in the credit. On the other hand, bills of lading that cover container shipments do not AUTOMATICALLY indicate whether or not the goods have been consolidated. In addition Opinion R212 seems to have been based on the provisions of Article 23 (not relevant here). Therefore a clear (i.e. automatic) link cannot be made between the additional condition and a document stipulated in the credit. Overall, I favour the latter argument, but without any great confidence.
I’d welcome reactions to the above which, given the scope for dispute I see with credit provisions such as the I have described, may form the basis of an article for Doc Credit Insight (if the Editor is agreeable).
[edited 11/23/01 3:15:35 PM]
When it comes to how non-documentary conditions must be treated, sub-Article 13c seems to be unequivocal. It states that 'banks will deem such conditions as not stated and will disregard them.' In other words, per sub-Article 13c there is no choice; non-documentary conditions must be disregarded i.e. even if the documents evidence the non-documentary condition has been ‘breached’ they cannot be treated as being discrepant.
Position Paper No. 3 states:
'Sometimes, however, a condition appears in a documentary credit which can be clearly linked to a document stipulated in that documentary credit. Such a condition is not then deemed to be a non-documentary condition.'
To me logic suggests that if a condition is not a non-documentary condition it must be a documentary condition. Therefore, the document -to which the 'clear link' can be made- must evidence the documentary condition has been complied with. In other words, absence of evidence of breach of, or lack of inconsistency with, the condition (‘negative compliance’ as some above have described it)-or even evidence of compliance in a document with which the condition in question cannot be 'clearly linked'- does not result in compliance.
I did not regard the additional condition as something that could not be broken down in to two elements; to me full container and no consolidation were ‘two sides of the same coin’.
Therefore, based on the above, in the example I gave:
1. If the additional condition was a non-documentary condition, having confirmed the credit, we would have been obliged -per sub-Article 13c- to take up the documents if they evidenced the goods had been consolidated with others.
2. If the additional condition was a not non-documentary condition, but a 'documentary condition' linked to the bills of lading, then the bills of lading (alone) would have had to evidence positively that the goods had been packed in a 'full' container &/or not consolidated.
The problem of deciding whether or not a condition is a documentary or non-documentary condition is -to me- complicated by ICC Opinion R212. With Position Paper No 3, the example of 'a condition which can be clearly linked to a document stipulated in [a] documentary credit' is that of a credit stipulating the country of origin of the goods and presentation of a certificate of origin. Given the nature of the document, I believe one can take the view that a certificate of origin must state -by definition- the country of origin of the goods. Therefore, merely by calling for such a document (non-) compliance with a credit provision regarding origin of the goods will AUTOMATICALLY occur. Hence the link can be made without doubt between this condition and a document stipulated in the credit.
However, in Opinion R212 the ICC Banking Commission states -I believe- that a clear link can be made with a document which would not AUTOMATICALLY evidence (non-) compliance with a condition. This, to me, increases the scope for disagreement with issuing banks and beneficiaries as to whether or not a particular condition is non-documentary or documentary.
As to whether the additional condition was a non-documentary or documentary condition, I can see arguments both ways. It is common for bills of lading that cover container shipments to show ‘FCL’ or ‘LCL’. Therefore, the additional condition can be clearly linked to a document in the credit. On the other hand, bills of lading that cover container shipments do not AUTOMATICALLY indicate whether or not the goods have been consolidated. In addition Opinion R212 seems to have been based on the provisions of Article 23 (not relevant here). Therefore a clear (i.e. automatic) link cannot be made between the additional condition and a document stipulated in the credit. Overall, I favour the latter argument, but without any great confidence.
I’d welcome reactions to the above which, given the scope for dispute I see with credit provisions such as the I have described, may form the basis of an article for Doc Credit Insight (if the Editor is agreeable).
[edited 11/23/01 3:15:35 PM]
NON-DOCUMENTARY CONDITIONS
Jeremy,
A CONDITION CAN BE DOCUMENTARY OR APPEAR TO BE NON-DOCUMENTARY, ALL DEPENDING ON A PERSON'S SCOPE OF KNOWLEDGE ABOUT OTHER TRADE PRACTICES
Whether a condition is considered documentary or not depends very much on how much the decision maker knows about the trade pracitces of other trades. For us, many so called non-documentary conditions are in fact documentary conditions if one knows the transport practice well. If one doesn't know other trade practices, then all these conditions are of course Greek to him and therefore all considered as non-documentary conditions.
HOWEVER, ONE'S KNOWLEDGE DOES NOT CHANGE THE NATURE OF THE DOCUMENT - DOCUMENTARY OR NON-DOCUMENTARY
The fact that one doesn't know about a condition (that can be reflected in a particular document, such as a B/L) does not change the nature of that condition.
A GOOD EXAMPLE TO ILLUSTRATE OUR STATEMENTS ABOVE
1ST APPROACH BY GROSS WEIGHT
If the DC says "consolidation not allowed", it is a documentary condition since the B/L always shows the gross weight.
If the whole shipment is loaded in a 20'x8'x8' aluminum dry cargo container, and the gross weight is about 44,800 lbs., (which is the maximum load capacity of this type of container) then it is a full container load (FCL) and therefore meets the DC requirement.
2ND APPROACH BY PLACE
We may also take another approach to check for such compliance - the place where the container is handled. Full containers are handled in container yard (CY) and consolidation is handled in container freight station (CFS).
If the B/L shows CY/CY, this tells the document checker that the container is fully loaded and hence the B/L complies with the DC condition which is therefore documentary since this condition in the DC can be checked for compliance in the stipulated documents, although no certificate to this effect is called for in the DC.
3RD APROACH BY VOLUME
We may also check for such compliance from the packing list. If the volume of the goods loaded in that same container is about 1,096 cu. ft. (which is the internal cubic capacity of that type of container) it also indicates that the whole container has been loaded with goods and it therefore also meets the DC requirement.
The more you know, the more you can decide confidently. If one does not know any transport practice, then all conditions could be non-documentary to him.
There is a Chinese addage: "One should not talk about snow with a fly" (that appears only in the Summer time).
SIMPLE SENTENCE HELPS
By the way, Jeremy, you possesses the potential to be a Judge, by your analytical mind (the good side) as well as by the way you write - like a Judge - that an ordinary person does not understand until after reading at least three times (the bad side).
Since a lot of members are not with English as their mother tongue, we would suggest you to use short sentences and make the sentence structure simple. Otherwise only people like Hatem (a Master in English Literature from London) can understand what you really mean on the first reading.
This is a sincere advice from a friend who cares about you. Please do not misinterpret it as a personal attack. Otherwise we would be glad to withdraw this comment.
http://www.tolee.com
[edited 11/23/01 5:32:35 PM]
A CONDITION CAN BE DOCUMENTARY OR APPEAR TO BE NON-DOCUMENTARY, ALL DEPENDING ON A PERSON'S SCOPE OF KNOWLEDGE ABOUT OTHER TRADE PRACTICES
Whether a condition is considered documentary or not depends very much on how much the decision maker knows about the trade pracitces of other trades. For us, many so called non-documentary conditions are in fact documentary conditions if one knows the transport practice well. If one doesn't know other trade practices, then all these conditions are of course Greek to him and therefore all considered as non-documentary conditions.
HOWEVER, ONE'S KNOWLEDGE DOES NOT CHANGE THE NATURE OF THE DOCUMENT - DOCUMENTARY OR NON-DOCUMENTARY
The fact that one doesn't know about a condition (that can be reflected in a particular document, such as a B/L) does not change the nature of that condition.
A GOOD EXAMPLE TO ILLUSTRATE OUR STATEMENTS ABOVE
1ST APPROACH BY GROSS WEIGHT
If the DC says "consolidation not allowed", it is a documentary condition since the B/L always shows the gross weight.
If the whole shipment is loaded in a 20'x8'x8' aluminum dry cargo container, and the gross weight is about 44,800 lbs., (which is the maximum load capacity of this type of container) then it is a full container load (FCL) and therefore meets the DC requirement.
2ND APPROACH BY PLACE
We may also take another approach to check for such compliance - the place where the container is handled. Full containers are handled in container yard (CY) and consolidation is handled in container freight station (CFS).
If the B/L shows CY/CY, this tells the document checker that the container is fully loaded and hence the B/L complies with the DC condition which is therefore documentary since this condition in the DC can be checked for compliance in the stipulated documents, although no certificate to this effect is called for in the DC.
3RD APROACH BY VOLUME
We may also check for such compliance from the packing list. If the volume of the goods loaded in that same container is about 1,096 cu. ft. (which is the internal cubic capacity of that type of container) it also indicates that the whole container has been loaded with goods and it therefore also meets the DC requirement.
The more you know, the more you can decide confidently. If one does not know any transport practice, then all conditions could be non-documentary to him.
There is a Chinese addage: "One should not talk about snow with a fly" (that appears only in the Summer time).
SIMPLE SENTENCE HELPS
By the way, Jeremy, you possesses the potential to be a Judge, by your analytical mind (the good side) as well as by the way you write - like a Judge - that an ordinary person does not understand until after reading at least three times (the bad side).
Since a lot of members are not with English as their mother tongue, we would suggest you to use short sentences and make the sentence structure simple. Otherwise only people like Hatem (a Master in English Literature from London) can understand what you really mean on the first reading.
This is a sincere advice from a friend who cares about you. Please do not misinterpret it as a personal attack. Otherwise we would be glad to withdraw this comment.
http://www.tolee.com
[edited 11/23/01 5:32:35 PM]
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
NON-DOCUMENTARY CONDITIONS
JSMITH,
How would you handle a condition in an LC that states that shipment not to be effect through XYZ Shipping Lines or shipment not to be effect from ABC port? Would you accept a transport document that shows shipment through XYZ Shipping Lines or shipment from ABC port since the condition is non-documentary? I believe negative compliance would satisfy the condition here.
How would you handle a condition in an LC that states that shipment not to be effect through XYZ Shipping Lines or shipment not to be effect from ABC port? Would you accept a transport document that shows shipment through XYZ Shipping Lines or shipment from ABC port since the condition is non-documentary? I believe negative compliance would satisfy the condition here.
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CSchneiderbauer
- Posts: 8
- Joined: Fri Apr 05, 2019 5:16 pm
NON-DOCUMENTARY CONDITIONS
I think that this is not a typical "non documentary clause" since it might be connected to at least one of the documents required.
Ignoring this condition might cause problems. I also would insist on a 'fcl/fcl' remark to appear on the b/l or an addition on one of the ben's docs (e.g.invoice) stating 'goods packed in full container'.
Ignoring this condition might cause problems. I also would insist on a 'fcl/fcl' remark to appear on the b/l or an addition on one of the ben's docs (e.g.invoice) stating 'goods packed in full container'.
NON-DOCUMENTARY CONDITIONS
T.O.,
To me, a beneficiary must be able to tell from the terms of a credit what will constitute a complying presentation. If I understand you’re approach correctly, the beneficiary would be faced with a lottery as to whether or not a particular provision would be regarded as documentary or non-documentary. This lottery would not merely be based on the bank to whom they were presenting documents, but on who was actually checking the documents (i.e. that the particular examiner’s[s’] personal knowledge). Logic suggests to me that this would undermine the certainty that is supposed to come with a documentary credit.
I would also observe that when ‘examin[ing] 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’ a bank must do so in accordance with ‘international standard banking practice’ (as reflected in the Articles of UCP 500). I appreciate courts, at least in England, expect bankers involved in credit operations to have general knowledge -across the board- from their day-to-day operations (see, for example, Kreditetbank Antwerp v Midland Bank plc, 1999). Nonetheless, my impression is that your suggested approach goes well beyond ‘international standard BANKING practice’ [emphasis added].
Given the above, I could not agree with the approach you seem to be advocating (apologies if I have misunderstood).
Abdulkader Bazara,
I would not regard either of these provisions as being non-documentary. To me they can clearly be linked to the transport document. Provided the transport documents is issued by a carrier other than XYZ Shipping Lines and indicates a port of loading other than ABC port I believe ‘positive’ compliance has been shown.
Regards, Jeremy.
[edited 11/26/01 10:18:10 AM]
To me, a beneficiary must be able to tell from the terms of a credit what will constitute a complying presentation. If I understand you’re approach correctly, the beneficiary would be faced with a lottery as to whether or not a particular provision would be regarded as documentary or non-documentary. This lottery would not merely be based on the bank to whom they were presenting documents, but on who was actually checking the documents (i.e. that the particular examiner’s[s’] personal knowledge). Logic suggests to me that this would undermine the certainty that is supposed to come with a documentary credit.
I would also observe that when ‘examin[ing] 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’ a bank must do so in accordance with ‘international standard banking practice’ (as reflected in the Articles of UCP 500). I appreciate courts, at least in England, expect bankers involved in credit operations to have general knowledge -across the board- from their day-to-day operations (see, for example, Kreditetbank Antwerp v Midland Bank plc, 1999). Nonetheless, my impression is that your suggested approach goes well beyond ‘international standard BANKING practice’ [emphasis added].
Given the above, I could not agree with the approach you seem to be advocating (apologies if I have misunderstood).
Abdulkader Bazara,
I would not regard either of these provisions as being non-documentary. To me they can clearly be linked to the transport document. Provided the transport documents is issued by a carrier other than XYZ Shipping Lines and indicates a port of loading other than ABC port I believe ‘positive’ compliance has been shown.
Regards, Jeremy.
[edited 11/26/01 10:18:10 AM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
NON-DOCUMENTARY CONDITIONS
T. O. Lee's examples are good positive examples relating to weight, volume and place, but does not indicate that documents which do not fulfill these conditions may also be valid.
I am sometimes called upon to provide radical solutions to urgent problems. A shipment of one pallet which was urgently required has passed the cut-off for lcl for the vessel needed to deliver in time. Instead I arranged for this to be shipped FCL in a 20' container, suitably tethered. Obviously this shipment fell well below the maximum weight and cubic capacity of the container and was loaded at the exporter's premises to go directly to the vessel. Nonetheless this was regarded as FCL and was permitted to be loaded on board. The B/L also showed FCL.
I am sometimes called upon to provide radical solutions to urgent problems. A shipment of one pallet which was urgently required has passed the cut-off for lcl for the vessel needed to deliver in time. Instead I arranged for this to be shipped FCL in a 20' container, suitably tethered. Obviously this shipment fell well below the maximum weight and cubic capacity of the container and was loaded at the exporter's premises to go directly to the vessel. Nonetheless this was regarded as FCL and was permitted to be loaded on board. The B/L also showed FCL.
NON-DOCUMENTARY CONDITIONS
Dear C Schneiderbauer,
Thank you for contributing to this discussion.
If the additional condition is a non-documentary condition then one has no choice, ignoring it is mandatory per sub-Article 13c.
If the additional condition is a documentary condition then I agree ‘fcl’ on the b/l -by virtue of the general knowledge banks have from their day-to-day operations- ought to satisfy it. However, if (and I must stress the word ‘if’) -as I have suggested- it is the document with which the ‘clear link’ can be made ALONE that must evidence compliance, then your suggestion of an addition to one of the other documents would not result in compliance.
Regards, Jeremy Smith
Thank you for contributing to this discussion.
If the additional condition is a non-documentary condition then one has no choice, ignoring it is mandatory per sub-Article 13c.
If the additional condition is a documentary condition then I agree ‘fcl’ on the b/l -by virtue of the general knowledge banks have from their day-to-day operations- ought to satisfy it. However, if (and I must stress the word ‘if’) -as I have suggested- it is the document with which the ‘clear link’ can be made ALONE that must evidence compliance, then your suggestion of an addition to one of the other documents would not result in compliance.
Regards, Jeremy Smith
NON-DOCUMENTARY CONDITIONS
Laurence,
I am not quite sure what you mean by ‘good positive examples’. To me the issue is: are they examples of ‘international standard banking practice’ for determining documents compliance? I believe the answer is ‘no’, as it would not be reasonable to expect bankers involved in credit operations, in general, to have this knowledge from their day-to-day operations. (By the way, I do not expect T.O. to agree with this view and we shall simply have to agree to differ.)
As to your example of a ‘radical solution’, the fact is that the document examiner was presented with a b/l which stated ‘fcl’ and thus was able to apply it to any appropriate provision of the credit.
Regards, Jeremy.
I am not quite sure what you mean by ‘good positive examples’. To me the issue is: are they examples of ‘international standard banking practice’ for determining documents compliance? I believe the answer is ‘no’, as it would not be reasonable to expect bankers involved in credit operations, in general, to have this knowledge from their day-to-day operations. (By the way, I do not expect T.O. to agree with this view and we shall simply have to agree to differ.)
As to your example of a ‘radical solution’, the fact is that the document examiner was presented with a b/l which stated ‘fcl’ and thus was able to apply it to any appropriate provision of the credit.
Regards, Jeremy.