ICC Digital Library Forum

Jeremy,

Agree with you in regards to clause B.

ICC has provided an answer to a query similar to point A. Refer to "Opinions from the Frankfurt Banking Commission
Documentary Credits Insight.Volume 8 No.1 January-March 2002" under the title "Article 14; sub-Articles 9(a), 13(b) and 14(d)(i)
Restricting negotiation to a particular branch of a bank". The following response given (refer to the last two paragraphs):

"Analysis and conclusion
Issue 1

When issuing letters of credit, the issuing bank, if it elects to restrict negotiation, should do so on the basis of restriction to a particular bank and not a branch of that bank. Branches of banks in the same country are deemed to be the same bank for the purposes of acting in a role envisaged by the UCP, i.e. advising, confirming and/or nominated bank. We would refer you to the opinion given at the last ICC Banking Commission meeting under reference TA. 493.

If, nonetheless, a credit is restricted to a particular branch of a bank and the documents are received by the issuing bank from another branch of that bank in the same country or a completely different bank, it must still review the documents in accordance with the requirements of Article 14 of the UCP 500 and determine whether or not the documents comply with the terms and conditions of the credit. Whilst the documents may have been received from another branch or bank, this does not relieve the issuing bank of its obligation towards the beneficiary as defined in sub-Article 9(a).

Where conforming documents are received from a branch or bank other than that which is nominated in the credit, the issuing bank will be entitled to enquire of the nominated bank whether any similar presentation(s) have been made to it (the nominated bank). On the basis that the nominated bank has received no similar drawing (or one which would affect the ability to honour the presentation received from that other branch or bank), then the issuing bank must honour the presentation. "

NOT ALL DATA CONTENT IN A DC ARE "TERMS AND CONDITIONS"

From our views, not ALL the data content in a DC are "terms and conditions" upon which the discrepancies are to be determined.

BENEFICIARY ALWAYS HAS A CHOICE FOR THE PAYMENT MODE IN A NEGOTIABLE DC

For example, for a DC available for negotiation, the beneficiary, just for argument sake, may choose not to negotiate but to wait for the payment made upon maturity of the drafts. The issuing bank cannot deem such choice as a discrepancy because negotiation is provided just for the purpose of helping the beneficiary to get his money faster. It should not be deemed to be a condition precedent to payment.

Hence, the issuing bank, under UCP 500, has no right to limit the right of the beneficiary on his choice in payment mode or on presentation routing, directly to the issuing bank or through another bank as its agent, which is his right given under the laws.

For the same reason, a draft cannot add any condition precedent to payment. All drafts are therefore unconditional as far as payment obligation is concerned. So does a DC.

DEFINITION OF DISCREPANCY - AN OTHERWISE COMPLIANT DOCUMENT BEING SENT "WRONGLY" IS STILL COMPLIANT BY ITSELF

The definition of discrepancy is that a document "on its face" does not comply with the DC terms and conditions. Sending the documents by a bank not nominated in a DC is a "document routing" issue rather than a "document on its face" issue because the document checker cannot find such discrepant data content on (the face of) the document itself. The beneficiary may challenge the issuing bank: "Which part of the data content of the document is discrepant?"

An otherwise compliant document being sent by an alternative mode is still compliant by itself.

I have the luxury of time to post comments here just because I have nothing to do during the five hours caught up in the Air France transit lounge that provides internet services in its business section.

www.tolee.com

[edited 2/26/02 1:22:34 PM]