ICC Digital Library Forum

Laurence,

MEANING OF “BIFURCATED STANDARD”

Your interpretation of “bifurcated standard” as “operating dual standards” comes quite close. That means the issuing bank may use “doctrine of strict compliance” at one time and at other times use “doctrine of substantial compliance” in determination of discrepancies in the presented documents under DC.

It is accepted in ISBP that these two doctrines can both be used, but whether also applicable to the same discrepancy, we are not so certain as this is not stated in the UCP or ISBP. However, from the wording in ISP 98 sub-Rule 3.07, "Separateness of Each Presentation", it appears that this "bifurcated standard" may be applied to the same discrepancy. “Pourquoi Pas?” (“Why Not?” - a French word we know after the explanation by the owner of a gourmet restaurant in Toronto with the same name).

To be honest, this gives a bank a freedom to consider other factors as well, not only based on the documents alone as required by the UCP 500 Articles 13 & 14, such as the financial position of the applicant, whether the goods are perishable in nature or easily disposable in the market place, in-house policy, advice from the legal counsel and other reasons.

FURTHER LEGAL EXPLANATION OF “BIFURCATED STANDARD” BY A DC LAW GURU

For further explanation of this term, please refer to page 9-27, Section 9.03 (1) (a), under the topic of “Another Substantial Compliance Rule” in an authoritative publication in our private library “The Law of Letters of Credit, Commercial and Standby Credits” Second Edition, by John F. Dolan, the USA guru on DC laws.

Mr. Dolan explains: “The beneficiary cannot complain if he fails a strict compliance test, but the account party (applicant in USA terms) cannot complain if the issuer (issuing bank in USA terms) accepts less than strict compliance”.

So no complaints for a bank to use “dual standards”.

WHAT HAPPEN IN ISP 98 AND ISBP?

ISP sub-Rule 5.06 (c) also supports something like “bifurcated standard” although strictly speaking this term only refers to the “doctrine of strict or substantial compliance”.

Both the ISBP and ISP 98 Rule 3.07 (according to our friend Professor Jim Byrnes, whom we often address as the “father” of ISP 98, there is no such thing as “Articles” in the ISP 98. All you have are “Rules” or “sub-Rules” to be precise. This is a good tip to test whether a banker is really good at ISP 98, paying attention to each minute detail, as we consultants do.) consider that each presentation is separate. This seems to support the spirit of “bifurcated standard”.

www.tolee.com

[edited 7/10/02 7:24:20 PM]

T.O.,

I infer from your lack of response to the question that there is no published standard titled "Bifurcated Standard". You are right to say that we should pay attention to detail. From your description of this "standard" it would appear not to be a "standard" in the accepted sense of the word. A standard is usually taken to mean something which has universal acceptance as an indicator of performance or measurement. A "standard" which offers more than one interpretation therefore fails to be a standard. Neither you nor I have "standard" 20/20 vision. But this "standard" is limited to certain parts of the world still clinging to Imperial measurements. This "standard" fails the universal approval test & therefore fails to be a true standard.

I disagree that operating "dual standards" is similar to your interpretation of a "bifurcated standard". Operating dual standards is best encapsulated in the expression "Do what I say, not what I do." In relation to the UCP it may relate to an issuing bank, which rejects a presentation based on a claimed discrepancy under influence of the applicant, but when presented with an identical set of documents which the applicant is content to accept, honours the presentation without quibble.

Maybe it's too early in the morning, but I fail to see support for your "bifurcated standard" in ISP 3.07. Could you elaborate directly from this sub-Rule ?

Laurence

Laurence,

WE USE KISS RULE IN DISCUSSION FORUM POSTINGS

We are just making it easy to understand the meaning of “bifurcated stand” in an informal way in the Discussion Forum. That is why we would not make it too academic or it would be more difficult to understand. This applies to all our postings here.

YOU ARE ALREADY WITH ISP 98 SUB-RULE 3.07

Now if you read the ISP 98 sub-Rule 3.07 (a) (b) & (c) a second time, you should be able to realise that they have “similar” meaning with your last comment quoted below:

“In relation to the UCP it may relate to an issuing bank, which rejects a presentation based on a claimed discrepancy under influence of the applicant, but when presented with an identical set of documents which the applicant is content to accept, honours the presentation without quibble”

More than this, this sub-Rule is created to enable the issuer to do that sort of “bifurcated standard” thing. In a nutshell, the issuer may react 180 degree differently for the same discrepancy in another presentation by the same beneficiary.

To expand your quoted comment a bit, the issuer may refuse to accept the same discrepancy even when the applicant waives it, although the same discrepancy was accepted by the issuer in a previous presentation.

Hope this will make it crystal clear to you what we actually mean.

BUDDHISM MAY ENERGIZE OUR ANALYTICAL POWER IN DETERMINATION OF DISCREPANCIES

In Buddhism, we are told not to put too much emphasis on the literal meaning, as words would also have their limits to convey our real intentions. Some sophisticated Buddhism concepts, the supreme ones, cannot be expressed by any language in this world. We have to inspire ourselves through meditation in order to understand them by thinking in a totally undisturbed and placid environment when our minds are not drifting on or thinking any other things, such as our children, wives, career, UCP, ISP so on and so forth.

The procedures of meditation are:

(1) Try to calm down yourself by not thinking. This is very difficult for us, especially for those energetic and aggressive people.

(2) After placing our mind totally empty, then we start thinking about the Buddhism truth of the universe.

(3) Then we come to know gradually how the universe really works out, if you have that sort of capability by throwing out our “internal vices” such as selfishness, greed etc. This sort of awareness cannot be expressed in any language in this world.

Hence Buddhism MAY (depends on how good you are, in terms of throwing away our “inherent vices” that are blockades to achieve further wisdom) energize one’s DC skills, particularly in resolving a DC problem, such as whether a discrepancy is or is not a valid discrepancy.

www.tolee.com

[edited 7/11/02 2:55:43 PM]

T.O.,

I do not think that you are describing a "bifurcated standard", but rather the principle that a bank is not bound by it's own precedent in the determination of discrepancies. Typically this can happen in a DC permitting partial shipment where a bank examines a first presentation, but fails to spot a discrepancy. The second presentation is made which may be identical in respect of the discrepancy, but is spotted by the bank. Beneficiary's often rely on the Bank's interpretation of the UCP and efficiency in checking documents and so mistakenly assume that a second identical presentation must be acceptable if the first was acceptable.

Laurence

Laurence,

Please understand that we are not the inventor of the term “bifurcated standard”. We are a mere user of this term and simply interpret its meaning based on the DC law Guru Professor John Dolan’s authoritative publication in our private library as quoted in our previous posting.

If you think that is not the meaning of this term, fine, then please write to Professor Dolan in Wayne State University USA, stating your reasons, as we have no further authority to debate with you since our views are entirely based on and learnt from the Processor.

We know our mileage and know where to stop. On this term, we must admit that we know only as much (or as little) as what is written in this publication and no more. As a consultant and expert, we should be honest to ourselves and are not afraid to say that we don’t know. Our customers would trust us more for that, and also the Judges.

www.tolee.com

[edited 7/12/02 5:17:14 PM]

Laurence,

OUR NEW INTERPRETATION OF “AGREE TO DISAGREE”

All the time you disagree with our interpretation of "bifurcated standard". This is fine. Discussion Forum is to provide an opportunity for us to disagree so that we may go to the root of the problem or issue deeper and as a result of heated arguments, all of us would benefit from our exchange of different views. We love Jeremy for this reason although sometimes, our arguments are presented in a challenging way to stimulate him to go further. We do not intend to kill our “opponents“ or we would have no “enemies” ("rivals" to be precise), which is not a good thing for all of us. However, if we worry that the arguments are going out of control, we would ask our rivals to calm down a bit. Hope this is not to be interpreted as a "bifurcated standard" by you.

HOW TO BUY DISAGREEMENTS FROM YOUR STAFF MEMBERS

When I was a director and general manger of a division of the “Taipan” company, Jardine Matheson & Co., Ltd. in Hong Kong (that has retail banking, merchant banking, investment, shipping, insurance, trading, real estate, supermarket, engineering, motoring, shipping, freight forwarding, midstream operations, hotels, 7-11, Pizza Hut, farming, foreign investments and joint ventures, you name it) that contributes 10% of the Hong Kong total market share value, I had a plaque displayed in my room for my staff members to see. It says:

“If you always agree with your boss, then one of us is not necessary!”

This is also our culture in DC workshops. At the end of the workshop, if there is a prize given, the winner is always the one who disagrees with us all the time.

As a DC adviser of the Jardine Group, this gives me a very valuable opportunity of a lifetime to go into different and diversified industries within the Group and learn their trade practices for ten years. It lays a solid foundation for my later consultancy carreer.

However, we have also noted that you have never tried to share with us what you actually mean by that term.

www.tolee.com

[edited 7/13/02 5:05:16 PM]

T. O.

As I am not familiar with the work of John Dolan, I was relying on your description of a "bifurcated standard" and, as you rightly say, I was questioning it with a view to a deeper understanding of this viewpoint.

If one wishes to promulgate one's point of view as a "standard", one must be certain of general acceptance. I question if this is the case here.

Laurence

Laurence,

For the explanation of the word "standard", Hatem should be the right one. But where is he now?

We first came across this word from the Hollywood movies, such as those stories about the Roman Empire. A “standard” is something like a flag nowadays, a symbol to represent a regiment or nation.

In Buddhism, we are told not to care too much about the literal meaning of a word, as it has its own limits. For example, the most profound Buddhism theories cannot be expressed in words. It can only be felt if one’s mind is cleaned after self elimination of one’s “inherent vices”, such as greed, anger and indulgence, selfishness and the like which are all inborn.

www.tolee.com

T.O.

I was not trying to focus on the literal meaning of a word. I was trying to ascertain if there was a standard meaning of "bifurcated standard" and whether it has sufficient general acceptance to justify a claim to it being truly a standard.

Does anyone else claim that this is a standard ?

Laurence