ICC Digital Library Forum

Jeremy,

what is your contention that a singular "period for shipment" permits multiple latest shipment dates, based on ?

Laurence

The fact that:
1. No sensible person could have any possible objection to the principle of multiple latest shipment dates in the transfer (e.g. the issuing bank or applicant) as no party’s interests are jeopardised. (Incidentally, if the second beneficiary has not agreed multiple shipment dates this is a contractual, not a doc credit, issue.)
2. Saying that sub-Art 48h allowed only one lsd would be an over literal reading of it, which served no useful purpose.
3. A complying presentation under the transfer by the second beneficiary would automatically be a complying presentation with respect to the credit on substitution of the first beneficiary’s invoices or, in the absence of substitution, such second beneficiary’s presentation would automatically be binding on the issuing and any confirming bank.

Please note that as I do not want to be drawn into a long winded and ultimately inconclusive debate on this subject I do not intend to contribute further.
[edited 10/9/02 4:43:10 PM]

Jeremy,

We note that your opinions expressed so far appear to be coming from a banker’s perspective, which may not coincide with the market practices.

We have mainly two versions of shipment period(s)/deadline(s) (however named) in the marketplace.

THE FIRST VERSION – ONE SHIPMENT DEADLINE

The first version is commonly used in transferable DCs, setting only ONE shipment deadline date and allowing partial shipments. As the first beneficiary has to compare different offers from different suppliers for the same kind of goods called under the transferable DC, he would not commit suicide by asking for many fixed shipment periods/dates. This would limit his flexibility in choosing the best supplier of a particular kind of goods, who may not be able to meet a fixed shipment period.

But his goods are better in quality and cheaper in price. Making better quality goods would take more time, but then the fixed shipment period cannot be met.

Asking for an amendment is not practical, as the applicant may not want to be bordered from time to time, not to mention the extra costs of amendments. For some countries, amendments are also difficult to obtain.

FIXED SHIPMENT PERIODS IS NOT WELCOME BY A FIRST BENEFICIARY

I was doing import and export business when I was in my thirties and forties and hence, as a cook from the kitchen named “IMP/EXP”, I know very sure why a first beneficiary would not like to be bound by fixed periods of partial shipments.

THE SECOND VERSION – MORE THAN ONE SHIPMENT DEADLINE

Now the other version is to fix different periods of shipments in the DC. This may be almost close to instalment shipments (then subject to UCP 500 Article 41), depending on how the shipping terms are worded. They may be close to instalment shipments but in fact they are not instalment shipments. They may become instalment shipments unintentionally. Please search for “instalment shipments” in the DC Pro to find out the appropriate opinions of the ICC Banking Commission on this issue.

DANGERS OF SECOND VERSION – GETTING CLOSE TO OR UNINTENTIONALLY BECOMING INSTALMENT SHIPMENTS

As a cook form the same kitchen, I would not like to accept such fixed shipment periods for two simple and pragmatic reasons:

1 Such fixed periods of shipments may unintentionally become instalment shipments, particularly in transferable DCs from untrained applicants, and their counterparts, the inadequately trained bankers. Otherwise ICC Banking Commission would not require issuing another document explaining on Article 48 of the UCP 500.

2 Failure to perform one instalment shipment would nullify the rest of the shipments according to UCP 500 Article 41. The first beneficiary would face claims against the underlying supply contracts from the many second beneficiaries.

FOCUS ON IMPACTS TO MARKETPLACE RATHER THAN LITERAL INTERPRETATION

Hence, the matter is not as simple as you think, purely arguing on the literal interpretation of “shipment period” whether or not indicating only one shipment date or many shipment dates. We always see things from the reality and its impacts in the marketplace rather than dwelling on the literal interpretation, on the “face” of the instructions in the DC. We go beyond the “face” and deal with the “meat” of the documents and their impacts in the marketplace. A DC is issued mainly to facilitate payment in the marketplace rather than to provide intellectual entertainment for the DC experts.

Hope this would help to end the arguments between you and Laurence on the literal interpretation of “shipment period”. Whoever is the winner has little meaning in the marketplace. The first beneficiary from the kitchen is not going to love shipment “periods” for reasons stated above.

www.tolee.com

[edited 10/10/02 5:35:04 PM]

Jeremy's contention that a singular "period for shipment" permits multiple latest shipment dates, is obviously not based on UCP. Does he really expect us to believe that the reference in UCP to a singular period for shipment is intended to permit multiple shipment periods ?

As T.O. has already suggested, Jeremy has taken no account of the preferences of the beneficiaries. This may be because he has no direct experience of this. He has previously written that he takes no account of such wishes when taking a bank policy decision e.g. on obtaining a waiver against discrepant documents by default without the express agreement of the beneficiary. Since this group (beneficiaries) disagree with his opinions, they must fall into Jeremy's category of "no sensible people" in his last posting.

A simple example may serve to elucidate the dangers for a second beneficiary in allowing this form of amendment without agreement on the part of the second beneficiary :
A first beneficiary concludes a contract, part of which requires supply by a second beneficiary of goods at a fixed price, payable against a transferable DC. Such DC is opened, but in the interim, when the transferring bank discusses conditions attached to the credit to be received by the second beneficiary, the first beneficiary may have received an offer of the same goods by another supplier at a cheaper price, with 50% of the goods immediately available. He can avail of this offer outside the DC established, but he can restrict shipment by the original supplier by clausing the DC with a shipment schedule including 50% to be shipped before issue of the credit and permitting subsequent shipment in the absence of the first part of the schedule.

DANGEROUS PRECEDENT
If we permit a transferring bank to make a change to the terms of a DC in this manner, (without amendment) we wedge open the door to other changes made without amendment. If a transferring bank is permitted to make such a change, the issuing bank is no less entitled to such legerdemain practices. It follows also that if the issuing bank is allowed this in a transferable credit, it has a strong case to do so in other credits. I, like T.O., have about thirty years experience of import and export operations (as beneficiary & applicant)involving DCs and this compels me to speak against this.

Laurence

T.O.,

I feel I must relent and make a further posting.

Thank you for mentioning Article 41. I have to admit I had not factored this into my thoughts. A series of latest shipment dates would seem to fall within the ambit of Article 41, I agree. Nonetheless, I do not see that creating the possibility of a second beneficiary falling foul of this article should have an impact on one’s interpretation of sub-Art 48h. After all, as a doc credit banker, what is or is not in the second beneficiary’s interest is no concern of mine, merely the discharge of my legal obligations.

The Sleight of Hand Merchant

Jeremy,

Perhaps studying too much laws and all the time working in the bank may have shaped your thoughts to put too much emphasis on your legal obligations. We have seen many such cases in other professions too.

A BIRD’S EYE VIEW ON THE MARKETPLACE

Please forget about your role as a seasoned banker for a moment and try to go to the penthouse of your bank building to have a bird’s eye view on the marketplace. Then you will see underneath you a lot of other commercial buildings, where the importers, exporters, insurers, carriers, freight forwarders, accountants, lawyers, inspection agencies, so on and so forth, are working harmoniously.

THE MARKET MACHINE

Standing in this high point, you would realise that you, as a banker, are in fact a gear in the machine called “marketplace”. A gear should work in harmony with the other gears, conveying belts, motors, bearings, meters and other parts of the same machine. A gear cannot say:” I am too tired and I refuse to spin”. Then the whole machine will stop working just because one small gear wants to take a rest. The show must be on, whether rain or shine. If a gear behaves like that, focusing only on self-interest, then it would be replaced sooner or later. Customers would to your competitor across the street that says yes.

A PLAYER’S OBLIGATIONS IN A NATIONAL TEAM

So as banker, you are like a player in your British World Cup Team. If a goal is shot towards your goal and you happen to be there, you have to play your defence although you are a striker and this would cost you an arm and a leg. You cannot say: “I have to look after the interest of my team Manchester United first. My team needs me the next month for an important match and so I have to keep my arm and my leg. Sorry, this ball is not for me”.

A BANKER IS TO FACILITATE TRADE AND NOT TO SET OBSTACLES

Bear in mind that in the role of a banker you are to facilitate trade and not to interfere with or place obstacles in the trade, just for the purpose of protecting your own interest.

Although your postings are with noble honesty, for this we respect you very much, but if your clients happen so see your postings here,

"After all, as a doc credit banker, what is or is not in the second beneficiary’s interest is no concern of mine, merely the discharge of my legal obligations",

they would go for your competitors.

This is a friendly advice. But you have the right not to listen.

www.tolee.com

[edited 10/10/02 5:31:10 PM]