Jeremy,
I was referring to "good positive examples" of FCLs, but making the point that these examples were not comprehensive and thus as you said, the document checker in the bank should accept the B/L showing FCL, even if the weight, volume etc is below what would normally be expected.
Laurence
NON-DOCUMENTARY CONDITIONS
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
NON-DOCUMENTARY CONDITIONS
FCL IS FCL AND THEREFORE NOT CONSOLIDATION
Laurence,
You gave an example that you ccould not make an originally intended LCL shipment due to passing the cut-off time for LCL shipment. The goods that had to be shipped promptly (e.g. to catch the DC expiry deadline) and therefore were shipped in FCL mode, although the container was not fully loaded to its maximum capacity in terms of weight and/or volume.
This is of course not consolidation since the full 'box rate' of a 20 ft. container was charged, as evidenced on the face of the B/L in the seafreight calculation section. The goods were actualy shipped in a whole 20 ft. container, not sharing with other goods (what consolidation is all about).
THE MICHAEL JACKSON WAY
When Michael Jackson went to shopping and dinner with his love ones, he did not want to be disturbed by his fans. Since he had more money than he could spend, he chartered the whole department store and the whole restaurant. Is this "consolidation" (sharing the services with other guests)? Of course not as these are exclusive services!
USE COMMON SENSE AND NOT TO ABUSE ON THE NOTION OF "ON ITS FACE"
So we should not give our judgement "solely as appearing on its face". We should use simple common sense. That is what document examination is all about. Document checking is an art.
DC ARTIST V. DC TECHNICIAN
We predict that someday certain bankers (such as those passing the CDCS with distinction) may print on their name cards the title of "DC Artist". We always have an objective to become one.
One can never become a DC artist unless one has simple common sense and also knows the trade practices of other trades well, to such an extent to determine discrepancies accurately and confidently. Otherwise the best he could do is a mere DC technician (and Jeremy may not buy this idea).
This is entirely up to you. No one can help you.
http://www.tolee.com
[edited 11/26/01 8:14:25 PM]
Laurence,
You gave an example that you ccould not make an originally intended LCL shipment due to passing the cut-off time for LCL shipment. The goods that had to be shipped promptly (e.g. to catch the DC expiry deadline) and therefore were shipped in FCL mode, although the container was not fully loaded to its maximum capacity in terms of weight and/or volume.
This is of course not consolidation since the full 'box rate' of a 20 ft. container was charged, as evidenced on the face of the B/L in the seafreight calculation section. The goods were actualy shipped in a whole 20 ft. container, not sharing with other goods (what consolidation is all about).
THE MICHAEL JACKSON WAY
When Michael Jackson went to shopping and dinner with his love ones, he did not want to be disturbed by his fans. Since he had more money than he could spend, he chartered the whole department store and the whole restaurant. Is this "consolidation" (sharing the services with other guests)? Of course not as these are exclusive services!
USE COMMON SENSE AND NOT TO ABUSE ON THE NOTION OF "ON ITS FACE"
So we should not give our judgement "solely as appearing on its face". We should use simple common sense. That is what document examination is all about. Document checking is an art.
DC ARTIST V. DC TECHNICIAN
We predict that someday certain bankers (such as those passing the CDCS with distinction) may print on their name cards the title of "DC Artist". We always have an objective to become one.
One can never become a DC artist unless one has simple common sense and also knows the trade practices of other trades well, to such an extent to determine discrepancies accurately and confidently. Otherwise the best he could do is a mere DC technician (and Jeremy may not buy this idea).
This is entirely up to you. No one can help you.
http://www.tolee.com
[edited 11/26/01 8:14:25 PM]
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
NON-DOCUMENTARY CONDITIONS
JSMITH
Despite the fact that article 13c states “banks will deem such conditions as not stated and will disregard them”, I don’t agree with the comments that “even if the documents evidence the non-documentary condition has been “breached” they cannot be treated as being discrepant.”
I believe that a document that evidence a breach to the non-documentary condition automatically creates an indirect link to the non-documentary condition and should be consider as discrepant.
My understanding of article 13c is that for a non-documentary condition, a documentary evidence is not called for i.e. silence would do. However, if a documentary evidence is made, then, it should comply with the condition. For example if a credit has a condition "good of Saudi Arabian origin" and does not call for a certificate of origin but the invoice which is called under the LC shows goods as "UK Origin", I would consider the invoice as discrepant. Though the invoice isn't a document that has to show origin of goods, once the origin is stated in it, it has created a link to the condition and must comply with it.
Similarly, when we talk abt a condition stating consolidated shipment not allowed and if any of the documents presented under the LC's shows an evidence that consolidation has taken place, that document has created a link to the condition and must be checked against it. Non-compliance will evidence a discrepancy.
[edited 11/27/01 12:14:29 AM]
Despite the fact that article 13c states “banks will deem such conditions as not stated and will disregard them”, I don’t agree with the comments that “even if the documents evidence the non-documentary condition has been “breached” they cannot be treated as being discrepant.”
I believe that a document that evidence a breach to the non-documentary condition automatically creates an indirect link to the non-documentary condition and should be consider as discrepant.
My understanding of article 13c is that for a non-documentary condition, a documentary evidence is not called for i.e. silence would do. However, if a documentary evidence is made, then, it should comply with the condition. For example if a credit has a condition "good of Saudi Arabian origin" and does not call for a certificate of origin but the invoice which is called under the LC shows goods as "UK Origin", I would consider the invoice as discrepant. Though the invoice isn't a document that has to show origin of goods, once the origin is stated in it, it has created a link to the condition and must comply with it.
Similarly, when we talk abt a condition stating consolidated shipment not allowed and if any of the documents presented under the LC's shows an evidence that consolidation has taken place, that document has created a link to the condition and must be checked against it. Non-compliance will evidence a discrepancy.
[edited 11/27/01 12:14:29 AM]
NON-DOCUMENTARY CONDITIONS
We support the opinions of AbdulBaker Bazara on non documentary conditions.
We have a question for Jeremy:
"If the heading of a B/L is DISCREPANT AND FRAUDULENT BILL OF LADING, is this a discrepancy?
But according to Article 23 a B/L can be "however named".
And are you going to pay the beneficiary?
Checking with simple common sense or "solely on its face"?
Some day we may get this sort of questions in CDCS exam and we better get prepared for it.
http://www.tolee.com
[edited 11/27/01 5:14:51 AM]
We have a question for Jeremy:
"If the heading of a B/L is DISCREPANT AND FRAUDULENT BILL OF LADING, is this a discrepancy?
But according to Article 23 a B/L can be "however named".
And are you going to pay the beneficiary?
Checking with simple common sense or "solely on its face"?
Some day we may get this sort of questions in CDCS exam and we better get prepared for it.
http://www.tolee.com
[edited 11/27/01 5:14:51 AM]
NON-DOCUMENTARY CONDITIONS
Dear AbdulkaderBazara,
I have a lot of sympathy for your views and appreciate that what I am suggesting may challenge documentary credit practitioners’ long held assumptions. I would not be surprised if a few months ago I would have expressed similar views. However, having now considered the matter, all I can do is go on what UCP 500 & 400 Compared (which I recognise is not an ICC Banking Commission ‘approved’ publication- see ICC Document 470/908 rev), Article 13c, Position Paper No. 3 and Opinion R212 say.
I do not wish to quote long extracts from UCP 500 & 400 Compared, but shall quote the conclusion:
‘to disregard the non-documentary requirement and [treat it] as SURPLUSAGE …… was the unanimous choice ….. because of its conceptual simplicity and operational ease. The onus must be on the Applicant and the Issuing bank to issue the Credit properly. They cannot be allowed to shift this responsibility to other parties. The Applicant and the Issuing Bank must be the ones who must determine the document required to satisfy a non-documentary condition.’ [emphasis added]
This gives the background to the wording of sub-Article 13c and demonstrates, I believe, the intention was that banks literally deem non-documentary condition as not stated and that they disregard them. This approach seems to be re-iterated in the 5th and 6th paragraphs of Position Paper No 3.
Turning to your example of a credit with the condition "good of Saudi Arabian origin" which does not call for a certificate of origin, but the invoice which is called under the LC shows goods as "UK Origin", Position paper No. 3 says:
‘For example, if a condition in the documentary credit sates that the goods are to be of German origin and no certificate of Origin is called for, the reference to ‘German origin’ would be deemed to be a non-documentary condition and DISREGARDED in accordance with sub-Article 13(c).’ [emphasis added]
Therefore, in your example, if the invoice showed goods of UK origin I do not see how, per Position Paper No. 3, they could be rejected. Consequently, I believe this extract from Position Paper No. 3 contradicts your view that a document that evidences a breach of the non-documentary condition automatically creates an indirect link to the non-documentary condition and should be considered as discrepant.
T.O.,
I found you’re humorous question most amusing. I shall have to try to think of some drolleries myself.
On a serious note, while I would accept that judgement is required in documents examination (i.e. it can be considered an ‘art’), I would vigorously contest any straying from checking documents on their face using knowledge other than that gained by a banker from day-to-day credit operations, as I do not believe this is what UCP500 envisages.
Regards, Jeremy.
[edited 11/27/01 10:14:27 AM]
I have a lot of sympathy for your views and appreciate that what I am suggesting may challenge documentary credit practitioners’ long held assumptions. I would not be surprised if a few months ago I would have expressed similar views. However, having now considered the matter, all I can do is go on what UCP 500 & 400 Compared (which I recognise is not an ICC Banking Commission ‘approved’ publication- see ICC Document 470/908 rev), Article 13c, Position Paper No. 3 and Opinion R212 say.
I do not wish to quote long extracts from UCP 500 & 400 Compared, but shall quote the conclusion:
‘to disregard the non-documentary requirement and [treat it] as SURPLUSAGE …… was the unanimous choice ….. because of its conceptual simplicity and operational ease. The onus must be on the Applicant and the Issuing bank to issue the Credit properly. They cannot be allowed to shift this responsibility to other parties. The Applicant and the Issuing Bank must be the ones who must determine the document required to satisfy a non-documentary condition.’ [emphasis added]
This gives the background to the wording of sub-Article 13c and demonstrates, I believe, the intention was that banks literally deem non-documentary condition as not stated and that they disregard them. This approach seems to be re-iterated in the 5th and 6th paragraphs of Position Paper No 3.
Turning to your example of a credit with the condition "good of Saudi Arabian origin" which does not call for a certificate of origin, but the invoice which is called under the LC shows goods as "UK Origin", Position paper No. 3 says:
‘For example, if a condition in the documentary credit sates that the goods are to be of German origin and no certificate of Origin is called for, the reference to ‘German origin’ would be deemed to be a non-documentary condition and DISREGARDED in accordance with sub-Article 13(c).’ [emphasis added]
Therefore, in your example, if the invoice showed goods of UK origin I do not see how, per Position Paper No. 3, they could be rejected. Consequently, I believe this extract from Position Paper No. 3 contradicts your view that a document that evidences a breach of the non-documentary condition automatically creates an indirect link to the non-documentary condition and should be considered as discrepant.
T.O.,
I found you’re humorous question most amusing. I shall have to try to think of some drolleries myself.
On a serious note, while I would accept that judgement is required in documents examination (i.e. it can be considered an ‘art’), I would vigorously contest any straying from checking documents on their face using knowledge other than that gained by a banker from day-to-day credit operations, as I do not believe this is what UCP500 envisages.
Regards, Jeremy.
[edited 11/27/01 10:14:27 AM]
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
NON-DOCUMENTARY CONDITIONS
Dear Jeremy,
Before giving my comments, I have gone through position paper no. 3 and UCP 500 & 400 Compared.
I wonder how would a judge in a court of law would look at it if a disgruntled applicant sues the bank for wrongful honor i.e. in case the bank honored the invoice in the example given above.
I agree that the onus must be on the Applicant and Issuing Bank to issue the Credit properly and believe that a prudent advising, confirming, nominated bank or even a beneficiary would consider a non-documentary clause as incomplete or unclear instruction from the point of view of article 12 of UCP and would request for a clarification. By the way many banks do that to avoid future unpleasant situations.
Finally, I believe that we should agree to disagree on this point.
[edited 11/27/01 12:39:17 PM]
Before giving my comments, I have gone through position paper no. 3 and UCP 500 & 400 Compared.
I wonder how would a judge in a court of law would look at it if a disgruntled applicant sues the bank for wrongful honor i.e. in case the bank honored the invoice in the example given above.
I agree that the onus must be on the Applicant and Issuing Bank to issue the Credit properly and believe that a prudent advising, confirming, nominated bank or even a beneficiary would consider a non-documentary clause as incomplete or unclear instruction from the point of view of article 12 of UCP and would request for a clarification. By the way many banks do that to avoid future unpleasant situations.
Finally, I believe that we should agree to disagree on this point.
[edited 11/27/01 12:39:17 PM]
NON-DOCUMENTARY CONDITIONS
Jeremy,
By the way you handle (not answer) our tricky queries, you prove to be a right candidate for the next MP election in England.
THE SUBTLE MEANING OF "CDCS"
Whoever that has passed the "CDCS" exam (which means to us "Check Documents with Common Sense") should do his job worth his title CDCS.
Those who interpret "solely on its face" to mean "purely literal meaning" may soon be replaced by a computer that can do this job 100 times better. Maybe this is one of the reasons why some senior DC technicians/experts in USA and elsewhere are forced to retire early and be replaced by a computer that can do the same job better and there is a cost saving benefit too, no need to have holidays, medical benefits, provident funds and other provisions.
But the computer cannot replace a person with common sense. By the time the computer has common sense, then both you and I don't have to work anymore. Our main job is to ensure that the computers would not start a revolution in order to switch positions with us.
http://www.tolee.com
[edited 11/27/01 2:57:25 PM]
By the way you handle (not answer) our tricky queries, you prove to be a right candidate for the next MP election in England.
THE SUBTLE MEANING OF "CDCS"
Whoever that has passed the "CDCS" exam (which means to us "Check Documents with Common Sense") should do his job worth his title CDCS.
Those who interpret "solely on its face" to mean "purely literal meaning" may soon be replaced by a computer that can do this job 100 times better. Maybe this is one of the reasons why some senior DC technicians/experts in USA and elsewhere are forced to retire early and be replaced by a computer that can do the same job better and there is a cost saving benefit too, no need to have holidays, medical benefits, provident funds and other provisions.
But the computer cannot replace a person with common sense. By the time the computer has common sense, then both you and I don't have to work anymore. Our main job is to ensure that the computers would not start a revolution in order to switch positions with us.
http://www.tolee.com
[edited 11/27/01 2:57:25 PM]
NON-DOCUMENTARY CONDITIONS
Dear AbdulkaderBazara,
I share the quandary -that I believe that you feel- regarding applying sub-Article 13(c) and Position Paper No. 3 as they appear to be written. I too would share your lack of enthusiasm about taking up documents that showed goods of UK origin where the credit specified goods of Saudi Arabian origin, but did not specify a certificate of origin. The only way I see round this dilemma is -as I believe you are suggesting- by applying Article 12 in every situation where it is not apparently beyond any doubt whether or not a condition is documentary or non-documentary. I also take the view that where a condition is undoubtedly non-documentary it is best to say so in the acknowledgement sent to the issuing bank and that sub-Article 13(c) will therefore be applied to it, so as to avoid later argument.
Dearest T.O.,
For the avoidance of doubt, I must say that I do not equate ‘facial compliance’ to mean ‘literal compliance’. As to the computer, I’m sure its coming, given the cost of training and employing credits staff; I just pray it does not occur until I’ve reached 50 (when I can have early retirement).
Best regards, Jeremy.
[edited 11/27/01 4:33:21 PM]
I share the quandary -that I believe that you feel- regarding applying sub-Article 13(c) and Position Paper No. 3 as they appear to be written. I too would share your lack of enthusiasm about taking up documents that showed goods of UK origin where the credit specified goods of Saudi Arabian origin, but did not specify a certificate of origin. The only way I see round this dilemma is -as I believe you are suggesting- by applying Article 12 in every situation where it is not apparently beyond any doubt whether or not a condition is documentary or non-documentary. I also take the view that where a condition is undoubtedly non-documentary it is best to say so in the acknowledgement sent to the issuing bank and that sub-Article 13(c) will therefore be applied to it, so as to avoid later argument.
Dearest T.O.,
For the avoidance of doubt, I must say that I do not equate ‘facial compliance’ to mean ‘literal compliance’. As to the computer, I’m sure its coming, given the cost of training and employing credits staff; I just pray it does not occur until I’ve reached 50 (when I can have early retirement).
Best regards, Jeremy.
[edited 11/27/01 4:33:21 PM]
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
NON-DOCUMENTARY CONDITIONS
In response to Hatem Shehab, I can probably best answer by using his own words " the report is a culmination of a process of future predicted events based on historical performance of the customer". The fact that this report is the culmination of a process is indicative that it is issued at a moment in time, not that its point of reference is a moment in time as with certain aspects of accountancy. Anybody can predict future events with or without the aid of historical data, but obviously one is more inclined to value such predictions if all known relevant data is incorporated. I reserve omniscience for deity, although some banks (not yours) act as though they are, particularly with regard to their professional financial abilities. All of us are fallible, and human predictions are subject to human fallibility. The best that we can do is to minimise the fallibility of such predictions by basing them on the most comprehensive and accurate information available upto the time such predictions are made. This is why I said that “BANK REPORTS ARE PERHAPS THE BEST INDICATORS WE HAVE GOT AS TO THE FINANCIAL STANDING OF A COMPANY". The fact that it is the best available, does not make it infallible.
I have come across instances over the years of information being witheld from banks or manipulated for commercial reasons. Although my experience of this is limited, I have never come across an instance where a bank discovered such ploys, particularly as they were short term. The professional approach of Hatem Shehab's bank may be evident from his responses, but not all banks are so diligent and unless the applicant is familiar with the bank intended to issue such a report, it may be difficult to assess in advance how reliable or not such a report may be.
To T.O.
I did not suggest that the FCL shipment was a consolidation. I was alluding to the fact that you gave examples of criteria used for determining FCL such as weight and cubic measurements consistent with the container being full. These examples were correct, but not comprehensive indicators of the weights/volumes one could find in FCL consignments. This is why I gave a real example of a true FCL shipment whose weight & measure were well below the maximum usually associated with a FCL. Although I advocate your "common sense" approach to DC matters, I could sympathise, but not agree with a possible objection from a bank checker to a B/L which "on its face" indicated FCL shipment, but common sense would indicate that a FCL shipment would contain more than one pallet.
To Abdulkader Bazara
Mailed DCs require as part of the presentation, the original DC. Apart from this, it is common practice for a copy DC to be required for presentation. Thus one can regard the DC itself as one of the documents called for. If we accept this as a general principle, then if a non-documentary condition is expressed in the DC, such as "goods of French origin", without requiring a C/O, if another document (invoice) is presented showing German origin, one can say that there is inconsistency between documents (DC & invoice), resulting in a discrepancy as per Article 13 a.
Laurence
[edited 11/28/01 5:01:13 PM]
I have come across instances over the years of information being witheld from banks or manipulated for commercial reasons. Although my experience of this is limited, I have never come across an instance where a bank discovered such ploys, particularly as they were short term. The professional approach of Hatem Shehab's bank may be evident from his responses, but not all banks are so diligent and unless the applicant is familiar with the bank intended to issue such a report, it may be difficult to assess in advance how reliable or not such a report may be.
To T.O.
I did not suggest that the FCL shipment was a consolidation. I was alluding to the fact that you gave examples of criteria used for determining FCL such as weight and cubic measurements consistent with the container being full. These examples were correct, but not comprehensive indicators of the weights/volumes one could find in FCL consignments. This is why I gave a real example of a true FCL shipment whose weight & measure were well below the maximum usually associated with a FCL. Although I advocate your "common sense" approach to DC matters, I could sympathise, but not agree with a possible objection from a bank checker to a B/L which "on its face" indicated FCL shipment, but common sense would indicate that a FCL shipment would contain more than one pallet.
To Abdulkader Bazara
Mailed DCs require as part of the presentation, the original DC. Apart from this, it is common practice for a copy DC to be required for presentation. Thus one can regard the DC itself as one of the documents called for. If we accept this as a general principle, then if a non-documentary condition is expressed in the DC, such as "goods of French origin", without requiring a C/O, if another document (invoice) is presented showing German origin, one can say that there is inconsistency between documents (DC & invoice), resulting in a discrepancy as per Article 13 a.
Laurence
[edited 11/28/01 5:01:13 PM]
NON-DOCUMENTARY CONDITIONS
Laurence,
COMMON SENSE V. RIGHT PROCEDURE
If we see the gross weights, volume of the goods stowed in a container are too far away from the maixmum loading capacity for that type of container, we would of course also check on the freight calculation before we determine this is a LCL or FCL shipment.
We would not, as bankers also do, determine discrepancies solely based on one single data content in a document. We have to look at the whole presentation to ensure no Philosopher's stone (from Harry Potter) is unturned.
So this is not a common sense issue but rather the issue concerning the right procedure to check documents.
PLEASE DON'T COMMENT ON OUR OPINIONS IN ISOLATION
Please do not comment on our two posted opinions in isolation or some members may be misled.
As we have said, there are MANY ways to check consolidation. We cannot cover them all here without giving a lengthy lecture, which the DC Pro Discussion Forum is an inappropriate forum.
Our scope of exposure to problems and disputes as a consultant is much wider because we live in the problems that give us the survival.
http://www.tolee.com
[edited 11/28/01 5:29:56 PM]
COMMON SENSE V. RIGHT PROCEDURE
If we see the gross weights, volume of the goods stowed in a container are too far away from the maixmum loading capacity for that type of container, we would of course also check on the freight calculation before we determine this is a LCL or FCL shipment.
We would not, as bankers also do, determine discrepancies solely based on one single data content in a document. We have to look at the whole presentation to ensure no Philosopher's stone (from Harry Potter) is unturned.
So this is not a common sense issue but rather the issue concerning the right procedure to check documents.
PLEASE DON'T COMMENT ON OUR OPINIONS IN ISOLATION
Please do not comment on our two posted opinions in isolation or some members may be misled.
As we have said, there are MANY ways to check consolidation. We cannot cover them all here without giving a lengthy lecture, which the DC Pro Discussion Forum is an inappropriate forum.
Our scope of exposure to problems and disputes as a consultant is much wider because we live in the problems that give us the survival.
http://www.tolee.com
[edited 11/28/01 5:29:56 PM]