ICC Digital Library Forum

a l/c requires presentation of an insurance policy in one original, beneficiaries presented a full set (2/2) insurance policy. Is this acceptable? I cannot find any guidelines in the ucp 500 for this particular case.
Helmut Abfalter

This is acceptable.

If the credit calls for one original but the Ins document shows that two were issued both must be presented per Art 34a

Official ICC opinion R359 covers a very similar matter. The following is the Conclusion from that Opinion:

"If the insurance document is issued in more than one original, then all the originals must be presented to comply with the provisions of sub-Article 34(b). For the avoidance of any potential problem, when the credit requires the presentation of one original insurance document then only one original should be produced."

This highlights that there may be a problem depending on the wording of the L/C.

I don't see the problem here.

To view the full opinion search R359 in the ICC opinions section of the site.

[edited 9/28/01 3:43:25 PM]

FOLLOWING DC INSTRUCTIONS SHOULD NOT BE DEEMED AS A DISCREPANCY

If the DC asks for one original insurance document, and the bank deems presentation of one original insurance document (that states on its face two originals are issued) as a discrepancy, then we consultants would ask the bank: "Against which terms and conditions of the DC and against which article in the UCP 500?"

DC TERMS OVERRIDE THE UCP 500

If the DC requires one original insurance document and so is done by the beneficiary, we do not see why such compliance would be deemed as a discrepancy? The DC terms and conditions would override the UCP 500 according to Article 1 of UCP 500.

SECOND ORIGINAL DEEMD AS ADDITIONAL DOCUMENT

But on the other way round, if two originals are presented under such circumstances, we would deem the second original as an "additional" document which would not be examined under sub Article 13 (a) of UCP 500.

WHICH IS THE FIRST ORIGINAL?

But then the problem does not end here? Hey! Which one is the first original? We have come across such arguments in our consultancy career. The best approach is to ask the presenter to verify this from the issuer, the insurance company, if this is a necesity.

From a practical point of view, any original would do for examination purpose. From our experience involved in DC disputes, if a lawyer raises this issue in the court, a practical minded judge may stop him to save time.

A DOCUMENT CHECKER SHOULD NOT ADJUDICATE THE APPLICANT'S PURPOSE

The document checker is not to adjudicate the underlying reason why the applicant wants only one copy. The applicant has the freedom to do so. Once the DC is opened, the issuing bank is deemed to have accepted this term and should have examined the documents baed on such term.

BE CONSIDERATE WTIH ICC

This is only a simple common sense problem that needs not involve the ICC Banking Commission for an opinion. We feel sorry for Mr. Gary Collyer, the Technical Adviser of the ICC Banking Commission, who told us that he had to handle the ICC opinions on board a plane to India where he was invited to lecture on the UCP 500.

THE STORY OF BROKEN CLOCKS

We also heard from our friend Mr. Don Smith (a senior executive from Citicorp, with his office in Wall Street) who told the audience in a DC seminar that he was one time consulted whether an invoice showing "broken clocks" in the description of goods is discrepant or not whilst the DC says "clocks". He was wise to advise the document checker to call the applicant.

You know what the applicant said: "Hey! our business is to buy broken antique clocks, fix them and re-sale for a good price to the antique shops".

As we recall this story solely by memory, there might be discrepancies on the minute details. But for the purpose of illustration, this should be OK.

DON'T DO MORE THAN REQUIRED. YOU DON'T GET A BONUS BUT A LIABILITY

So document examiners should use simple common sense. If they have doubts, they should verify wtih the applicant and not to adjudicate all by themselves. This is a foolish act as they may take up a liability which they could have easily avoided in the first place.

UCP 500 V. RISK MANAGEMENT

Although the UCP 500 does not require the issuing bank to approach the applicant, such deed is nevertheless effective to prevent DC frauds which are so common nowadays. From a risk management point of view, this is a good practice.

http://www.tolee.com

[edited 9/28/01 9:29:23 PM]

If L/C asks for one original of insurance policy but two originals are presented, this is not a discrepancy. I also agree that even if insurance policy indicates that it is issued in two originals but only one is presented in our case (L/C calls for one original), this is fine. UCP500 in art.34b says: "If the insurance document indicates that it has been issued in more than one original, all the originals must be presented unless otherwise authorised in the Credit". I consider stipulation of one original of insurance policy as "otherwise authorised in L/C", so I do not see any contradiction btw L/C and UCP in this case.

To avoid any problem, the applicant should well call for original or full set of insurance documents instead.

Pavel Andrle
[edited 10/9/01 9:03:46 PM]

re previous post. Personally, I would still expect to see the other original. I don't think that the language 'in one original' is sufficiently strong enough to be taken as an 'unless otherwise authorisation' and cannot be construed as allowing non-presentation of the 2nd original.
I feel that you would need a specific statement to that effect or evidence in the l/c that the 2nd original has been disposed of elsewhere e.g. sent directly to buyer.

The original question " a l/c requires presentation of an insurance policy in one original, beneficiaries presented a full set (2/2) insurance policy. Is this acceptable?"
To me this is clearly acceptable.
The discussion then moved on to discuss whether it would be acceptable for one original insurance document to be presented in a credit which called for presentation of an insurance document in one original - when the insurance document itself indicated it had been issued in more than one original.
My view here is that this is open to interpretation as expressed on the sound views posted above.

It would not surprise me if a checker in a nominated bank found it acceptable and the subsequent checker in the issuing bank found these facts unacceptable.

However, Now I must jump of the fence and as a banker 'determine on the basis of the documents alone whether they comply (UCP 14 b)'. Next, I must decide to refuse the documents or not (UCP 14 c) So, my decision is that presentation of one original insurance document is acceptable in a case where the credit called for presentation of an insurance document in one original, notwithstanding the provisions of UCP 34 b.

On examination of the terms and conditions of the credit I see that it precisely called for 'presentation of insurance policy in one original'. One original was presented.

Should I be the banker in the nominated bank that decided to accept the document when an issuing bank decided to refuse, then I believe any court (knowledgeable in the customs and practice of documentary credits) would support my decision to deem the document acceptable tender under the issuing banks irrevocable and definite undertaking.

Should I be the beneficiary about to tender documents then I would take utmost care and action to present full set (2/2) insurance document if the insurance document itself indicated it was issued in more than 1 original. As a beneficiary it is always best to take steps to avoid 'issues of interpretation' when possible. In this case this action is possible.

Regards from Istanbul.

Vinnie

Vin,

The stipulation in the DC, being specific to the underlying trade, would override the related Article in the UCP 500, which is for general trade and nevertheless of "unless otherwise stipulated" nature.

If two originals are presented, then which one should be deemded as an additional document? We think only God can decide this.

If the applicant tries to be naughty, and accepts only the (first if you will) original, then how can the bank convince him? on its face?

T. O.