ICC Digital Library Forum

A Documentary credit requires a draft to be presented with a tenor - "90 days from bill of lading date".

A draft was accordingly presented with "90 days from bill of lading date" without mentioning the bill of lading date. The bill of lading formed part of the other documents presented. Is the draft consistent with the DC requirement or is the draft a discrepant document as the bill of lading date was not mentioned in the draft.

Members can post their comments without any responsibility on their part.

Thanks.......Krishnakumar Duraiswamy, Dubai-United Arab Emirates


[edited 3/23/02 8:19:24 PM]

I think that the draft was in this case discrepant as the maturity date of the draft must be determinable from the data in the draft itself. This is also condition of the Geneva Conventions, on which bill of exchange law in many countries is based.

In this respect it might be interesting to see how the new draft on “International Standard Banking Practices”, being prepared by a working group of Banking Commission of ICC, addresses the issue (Page12):

quote:
Tenor

1. The tenor must be in accordance with the terms of the credit.

a. If a draft is drawn at a tenor other than sight, it must be possible to establish the maturity date from the data in the draft itself without referring to any other document.

c. If the credit calls for drafts drawn at a tenor XXX number of days after the date of another document, or an event, the draft could, for example, be issued in one of the following ways:

i. tenor reads “XXX days after ... (naming said document) ... date (dd/mm/yy)”, or indicating on the face of the draft “... (naming said document) ... date: ... ” or,

ii. issuance date of the draft equals the date of said document or event and the tenor reads “XXX days date” or,

iii. tenor reads at or on a specific date, for example, “dd/mm/yy” being the due date calculated XXX days after the date of said document or event, or

iv. tenor reads “XXX days after shipment date (dd/mm/yy)” or other “event date (dd/mm/yy)” or indicating on the face of the draft the “shipment date” or other “event date”.

The above examples are illustrative and not exhaustive.

unquote

Best Regards,

Pavel Andrle


[edited 3/24/02 11:52:19 AM]

Does anybody encounter difficulties with interpretation of "B/L date" ? The UCP deals with date of issuance, date of loading on board and date of shipment, but not B/L date per se.

Laurence

To clarify the meaning of B/L date, here is an extract from an Official ICC Unpublished Opinion:

"For the purpose of fixing the maturity date of a draft to be drawn
under a credit which stipulates such draft to be drawn "X days after B/L date " the date of the on board notation, if any, should be considered the " B/L date " irrespective of whether the date of the on board notation is later or earlier than
the date of issuance of the bill of lading."

Search under "b/l date" to see the full opinion.

Dear Pavel

Although it is a common practice that the draft indicates the tenor as requested in the letter of credit, however sometimes beneficiaries and even banks would prefer to see a mirror image of what is stipulated in the L/C regardless whether it make sense or not. This is because they are frightened from being encountered with discrepancies from the issuing bank. To illustrate if the credit stipulates that “drafts to indicate that it is drawn under our bank credit No. 12/125/4578” do not be surprised if you are encountered with a draft exactly quoting the same thing presented by beneficiaries and subsequently by the nominated or confirming bank, although the beneficiary’s bank credit number is different. Would you raise a discrepancy in this case that there is a consistency between the draft and the invoice if the later indicated the credit number of the nominated or confirming bank using the same analogy?

I do not think that the above case amount to a discrepancy. Banks should perform their jobs in honorable manner and not try to be deceitful. If I were encountered with your reasoning in a real case I will till you the following:

1. On what article of UCP 500 your rejection is based?
2. The international Standard Banking Practice, with all due respect to it, is not yet official and therefore I do not accept reference to it. (Needless to mention that I recognize its importance, but at this time I want to protect my customer - beneficiary)
3. Your reference to Geneva Convention is related to applicable law and not to UCP 500 for which you are to refuse the presentation thereunder. Are you going to stipulate in your advice of refusal that this is a discrepancy according to Geneva Convention?
4. I am sure that the bank is able to determine the tenor of the draft unless the bank proves that he cannot and even in that case we need to see on what grounds the bank builds up its case.
5. If we accept the banking commission opinion on bill of lading date then there will be no question of any difficulty in determining the tenor of the draft and the whole matter of raising a discrepancy will be, in my opinion, superfluous and groundless.

Hello all,

I’m back, well rested and ready for battle (in the purely constructive, open minded and metaphorical sense of the word, of course).

On this one, my sympathies lie with Pavel, rather than Hatem (who[m?] I had the great pleasure of meeting in Amsterdam last week at the IIBLP Annual Survey).

My personal view is that where a credit specifies presentation of a bill of exchange -at least where drawn on a BANK (i.e. it is not subject to the last sentences of sub-Art 9a/biv)- (or ‘draft’), generally the bill should appear to meet the requirements (if any) of the governing law of the credit, in order to be compliant. (However, I recognise there seem to be some who take the view negotiable instrument law should not affect credit operations, e.g. the IIBLP?) Therefore, where checking documents under a credit subject to English law, I would check it against S3 (‘Bill of exchange defined’) and -in this case- S11 (‘Bill payable at a future time’) of the Bills of Exchange Act, 1882. Consequently, if presented to me, I would (in the absence of ‘special’ circumstances) reject the bill (assuming the credit stipulated that it be drawn on the issuing/nominated bank) quoted in the query as not being payable (per S11) ‘At a fixed period after date or sight …… [or] On or at a fixed period after the occurrence of a specified event which is certain to happen’.

My notice of rejection would, per force, make no reference to UCP but to law.

Laurence, re your query, see discussion “B/L DATE; ARTICLE 23(B)(II)”, started on 29 Jan, (if you have not already).

Hi Jeremy

Welcome back to the battlefield. I thought we should have a bone pick with after the lovely chats we had in the city of joy in Holland. we might as well "fight" here. (in line with your approach of course)

1. Please note that the query stated that the credit called for a draft. How would you be sure that it is the bill of exchange outlined in your English Law? Do think the beneficiary was aware that you INTENDED to check that draft in accordance with your local laws of which he might know nothing about? I am sure that it would be very difficult to prove to the court of law that the draft was to be issued in accordance with your local laws especially if the beneficiary is an overseas buyer who is totally ignorant of your legal requirements, secondly your stipulation was explicit that UCP500 is the governing rules, and thirdly that this type of “discrepancy” is not material and does not, in my opinion, affect neither the underlying contract nor the obligation of the issuing bank who can determine the value date. If you want to conclude that is draft is not payable then you have to prove that you are unable to determine the maturity date of the draft, which I believe you can from the bill of lading date.

2. What could make your day worse, which I do not wish, is that the draft contains the issuance date, and therefore, maturity can be easily established by a simple calculation.

3. The beneficiary has followed the literal compliance and acted in good faith to ensure that he has presented documents in order and to obtain his money for the performance.

4. If your intension to examine certain documents under the English law then this would mean that you might also do so for other documents assuming those documents have regulations and guidelines. Why then you did not stipulate that in the L/C.

5. Under article 21 of UCP, the credit failed to specify the specific contents required to appear in that draft. The only thing, which was expressly specified, was “draft to be presented with a tenor 90 days from bill of lading date" and you got what you wanted dear, and therefore you should not be demandy and expect further requirements from the beneficiary.

6. The issuing bank cannot and should not expect any further requirement after the surrender of the documents stipulated in he L/C. raising such a discrepancy with your reasoning is a post-presentation requirements.

7. If you decide to reject the documents due to “the bill not being payable at a fixed period after date or sight (or) On or at a fixed period after the occurrence of a specified event which is certain to happen as per the Bills of Exchange Act, 1882 under the English law” my response to your advice of refusal will be that you did not act as per UCP500 article 13 & 14 and therefore you are precluded from dishonoring the documents.

8. I am not sure what do you want to convey about IIBLP, however please note that I believe that raising such a discrepancy is intentionally to hamper the flow of this business transaction and it smells with bad faith and malpractice.

9. Last, if I were a judge I will brush away all the above argument and consider it time-consuming. I will simply state “if banks are to excel in something, it is surly the determination of maturity date, this is what banks were made for”

Best Regards

[edited 4/2/02 2:31:51 PM]

Hatem,

This is a 'three piper', as I think Sherlock Holmes would say.

I'll try to get back to you tomorrow with my response.

Regards, Jeremy

If one accepts that the draft is an intrinsic part of the presentation, does the converse also apply, i.e. that some/all of the other documents attached form a part of the draft ? Even if not, would the act of attaching a copy B/L to the draft enable compliance with the requirement to be able to determine maturity ? A similar situation arises with continuation pages attached to B/L, which are acceptable. These pages contain data missing & usually included on the B/L proper, so would extra data (B/L date) attached to the B/E in the form of a copy B/L be acceptable ? In my opinion, I would accept it. However, if one accepts this, the question of whether or not to accept the original B/L attached as part of a presentation as acceptable for maturity purposes becomes more difficult. I suggest, therefore, the expediency of the negotiating bank attaching a copy B/L as an integral part of the draft, if it was not already present. This would be no more difficult for the bank than copying an invoice for a bene who had inadvertently omitted such from a presentation.

If one considers the legal aspects of this too much, one could also argue that the jurisdiction determines the format of the B/E. This then leads one into attempting to decipher whether the jurisdiction lies at the issuing bank, negotiating or confirming bank, or country of currency. Too many lawyers would love to get their hands on such considerations.

Instead we should try to take a reasonable approach to what is acceptable and common to most jurisdictions.

Laurence

We would not be able to add any comment on this hot issue as a consultant unless approved by our clients.

A TIGER JOINS IN

However, we keep watching the development of this issue between two “gladiators”, Hatam and Jeremy, since they both call this a battlefield (in the good sense of course). I would like to play the role of the “tiger” in the famous fighting scene between the Roman Emperor and the Gladiator Russell Crowe in the move Gladiator but this does not mean that the tiger would only be on the side of the Emperor. Please don’t forget this tiger would not be fired and still have to work after the Roman Emperor died at the battlefield.

GLADIATOR JEREMY SHOULD BE CONSISTENT IN HIS APPROACH

Now this tiger’s first move is to bite (taking a good sense or rather challenge) the Gladiator named Jeremy. You claim that you are a DC technician and not wish to acquire knowledge about transport and insurance for the purpose of examination of documents. Fine, but then you should be consistent in this approach. Then you should not acquire legal knowledge and use it to examine documents, particularly drafts. Otherwise you are not consistent with your treatment of legal, transport and insurance knowledge.

OUR REAL INTENTION

Our intention is just to comment on this side issue alone. Please do not deem this as our opinions on whether the draft due a number of days from the BL date should be discrepant or not.

Our purpose is to create some excitement and fun for a dry topic and we do not intend to hurt anybody. We are sure that Gladiator J would take this with a smile.

"T. O." may mean "Toronto Ontario" (where I am now from) but can also mean "Tiger Off-course/line" by lateral thinking.

www.tolee.com

[edited 4/2/02 6:26:22 PM]