Quote:
Hello Hatem,
Though I'm sure you're under pressure of immense work, I urgently need your opinion on the following matter which has been the subject of controversy between us (prime Bank in Lebanon) and a correspondent in Qatar who has issued L/C in favour of one of our customers against which we have issued 2 L/Cs (back-to-back) to Spain.
We have negotiated the 1st set of complying docs, which are rejected by the bank due to the alleged discrepancies as follows:
- "Description of goods incomplete”.
- "The insurance cert. doesn’t cover all the clauses as per l/c terms"
NB. - Mother L/C describes goods as follows: ”Lime stone crema caliza capri,green/black/black marble, athos white marbles as per Performa ...."
- The 2 back-to-back L/Cs cover only one item, which is “Lime stone crema caliza Capri”
- L/C stipulates the following risks to be covered by the insurance cert:” institute cargo clauses (all risks), institute war clauses, institute strikes, riot and civil commotion clauses.
We have disagreed and justified our point of view as follows:
First: since partial shipments are allowed, the invoice describing the actual goods shipped as " lime stone crema caliza capri as per Performa …" is complying, and pointed out that L/C clearly covers 3 different types of goods.
Second: the bank did not specify the missing clauses and I anticipated that it meant the clause "institute clauses all risks" and hence disagreed and referred it to article 36 of UCP 500. (The insurance presented covered institute cargo clauses A) and insisted the risks required by the credit are fully covered.
However the bank refused our points of view on the following basis per a swift, which we have received on the 24th at around 1:30 to which we could not respond due the failure in the system and the swift dept has already closed. Therefore we will point the following:
1. "As per article 37c invoice must show the description of goods as per credit"
2. “Riots and civil commotion” clauses not mentioned in the insurance certificate"
I have just prepared a reply wherein I referred the bank to the wider clarification and explanation of article 37 c as reflected in the ISBP which has been recently approved and accepted by the ICC, and have quoted the paragraph which categorically justifies our point of view regarding the invoice. Furthermore, I referred it to the inspection cert. presented among the required docs which is issued by the applicant of its credit wherein the description of goods is identical to that stated on invoice and by which we infer that applicant shares our view in considering the goods shipped as constituting only one type of the 3 different types of the required goods.
As for the insurance certificate, the one presented (insurance certificate serial # 375 covered under policy # CRG 419572 in 1 page with no attachments) stated the following clause:'' institute strikes clauses cargo." This clause implicitly covers strikes, riots and civil commotions risks. Actually, separate institute clauses for each of these risks do not exist, and according to the institute clauses the clause covering these risks is titled "institute strikes clauses cargo”. So I am justifying our point of view on the strength of this fact and to the fact that:
According to UCP 500 none of the articles 34, 35 and 36 stipulates literal correspondence of the risk clauses stated in the credit, on the contrary they render the risks stated in the insurance policy/cert. acceptable to banks where the risks as stated in the credit do not exist such as 'all risks'. Hence the main concern is that the insurance policy /cert. covers the required risks a matter which the insurance cert presented has fully complied based on UCP 500.
I'll be sending the reply tomorrow the 26th, as today is a holiday. However I need your opinion especially on the 2nd alleged discrepancy, and if you see it fit to send a query concerning both pls. do, as the L/C will be utilized several times.
The bank is already in receipt of the 2nd set which we have sent for their payment under UCP 500 (prior to our receipt of the refusal msg. on the 1st set) without pointing to them the discrepancy traced by us (both vessel certificates and the attachment to B/L bear wrong number of the B/L which our branch in Spain could not detect).
Hatem I have to know if you're able to assist me in this case. So pls. let me know as soon as possible, if you reply today pls. send the email at this address, otherwise pls. direct yr msg. to my address at the bank.
NB: IF YOU APOLOGISE THIS TIME DEAR HATEM, I MIGHT NOT BE ABLE TO FORGIVE.
Unquote
Goods Descr. & Insur. Coverage
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Goods Descr. & Insur. Coverage
Whilst I agree that notionally the description is curtailed and allowable in view of partial shipments being permitted, the issuing bank is within its rights to reject if the proforma details are omitted. This may be what they mean by saying that description of goods is incomplete.
Whilst the issuing bank may not accept what you say in relation to standard insurance clauses, a statement from the issuer of the insurance policy/certificate to the effect that clause "A" incorporates the standard clause required would, I feel, be more acceptable.
Laurence
Whilst the issuing bank may not accept what you say in relation to standard insurance clauses, a statement from the issuer of the insurance policy/certificate to the effect that clause "A" incorporates the standard clause required would, I feel, be more acceptable.
Laurence
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DimitriScoufaridis
- Posts: 85
- Joined: Fri Apr 05, 2019 5:17 pm
Goods Descr. & Insur. Coverage
Hatem,
It is known that the handling of back-to-back credits is a complicated process and one of the basic risks these transactions carry is that documentation received under the secondary credit could be unacceptable under the primary credit.
On the description of the invoice do the rest of the details correspond with the description in the credit [Sub-art. 37(c)]? If yes and since no inconsistencies have been noted, then I would agree with the Lebanese bank’s argument.
On the insurance certificate, the problem is with facial compliance of the document. Such insurance documents do not include all terms and conditions of the contract between the insurer and the assured. For more details you may refer to Michael Flanagan's posting of 1/2/03 (Re: Exclusion Clauses on Insurance Policies/Certificates).
Hatem,
Your friend mentioned that although discrepancies have been found in the 2nd set, his bank is not reporting them to the issuing bank. Could you please tell us what is the role of the Lebanese bank?
Dimitri
It is known that the handling of back-to-back credits is a complicated process and one of the basic risks these transactions carry is that documentation received under the secondary credit could be unacceptable under the primary credit.
On the description of the invoice do the rest of the details correspond with the description in the credit [Sub-art. 37(c)]? If yes and since no inconsistencies have been noted, then I would agree with the Lebanese bank’s argument.
On the insurance certificate, the problem is with facial compliance of the document. Such insurance documents do not include all terms and conditions of the contract between the insurer and the assured. For more details you may refer to Michael Flanagan's posting of 1/2/03 (Re: Exclusion Clauses on Insurance Policies/Certificates).
Hatem,
Your friend mentioned that although discrepancies have been found in the 2nd set, his bank is not reporting them to the issuing bank. Could you please tell us what is the role of the Lebanese bank?
Dimitri
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Goods Descr. & Insur. Coverage
Dear Dimitri
My friend is from the Lebanese bank. They noted a discrepancy on the 2nd set but did not state that on the documentary remittance schedule sent to the original issuing bank. Lebanese bank is the transferring bank of the credit to a Spanish bank.
Regards
My friend is from the Lebanese bank. They noted a discrepancy on the 2nd set but did not state that on the documentary remittance schedule sent to the original issuing bank. Lebanese bank is the transferring bank of the credit to a Spanish bank.
Regards
Goods Descr. & Insur. Coverage
First issue:
My interpretation would be that description of goods per partial shipment as „”Lime stone crema caliza capri as per Performa ...." would be acceptable.
Second issue:
Quoting:
L/C stipulates the following risks to be covered by the insurance cert:” institute cargo clauses (all risks), institute war clauses, institute strikes, riot and civil commotion clauses.
The insurance certificate presented stated the following clause: ' institute strikes clauses cargo."
Unquote
From the text above we see that the certificate presented also covered Institute cargo clauses A). I also suppose that the certificate covered institute war clauses, what is not mentioned above.
Based on my practice my opinion is that the negotiating bank was justified to insist on certificate to show that institute strikes, riot and civil commotion clauses are covered as per L/C conditions. The documentary checker is not supposed to be insurance expert to know that „institute strikes clauses cargo" cover also strikes, riot and civil commotion risks neither he/she is supposed to study detailed terms and conditions of the insurance documents.
Pavel Andrle
My interpretation would be that description of goods per partial shipment as „”Lime stone crema caliza capri as per Performa ...." would be acceptable.
Second issue:
Quoting:
L/C stipulates the following risks to be covered by the insurance cert:” institute cargo clauses (all risks), institute war clauses, institute strikes, riot and civil commotion clauses.
The insurance certificate presented stated the following clause: ' institute strikes clauses cargo."
Unquote
From the text above we see that the certificate presented also covered Institute cargo clauses A). I also suppose that the certificate covered institute war clauses, what is not mentioned above.
Based on my practice my opinion is that the negotiating bank was justified to insist on certificate to show that institute strikes, riot and civil commotion clauses are covered as per L/C conditions. The documentary checker is not supposed to be insurance expert to know that „institute strikes clauses cargo" cover also strikes, riot and civil commotion risks neither he/she is supposed to study detailed terms and conditions of the insurance documents.
Pavel Andrle