ICC Digital Library Forum

We have negotiated docs in which a credit called for commercial invoices.

Beneficiary presented a set of sales invoices. Issuing bank treated it as a discrepancy

advising that commercial & not sales invoices are called for.

Subsequently applicant accepted the alleged discrepancy & the bill was paid.

Your comments would be much appreciated.

A DOCUMENT TITLE VS. ITS DATA CONTENT,
WHICH IS MORE IMPORTANT?

One of the basic principles as evidenced in various ICC Banking Commission Opinions is that the title of a document is not important provided that its data content complies with that stated in the LC and in the UCP 500. Sub article 23 (a) of the UCP 500 stating that a bill of lading "however named" is acceptable is a very good example to demonstrate this principle.

HOMEWORK BEFORE POSTING QUERIES

For the enquirer, Mr. Michael Tan of Malaysia, please find out those opinions from the DC PRO - that is what it is for. It is also a good practice for an enquirer to check for those ICC opinions available in the DC PRO before he or she posts an educational query like this one.

LADIES WELCOME

So far we have also observed that very few ladies have posted queries to the DC PRO. This is contrary to the observations in our LC workshops in which over 60% of the participants are ladies, particularly in Hong Kong and China. In the Middle East, it is however a gentlemen's world.

We are from www.tolee.com

[edited 7/6/01 4:29:26 PM]

In this case, sales invoice & commercial invoice have the same import and are commonly used as synonyms. However, I would not go so far as T. O. Lee suggests regarding the title of the document not being important. In this case, for example, if a pro-forma invoice was presented, this would not convey the same import as the document requested in the L/C and would be discrepant.

OUR RESPONSE TO MR. BACON

To respond to the comment from our friend Mr. Bacon, by stating that "the title of a document is not IMPORTANT" we do not mean that a proforma invoice may or can replace a commercial or sales invoice. Our statement is made (and should also be interpreted) based on simple common sense which is used in examination of documents.

By that statement we actually intend to point out the IMPORTANCE of the title of a document RELATIVE to its data content, and not RELATIVE to other documents.

Therefore our statement should not be taken to mean that "We should NEGLECT the title of a document or a bill of lading can replace an air waybill as a transport document".

Our statement made in a discussion should not be read out of context or being carried too far.

INTERESTING STORY OF "HOWEVER NAMED"

With no intention to defend, let us tell our DC PRO members here an interesting story about "however named" which we also mentioned in our previous comment.

When Mr. Charles del Busto (Chairman of the UCP 500 Working Party and also Chairman of the ICC Banking Commission at that time) came to Hong Kong to introduce the newly launched UCP 500 in 1994/5, during his explanation of the meaning of "however named" in Article 23, in order to make an academic forum more interesting to attend, I then gave him a tricky question:

"Mr. del Busto, what about a bill of lading with a title "FAKE Bill of Lading"? Is it acceptable under the UCP 500?".

"T. O., this document is also acceptable!" he responded with a smile.

I understood what Mr. del Busto actually meant. I thought he was trying to say: "Well, T. O., a stupid question gets a stupid answer!" in order to make his presentation more interesting by creating some joke. I did not take his answer too seriously and he knew that. We smiled when we had coffee together after the seminar.

CONCLUSION

To end this comment, we always welcome different opinions and disagreements which make us all progress but we do not wish to be misunderstood, which we must clarify whenever we have the opportunity to do so. We wish to thank Mr. Bacon for his many agreements with our comments made on other issues in the "Discussion Forum" and hope that he can take our explanation here with a smile too.

We are from www.tolee.com

[edited 7/6/01 4:36:59 PM]

I thank Mr. T. O. Lee for his comments. My comments were made, like his, from personal experience. I have come across document checking officials in banks who did not understand the difference between pro-forma and commercial invoices. In fairness to the banks, I must also say that I have lectured to exporting and importing company employees who also did not understand the difference.

WHAT ARE PROFORMA DOCUMENTS?

A proforma document is a draft (not being a bill of exchange, but only a "preparatory document", "an estimate" or "what the future document (for example an invoice) would look like") with its data content not yet agreed by or binding to the parties. It is prepared for the purpose of building a platform (to borrow a computer jargon) leading to final agreement by the parties.

We have proforma charter party, proforma disbursements account on top of proforma invoice, which is better known in the market place.

THEIR APPLICATION

When I was doing import and export in my thirties, I was occasionally requested by overseas buyers to provide a proforma invoice to support the application of import licence or LC for restricted or controlled import items and also for foreign exchange application and other purposes.

PRECISION NEEDED IN PREPARATION

The final LC, and/or commercial invoice cannot deviate too much from the data content stated in the proforma invoice (such as quantity, country of origin and specifications).

From our experience, although a proforma invoice is not binding by its nature, yet it must be prepared with a level of precision comparable to documents presented under an LC or it may destroy the underlying transaction.

OTHER EXPERIENCES WELCOME

We would like to hear other experiences in the use of proforma documents from other learned DC PRO members.

We are from www.tolee.com

[edited 5/10/02 5:45:54 PM]