Point no. 2 reads as follows:
Quote
The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. Unless expressly stated otherwise, a request to issue or amend a credit authorizes an issuer to supplement or develop the terms in a manner necessary or desirable to permit the use of the credit.
unquote
I have always been an advocate of such statement (statement 2 above) and have discussed with legal bodies to draft a condition that would allow the issuing bank to act as stipulated above. This condition to be added in the reimbursement agreement between the applicant and the issuing bank.
However, following questions need to be answered:
a) What do the terms "SUPPLEMENT" & "DEVELOP" intend to include?
b) What are the limits? How can we find a common understanding of what the bank can actually do? In case of a dispute an applicant may consider the action of the bank as an amendment to his instructions rather than a development to the clause.
c) What would be the legal consequences of such action? Shouldn't such authority be part of the agreement between the applicant and the issuing bank i.e expressly stated in the terms and condition of the reimbursement agreement and if possible certain limits set?
d)wouldn't this encourage the confirming bank or the beneficiary to interpret a condition and provide documents according to their perceived interpretation of the clause i.e. supplement or develop a condition by presenting documents in the manner they feel the applicant or the issuing bank would like to see?
Point no. 8 - Dates
The article does not include the invoice as a document need to be dated. Any reason? Though I have seen unsigned invoices, I have never seen an invoice without date.
Appreciate your feedback
regards
[edited 8/16/02 1:59:03 PM]
ISBP Document 470/951rev3
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
ISBP Document 470/951rev3
Abdulkader,
As you have rightly pointed out, the definitions of the words “supplement” and “develop” are not given as well as the scope that the issuing bank may go further. Under such unclear situation, it would be risky for the issuing bank to carry out such actions. The applicant may sue the issuing bank for changing his original intention, as you have anticipated.
THIS QUERY IS A TRAP AS NOBODY CAN PROVIDE THE ANSWER WITHOUT CONSULTATION TO THE DC COMMUNITY FIRST
This time the queries you have raised are of a different nature. We cannot provide the answer here because even the drafter of the ISBP rev3, the ISBP Working Party, cannot provide the answer without consulting the DC community first. By DC community we mean not only the banks, but also their customers, particularly the applicants, who can be represented by the local chambers of commerce or exporter associations.
COMMERCIAL SENSE APPROACH THAT ADDS VALUE
Having said that, as a consultant, we may give a more practical solution here. We would recommend the issuing bank to approach the applicant first, pointing out what areas need to be supplemented and developed, then propose the amended version of the applicant’s instructions, for the applicant to approve. Only after receipt of written approval, the issuing bank would implement those amended versions but not sooner.
This should be a safe and sound approach, also making the applicant very happy, to come to the same bank again for such “value added” services next time. He is being respected as the issuing bank comes to him before giving him an unpleasant surprise. This is only commercial sense that can turn an otherwise negative thing into a positive thing.
In customer service theories, we have the "moment of truth" concept. When the applicant gives inconsistent or unclear instructions, this is the best opportunity for the issuing bank to show its care to its customers. This is the "moment of truth". If the issuing bank can catch this "moment of truth" and contributes by providing “value added” services, the customers will feel it very strongly. In life we have many opportunities. The trouble is whether we can make good us of such opportunities. Some people may not even see those opportunities and they are bound to be failures.
Go to law would only create hostility with the customer. Even if the issuing bank wins, it still loses. Because the customer would go to another bank that respects him more.
www.tolee.com
[edited 8/16/02 4:13:50 PM]
As you have rightly pointed out, the definitions of the words “supplement” and “develop” are not given as well as the scope that the issuing bank may go further. Under such unclear situation, it would be risky for the issuing bank to carry out such actions. The applicant may sue the issuing bank for changing his original intention, as you have anticipated.
THIS QUERY IS A TRAP AS NOBODY CAN PROVIDE THE ANSWER WITHOUT CONSULTATION TO THE DC COMMUNITY FIRST
This time the queries you have raised are of a different nature. We cannot provide the answer here because even the drafter of the ISBP rev3, the ISBP Working Party, cannot provide the answer without consulting the DC community first. By DC community we mean not only the banks, but also their customers, particularly the applicants, who can be represented by the local chambers of commerce or exporter associations.
COMMERCIAL SENSE APPROACH THAT ADDS VALUE
Having said that, as a consultant, we may give a more practical solution here. We would recommend the issuing bank to approach the applicant first, pointing out what areas need to be supplemented and developed, then propose the amended version of the applicant’s instructions, for the applicant to approve. Only after receipt of written approval, the issuing bank would implement those amended versions but not sooner.
This should be a safe and sound approach, also making the applicant very happy, to come to the same bank again for such “value added” services next time. He is being respected as the issuing bank comes to him before giving him an unpleasant surprise. This is only commercial sense that can turn an otherwise negative thing into a positive thing.
In customer service theories, we have the "moment of truth" concept. When the applicant gives inconsistent or unclear instructions, this is the best opportunity for the issuing bank to show its care to its customers. This is the "moment of truth". If the issuing bank can catch this "moment of truth" and contributes by providing “value added” services, the customers will feel it very strongly. In life we have many opportunities. The trouble is whether we can make good us of such opportunities. Some people may not even see those opportunities and they are bound to be failures.
Go to law would only create hostility with the customer. Even if the issuing bank wins, it still loses. Because the customer would go to another bank that respects him more.
www.tolee.com
[edited 8/16/02 4:13:50 PM]
ISBP Document 470/951rev3
Abdulkader,
Personally, regarding the latest draft of ISBP:
GENERAL PRINCIPLES, POINT 2
I am against anything being incorporated in ISBP that is not directly related to the examination of documents for facial compliance in accordance with sub-Article 13a. (Therefore, I am against inclusion of points 1 – 6 on principle.) It is difficult to predict how much protection point 2 would offer to a bank if not included in the recourse agreement.
I also would not favour the incorporation of such a provision in a recourse agreement. My own view is that if the applicant’s instructions do appear ambiguous, at the time of their receipt, they should be queried and clarified before they are acted on. Of course, it may be that such a provision is intended to be used in only exceptional circumstances, e.g. the issuing bank knows the credit is urgent but -through no fault of its own- is unable to contact the applicant. However, as you identify, the question then becomes one of interpretation of the provision.
GENERAL PRINCIPLES, POINT 8
Invoices are covered in a separate section, ‘Invoice’. Point 10 of this relates to dating. Why it should be considered that all ‘certificates, declarations, statements’ should be dated, but not invoices escapes me. Nonetheless, I welcome these particular provisions of ISBP, even if I am not convinced they reflect current isbp, as they create greater uniformity and certainty by the unequivocal nature of their statements.
Jeremy
[edited 8/20/02 2:57:47 PM]
Personally, regarding the latest draft of ISBP:
GENERAL PRINCIPLES, POINT 2
I am against anything being incorporated in ISBP that is not directly related to the examination of documents for facial compliance in accordance with sub-Article 13a. (Therefore, I am against inclusion of points 1 – 6 on principle.) It is difficult to predict how much protection point 2 would offer to a bank if not included in the recourse agreement.
I also would not favour the incorporation of such a provision in a recourse agreement. My own view is that if the applicant’s instructions do appear ambiguous, at the time of their receipt, they should be queried and clarified before they are acted on. Of course, it may be that such a provision is intended to be used in only exceptional circumstances, e.g. the issuing bank knows the credit is urgent but -through no fault of its own- is unable to contact the applicant. However, as you identify, the question then becomes one of interpretation of the provision.
GENERAL PRINCIPLES, POINT 8
Invoices are covered in a separate section, ‘Invoice’. Point 10 of this relates to dating. Why it should be considered that all ‘certificates, declarations, statements’ should be dated, but not invoices escapes me. Nonetheless, I welcome these particular provisions of ISBP, even if I am not convinced they reflect current isbp, as they create greater uniformity and certainty by the unequivocal nature of their statements.
Jeremy
[edited 8/20/02 2:57:47 PM]
ISBP Document 470/951rev3
Jeremy,
DATE AND SIGNATURE ARE NOT IMPORTANT FOR AN INVOICE
An invoice is to describe the goods in great details in compliance with the terms and conditions of the DC. When an invoice is presented for payment against a DC, the date of the invoice is not important. It does not carry any important message for examination for compliance purpose. So is the signature. Therefore an invoice needs not be signed under UCP 500 sub-Article 37 (a) (iii). So does the issuing date. That is common sense.
INSPECTION DATE, FAILING WHICH AN ISSUING DATE, IS IMPORTANT FOR AN INSPECTION CERTIFICATE
However, for a certificate that certifies some events to happen or some facts material to the underlying trade, then the date of the certificate is important, IF in the data content of the certificate there is no date mentioned for the date of the event or for the date of the material facts.
For example, a certificate of inspection is meaningless IF BOTH the date of inspection AND the date of issue of the inspection certificate are not given. Then the buyer is not certain when the inspection is carried out. If the inspection is carried out three weeks before shipment, the perishable goods may change from good condition to bad condition at the time of loading.
Hence, for an inspection certificate, if there is a date of inspection mentioned in the data content, there is no need for the issuing date. Otherwise the issuing date is important to the buyer. If the buyer sees the date of issue is three weeks before shipment for perishable goods, he may doubt whether the goods are still OK at time of loading. Then he has to do something to protect his interest. From our experience, if the documents have discrepancies, no matter how minor they are, the applicant would certainly not waive them. He would negotiate with the beneficiary to arrange an inspection upon arrival to determine whether he would take up the documents and the goods. This is again common sense.
Hence, all men are equal but not all documents are equal, as far as signature and date are concerned!
Hence we support the ISBP draft rev3 on these issues.
www.tolee.com
[edited 8/20/02 5:46:14 PM]
DATE AND SIGNATURE ARE NOT IMPORTANT FOR AN INVOICE
An invoice is to describe the goods in great details in compliance with the terms and conditions of the DC. When an invoice is presented for payment against a DC, the date of the invoice is not important. It does not carry any important message for examination for compliance purpose. So is the signature. Therefore an invoice needs not be signed under UCP 500 sub-Article 37 (a) (iii). So does the issuing date. That is common sense.
INSPECTION DATE, FAILING WHICH AN ISSUING DATE, IS IMPORTANT FOR AN INSPECTION CERTIFICATE
However, for a certificate that certifies some events to happen or some facts material to the underlying trade, then the date of the certificate is important, IF in the data content of the certificate there is no date mentioned for the date of the event or for the date of the material facts.
For example, a certificate of inspection is meaningless IF BOTH the date of inspection AND the date of issue of the inspection certificate are not given. Then the buyer is not certain when the inspection is carried out. If the inspection is carried out three weeks before shipment, the perishable goods may change from good condition to bad condition at the time of loading.
Hence, for an inspection certificate, if there is a date of inspection mentioned in the data content, there is no need for the issuing date. Otherwise the issuing date is important to the buyer. If the buyer sees the date of issue is three weeks before shipment for perishable goods, he may doubt whether the goods are still OK at time of loading. Then he has to do something to protect his interest. From our experience, if the documents have discrepancies, no matter how minor they are, the applicant would certainly not waive them. He would negotiate with the beneficiary to arrange an inspection upon arrival to determine whether he would take up the documents and the goods. This is again common sense.
Hence, all men are equal but not all documents are equal, as far as signature and date are concerned!
Hence we support the ISBP draft rev3 on these issues.
www.tolee.com
[edited 8/20/02 5:46:14 PM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
ISBP Document 470/951rev3
THE IMPORTANCE OF AN INVOICE DATE
There are two instances I can think of where an invoice date is essential :
1. In order to comply with the laws of the country of export relating to accounting dates, e.g. exemption from VAT based on export within a given no. of days from date of invoice.
Firms (especially American) who want to artificially inflate their sales figures to support their stock market price often use this ploy to declare sales which may not be exported for weeks after. Whether such practice is legal or not depends on the time limit in the individual country and, of course, whether or not they get caught ! The more than dubious accounting practices in the U.S. indicates that many firms take the view that these practices are only illegal if caught.
However, even if illegal in the exporting country, this practice is not dealt with by UCP & should therefore be acceptable. Perhaps the reason for this is that the bank/s examining the documents do so on behalf of the applicant, who may have little interest in the invoice date.
2. Payment of the invoice may be based on the invoice date, e.g. 30 days from invoice date. If the bank examining the documents has no means of determining the due date for payment because of a lack of invoice date, this should be a reason for rejection.
Laurence
There are two instances I can think of where an invoice date is essential :
1. In order to comply with the laws of the country of export relating to accounting dates, e.g. exemption from VAT based on export within a given no. of days from date of invoice.
Firms (especially American) who want to artificially inflate their sales figures to support their stock market price often use this ploy to declare sales which may not be exported for weeks after. Whether such practice is legal or not depends on the time limit in the individual country and, of course, whether or not they get caught ! The more than dubious accounting practices in the U.S. indicates that many firms take the view that these practices are only illegal if caught.
However, even if illegal in the exporting country, this practice is not dealt with by UCP & should therefore be acceptable. Perhaps the reason for this is that the bank/s examining the documents do so on behalf of the applicant, who may have little interest in the invoice date.
2. Payment of the invoice may be based on the invoice date, e.g. 30 days from invoice date. If the bank examining the documents has no means of determining the due date for payment because of a lack of invoice date, this should be a reason for rejection.
Laurence
ISBP Document 470/951rev3
T.O.,
Taking your example of the inspection cert, unless the credit specifies the time -in relation, for instance, to the date of shipment- when the inspection must take place, an inspection cert that was issued three weeks before shipment, in respect of perishable goods, would have to be taken as compliant. Nonetheless, I accept the argument that it should be apparent that inspection took place on or before shipment.
However, I see no reason why -for example- a certificate of origin should be dated, as its date of issue (whether before or after shipment) is irrelevant to the buyer and -prima facie- does not have any impact on the legal validity of the document. Perhaps it was considered by the drafters easier simply to have a blanket statement?
Jeremy
P.S. Catastrophic news: from the close of UK banking business today the discussion forum is going to have to try to get by without my incisive and erudite mind until 9 Sep.
[edited 8/21/02 2:24:40 PM]
Taking your example of the inspection cert, unless the credit specifies the time -in relation, for instance, to the date of shipment- when the inspection must take place, an inspection cert that was issued three weeks before shipment, in respect of perishable goods, would have to be taken as compliant. Nonetheless, I accept the argument that it should be apparent that inspection took place on or before shipment.
However, I see no reason why -for example- a certificate of origin should be dated, as its date of issue (whether before or after shipment) is irrelevant to the buyer and -prima facie- does not have any impact on the legal validity of the document. Perhaps it was considered by the drafters easier simply to have a blanket statement?
Jeremy
P.S. Catastrophic news: from the close of UK banking business today the discussion forum is going to have to try to get by without my incisive and erudite mind until 9 Sep.
[edited 8/21/02 2:24:40 PM]
ISBP Document 470/951rev3
Jeremy & Laurence,
We agree that ICC Banking Commission should not make a blanket opinion to cover issues that cannot be generalized, such as the examples given by you two on invoice date and date of a certificate of origin.
Again document examination should not be relying too heavily on the literal interpretation of rigid rules but to use simple common sense, an approach promoted by the late Father of Letter of Credit- Bernard S. Wheble, the guru with a lot of wisdom.
www.tolee.com
We agree that ICC Banking Commission should not make a blanket opinion to cover issues that cannot be generalized, such as the examples given by you two on invoice date and date of a certificate of origin.
Again document examination should not be relying too heavily on the literal interpretation of rigid rules but to use simple common sense, an approach promoted by the late Father of Letter of Credit- Bernard S. Wheble, the guru with a lot of wisdom.
www.tolee.com