ICC Digital Library Forum

Hi there,

I do not know how many of you are on vacation – but here is one for the rest of you

I have received a MT710 – advise of 3rd bank L/C. The advising bank have added the following clause to the credit:

Quote
The terms and conditions of the letter of credit must be checked carefully and observed precisely as the documents might be refused even on accord of insignificant deviations.
Unquote

So my question is, if you have seen this – or similar – clause, what you think about it, and how you would handle it?

Thanks in advance
Kim

Kim,

As you can see I am not on holiday. Role on September!

I imagine this ‘clause’ is addressed to the 2nd beneficiary. It certainly does not cause me undue concern as it does not seem to conflict with the UCP. Also, in ‘export’ credits we advise to UK beneficiaries we include something similar, viz:

‘Please check the terms and conditions of your credit now as your documents will have to comply strictly with its requirements. If they do not payment may be delayed or refused’.

Regards, Jeremy

Thanks Jeremy,

I feel a bit safer already

I am familiar with the clause that you mention, and I interpret this as a “friendly reminder” that all credit terms and conditions should be complied with. I have no problem with this.

What struck me here was the phrase “…might be refused even on accord of INSIGNIFICANT DEVIATIONS..” [emphases added].
It may be that I see ghosts here, but this “insignificant deviations” – what is the reach of that: Is it as you say “not in conflict with UCP” – or does it in fact apply a (very) strict compliance, that actually changes “international standard banking practice” as reflected by the articles of the UCP – e.g. what about misspelling as reflected in ISBP paragraph 28?

To some extent, this is a “fair” phrase, in the sense that the advising bank states rather clear that they intent to check the documents very very carefully. I must admit however that I do not like it one bit, because it implies (as is also the case by the way), that the chance that documents that will be accepted by the advising bank (who by the was is also confirming bank) is extremely limited – almost non-existent. So in effect the benni is stuck with an L/C, that should provide him payment after presentation – but what happens is that documents will be sent to approval at the issuing bank, and the (costly) confirmation is worthless!

I know it sounds hard on such a nice summer Wednesday, but I do not think that clauses like that is helping the L/C instrument.

Best regards
Kim

Kim,

Perhaps wrongly, I do not share your concerns. This is because I believe that many, if not most, beneficiaries would perceive that often the discrepancies raised by banks relate to what they (the beneficiaries) consider to be ‘insignificant deviations’ from the terms of a credit. To me, the clause you quote is an attempt to put the beneficiary on notice of this and thus the care needed in preparing the documents and not an attempt to apply a compliance standard stricter than that required by the UCP.

Perhaps the reduction in temperature today will change your perspective?

Regards, Jeremy

Dear Jeremy,

Did not think of it like that. Sounds reasonable. So although I must admit that I still have my reservations towards this “type” of credit, I will assume your perspective on this clause.

Not sure what just happened; must be summer creeping in on me

Thanks!
Kim