ICC Digital Library Forum

Hello All,

Received a credit for about GBP0.7m from a Far Eastern branch of a large EU incorporated bank that is available with us containing the following ‘additional conditions’:

‘As indicated in article 2 of UCP500*, no member of [name of issuing bank] Group other than ourselves, shall be responsible for payment hereunder unless such office has added their confirmation or similar engagement to the credit.’

* Is it?

‘Our performance* under this credit is subject to all laws, decrees, regulations and similar acts of government** and shall also be excused by other events beyond our control that prevent its performance.’

* Reimbursing a bank that has negotiated complying documents?

** Which government? The issuing branch's country's, the head office's country's and/or the U.S. (see below) government?

‘Transhipment through ….. OFAC sanctioned ports is not allowed.’

What is an OFAC sanctioned port? How is a bank to establish, for the purposes of the credit, if a port is so sanctioned?

Before I go into ‘rant mode’, anyone any thoughts please?

Thanks, Jeremy

[edited 7/21/2005 4:51:44 PM]

Dear Jeremy,

Yet another one of those clauses that so elegantly help to corrupt the L/C instrument!

Thanks for sharing your “weird stuff” with us

The reference to article 2 is “interesting”. I would assume that they refer to the last line: “For the purposes of these Articles, branches of a bank in different countries are considered another bank” – but would add (as I think I read between the lines in your posting) that this is not altogether clear. And since they state “as indicated in article 2 …” then one could of course ask about the purpose of mentioning this in the credit.

Must say that I share your concern: What is the effect of their “disclaimer of performance”, and how should a document checker relate to this “OFAC sanctioned port clause”. Sorry... but I do not hold that answer.

If I was you, I would certainly consider the “rant mode solution” …

Best regards
Kim

[edited 7/22/2005 10:02:43 AM]

I agree with both of you. Such clauses have not place on a L/C. They are confusing, not checkable. I do not like at all the disclaimer of performance which seems unlimited. Sounds like the opening bank is already preadvising the negotiating bank......that they will not pay. We would however seek for clarifications fefore entering such a transation.

to be continued
If this is an extreme case there is generally speaking the trend of putting inside D/C clauses and additional conditions which are confusing and in most cases useless. The clause for ex. in case of receipt of non complying documents by the issuing bank indicating "should the dox not be in conformity....we sahll approach orderers and so on and so on. Such para takes 1/3 of thespace of a D/C. But I do not understand why a bank is already at the opening of the L/C indicating what is is going to do should not conform documents be presented. In addition to that the procedure in those cases is already clearly indicated in the UCP. I find it completely out of place.
Anyhow the policy in our bank is the same as what suggested by the ICC in Paris since years and years, i.e. a D/C should be plain, clear and simple.
Roland

Roland,

Nice one. I cannot imagine it has escaped your notice that I am a leading advocate of overriding the ‘2nd half’ of sub-Art 14(d)(i). Unfortunately, it does require a lot of words.

The important point is that this particular overrider does not jeopardise the nominated bank’s interest. However, the ‘clauses’ (I have refrained from using a far more appropriate but far less polite term) I have quoted above most certainly do.

Before long we won’t be able to act as nominated bank on any credits at all.

Jeremy

[edited 7/22/2005 11:40:32 AM]