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Commission on Banking Technique and Practice Draft Opinions of the ICC Banking Commission

Attached are part 1 of the consolidated Draft Opinions for discussion at theSeptember 2010 Banking Commission meeting to be held in Orlando. These DraftOpinions are those that were scheduled to be discussed in Beijing (please also referto the separate document containing the Draft Opinions that were specificallysubmitted for consideration at the Orlando meeting). Please note that a number ofthese Draft Opinions have been amended since they were first distributed inFebruary - (denoted by the addition of "rev" after the reference number. Please alsonote: TA690 is now rev3 and TA708 is now rev2).

Included with this document is a summary paper outlining the changes that havebeen made to some of the Draft Opinions. This document should aid NationalCommittees in their review. Revised drafts have been created with the assistance ofrepresentatives of the 17 national committees that provided written comments to thedraft opinions, in advance of the planned Beijing meeting.

Please note that TA706 and 717 have separate attachments.

As established in the new opinions procedure, National Committees who indicatedthat they were able to provide their own analysis and conclusion to a query havedone so and, accordingly, this has been incorporated into the text of the concernedDraft Opinion(s).

Any comments should be sent, in a word document, NO LATER than 2 weeks prior tothe Commission meeting. National Committees are therefore requested to send theircomments by end of business day 8 September (Paris time). Please email yourcomments to Gary Collyer at: email: [email protected]

Please bring all documents to the meeting. They will not be re-distributed This ICC working document is provided to you on condition that its contents remainconfidential. Distribution is restricted to ICC National Committees and Groups, andto ICC members of the Commission on Banking Technique and Practice, anddesignated ICC National Committees. Reproduction and/or dissemination in anyform and by any means are strictly prohibited.

26 July 2010/TS/wfDocument 470/1135rev

mailto:[email protected]:[email protected]


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Ms. Marlén SandvikICC DenmarkBoersen1217 Copenhagen K.Denmark

8 February 2010

Subject: Document 470/TA.690rev3 (UCP 600)

Dear Ms. Sandvik,

Thank you for your query regarding UCP 600. Please find below the opinion ofthe officers of the Banking Commission.

QUOTE

We kindly ask your official opinion to the following issue associated with theinterpretation of UCP 600 sub-article 12(b).

UCP 600 sub-article 12(b) underlines that, by nominating a bank to accept adraft or incur a deferred payment undertaking, an issuing bank authorizes thatnominated bank to prepay or purchase a draft accepted or a deferred paymentundertaking incurred by that nominated bank.

This sub-article is new to the UCP, and its purpose is to respond to legalquestions raised as to whether UCP 500 or the international standard bankingpractice (prevailing under that regime) supported discounting of such obligations bynominated bank obligors. As such, the obligation of an issuing bank to honour acomplying presentation is clearly expressed in UCP 600 article 7, thus it must beexpected that the main background for sub-article 12(b) is to ascertain that a

nominated bank following its nomination is protected by the UCP 600. In terms ofprepaying or purchase of a draft accepted or a deferred payment undertakingincurred by a nominated bank, the question arises when and on which conditionssuch prepayment or purchase must be effected in order to be “included” in thenomination given by the issuing bank and consequently protecting the nominatedbank. In that respect please consider the following examples:

A documentary credit is available by deferred payment with a nominated bank(which has not confirmed the credit). A complying presentation is made to the



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nominated bank, and the nominated bank does not honour upon presentation butmerely forwards the documents to the issuing bank.

a) After receiving a notice of acceptance from the issuing bank, the nominatedbank – after express agreement with the beneficiary – prepays.The prepayment by the nominated bank is thereby effected after the issuing bank hasaccepted to pay at maturity, but before maturity.

b) After receiving a notice of acceptance from the issuing bank, the nominatedbank sends an acceptance advice to the beneficiary to honour the presentation on itsown. Before the maturity date, the nominated bank prepays the documents when

asked to do so by the beneficiary for the sake of financing.

Does the nominated bank in the above examples act in accordance with itsnomination, and is thereby protected by the UCP 600?

ANALYSIS & CONCLUSION

In both examples, the credit was available by deferred payment and nominated abank to honour, by incurring their deferred payment undertaking. The nominatedbank determined that a complying presentation had been made but was not willingto incur their deferred payment undertaking at that time. Subsequently, the issuingbank agreed that a complying presentation had been made and gave their acceptanceand advice of maturity date.

Example (a).

The nominated bank made a prepayment to the beneficiary based on theacceptance of the documents and advice of maturity from the issuing bank. Thenature of the express agreement between the nominated bank and the beneficiary isunclear, particularly as to whether the nominated bank ever incurred a deferredpayment undertaking, and has been disregarded for the purposes of this opinion.

Sub-article 12 (c) states “[R]eceipt or examination and forwarding of documentsby a nominated bank that is not a confirming bank does not make that nominatedbank liable to honour or negotiate, nor does it constitute honour or negotiation.”From the outline of the query, the nominated bank did not act on their nomination,i.e, to incur a deferred payment undertaking, and therefore their actions do notconstitute honour.

Sub-article 7 (c) states “[A]n issuing bank undertakes to reimburse a nominatedbank that has honoured or negotiated a complying presentation and forwarded the

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Document 470/1135rev


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documents to the issuing bank. Reimbursement for the amount of a complyingpresentation under a credit available by acceptance or deferred payment is due atmaturity, whether or not the nominated bank prepaid or purchased before maturity.

An issuing bank’s undertaking to reimburse a nominated bank is independent of theissuing bank’s undertaking to the beneficiary.” This sub-article entitles a nominatedbank to reimbursement only if it honours or negotiates, and in the case of anomination to incur a deferred payment undertaking, the nominated bank must dothat to obligate the issuing bank to reimburse. The issuing bank would still have anindependent undertaking to the beneficiary to honour a complying presentation.

Sub-article 12 (b) states “[B]y nominating a bank to accept a draft or incur a

deferred payment undertaking, an issuing bank authorizes that nominated bank toprepay or purchase a draft accepted or a deferred payment undertaking incurred bythat nominated bank.” This sub-article specifically refers to the situation where anominated bank prepays or purchases a draft accepted or a deferred paymentundertaking incurred by that nominated bank. In the context of this query, theauthorization contained in sub-article 12 (b) only extends to a nominated bank thathas acted on their nomination by incurring their own deferred payment undertaking.It does not extend to prepayment of a deferred payment undertaking given byanother bank.

This prepayment is considered not to have been effected in accordance withsub-articles 7 (c) or 12 (b), because the nominated bank did not prepay (or pay) adeferred payment undertaking incurred by them.

However, it should be noted that a bank may agree to provide finance to abeneficiary outside the scope of UCP 600, subject to terms and conditions as may beagreed between the bank and the beneficiary. .

Example (b).

Although the nominated bank did not act on its nomination at the time of

presentation, it subsequently acted by incurring its deferred payment undertaking(“the nominated bank sends an acceptance advice to the beneficiary to honour thepresentation on its own”) and made a prepayment to the beneficiary prior to thematurity date.

It should be noted that a nominated bank may act on its nomination at any timeprior to maturity and any prepayment may be made at any time up to the datereimbursement is due from the issuing bank. The issuing bank has an obligation toreimburse at maturity when a complying presentation has been made (sub-article 7(c)).

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This prepayment is considered to have been effected in accordance with sub-articles 7 (c) and 12 (b) because the nominated bank prepaid (or paid) a deferredpayment undertaking incurred by the nominated bank.

For the avoidance of doubt, a written communication from the nominated bank,to the beneficiary, wherein it is indicated that the bank undertakes to pay a certainamount of money on a specified due date, will constitute a deferred paymentundertaking for the purposes of sub-article 12 (b). This communication may begiven, and a prepayment may be effected, at any time before the specified due date.

However, it should be noted that if a beneficiary accepts a prepayment assatisfying its right to payment at maturity, then the nominated bank may be entitledto reimbursement under sub-article 7 (c), without regard to sub-article 12 (b), on thebasis of having incurred a deferred payment undertaking and having paid it atmaturity.

The opinion(s) rendered on this query reflect the opinion of the ICCBanking Commission’s officers based on the facts under “QUOTE” above. Theydo not necessarily reflect the opinion of the ICC Banking Commission untilthe Banking Commission renders its approval or disapproval of theseopinion(s) at the next scheduled meeting.

The reply given is not to be construed as being other than solely for thebenefit of guidance and there should be no legal imputation associated withthe reply offered.

If this query relates to a matter currently under consideration by thecourts, the ICC Banking Commission will refrain from considering it foradoption as an opinion.

Neither the ICC nor any of its employees, nor any member of the BankingCommission, including the Chairman, Vice-Chairmen or Technical Advisershall be liable to any person for any loss or damage arising out of any act oromission in connection with the rendered opinion(s).

Yours sincerely,

Thierry SenechalPolicy ManagerBanking Commission

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Mr. Amerigo Gori

Secretary GeneralICC Italia

Via Barnaba Oriani, 3400197 ROMAItaly

24 February 2010

Subject: Document 470/TA.706rev2 (UCP600)

Dear Mr. Gori,


QUOTE

ICC Italia submits to the ICC Banking Commission a query with a view toreceiving its formal opinion. This query is the expanded version of a previous

question withdrawn at the last ICC Banking Commission meeting. The position andthe comments of the customer are fully reported into the query.

1. Bank B receives from a foreign bank a standby letter of credit (SBLC) subjectto the UCP 600 in favour of its client. Bank B confirms the SBLC.

2. Thereafter, the SBLC is completely amended (see annex 1.1 to 1.3). As a resultof this amendment:

the field 45A “description of goods” is no longer included. In the amendedMT700, it read: “CLOTHING ORDERS SIGNED BY [Company O]”;

the SBLC is available provided the following documents are presented:

A) A statement of default with the following content: “WE HEREBYCERTIFY THAT [Company O] HAS FAILED TO FULFIL ITS PAYMENTOBLIGATION ON THE DUE DATE (I.E. 60 DAYS AFTER INVOICEDATE WITH REGARD TO INVOICE(S) NO. … DATED ….”

B) Copy of unpaid commercial invoice (s) issued by [Company G,Country I] and made out in the name of [Company O, Country N].



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3. Within the expiry date of the SBLC, the beneficiary requests payment from theconfirming bank by presenting the two requested documents (see annex 3.2and 3.3).

4. The presented invoice is issued by the beneficiary and made out in the nameof the applicant, bears no. 22878BIS, is dated 12/12/08 and the description ofgoods section includes only the following information: “INVOICE DUE TOCREDIT ASSIGNMENT DTD 11 DECEMBER 2008 FROM THE [COMPANY D]TO OUR COMPANY FOR GOODS SHIPPED BY [COMPANY D] TO YOURCOMPANY ON OUR BEHALF AS PER THE FOLLOWING DOCUMENTS:INVOICE NO. 4317 DTD 04/08/08, INVOICE NO. 4356 DTD 18/08/08,INVOICE NO. 4388 DTD 22/08/08, INVOICE NO. 5652 DTD 17/09/08,

INVOICE NO. 7342 DTD 20/10/08, TOTAL AMOUNT …. (amount of theclaim).”

5. The declaration of default contains the following phrase: “WE HEREBYCERTIFY THAT [COMPANY O] HAS FAILED TO FULFIL ITS PAYMENTOBLIGATIONS ON THE DUE DATE (I.E. 60 DAYS AFTER INVOICE DATE)

WITH REGARD TO INVOICE (S) NO. 22878BIS DATED 12/12/08, € …(amountof the claim).”

6. Bank B refuses the documents and replies with a message, sent on 19February 2009 (see annex 4), containing the following reason:“DOCUMENTATION DOES NOT COMPLY AS IT SHOWS SHIPMENT OF

GOODS AND UNPAID INVOICES ISSUED BY [COMPANY D] DIFFERENTFROM THAT INDICATED IN THE STANDBY LC”. Note that Company D is athird party extraneous to the SBLC.

7. On the instructions of the beneficiary, the documents are sent to the issuingbank for approval without mentioning the discrepancy stated to thebeneficiary, and the latter refuses to honour the documents stating: “WEREFUSE TO HONOUR YOUR CLAIM DUE TO THAT THE INVOICE SHOWSTHAT THE GOODS IS DELIVERED “FROM [COMPANY D] TO OUR COMPANYFOR GOODS SHIPPED BY [COMPANY D] TO OUR COMPANY ON OURBEHALF.” OUR STANDBY LETTER OF CREDIT ONLY COVERS GOODSDELIVERED FROM [COMPANY G] WE REFER TO ART.16C UCP 600. WE ARE

HOLDING THE DOCUMENTS FOR YOUR DISPOSAL PENDING YOURINSTRUCTIONS” (see annex 5).

The issuing bank gives, as the reason for refusal, the same declaration in theinvoice used by the confirming bank to refuse payment.

Query

We request the ICC Banking Commission to provide an opinion on the validityof the grounds used by the confirming bank and issuing bank to refuse payment.

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We ask, in particular, what importance, if any, and if so to what extent, shouldbe given to the declarations in the invoice that, in lieu of the description of goodsinvoiced, state that the goods were sent and invoiced to the applicant by a supplierother than the beneficiary and that the related right to the credit has been assignedby the supplier to the beneficiary of the SBLC.

We ask, therefore, if this information is an element of non-compliance with respectto conflicts between data according to the UCP and international standard bankingpractices.

Analysis

The beneficiary analysis of the case at hand is reported below in full:

QUOTEIn order to guarantee a commercial transaction, the [Country N]

subject/customer [Company O] issued on the 04/02/2008 a standby L/C to [CompanyG] through our bank, Bank B.

This first issue was not respecting at all the existing commercial agreements. So,following the tip of Bank B, it has been asked to completely modify the text of theguarantee, and - on the 14/02/2008 - we received again the modified text (REF. 1.1 to1.3) clearly stating in field 79 to cancel all the previous text and all the previousamendments and clearly stating to change them with the new text issued.

We remark that this standby L/C was regularly confirmed by Bank B (item 49), soBank B became directly responsible for the payments to us in case of claim.

To be as clear as possible, we wish to inform about what exactly the textrequired as necessary documents to do the claim for such standby L/C:- Statement purportedly signed by beneficiary and authenticated by Bank B wordedas follows: we hereby certify that [Company O] has failed to fulfil its paymentobligations on the due date (i.e. 60 days after invoice date with regard to invoice(-s)no....... dated ......

- Copy of unpaid commercial invoice (s) issued by [Company G] and made out in thename of [Company O].

Just to specify and in order to show a complete outline of what happened, weinform that company D did a few deliveries of goods to company O on our behalf(operation normally allowed and not forbidden by the text of the standby L/C).

Following such shipments, company D made an assignment of its credit againstcompany O in our favour (REF. 2). The credit assignment was also regularly notified

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to company O. After this, we issued a regular commercial invoice (as pointed out inthe text of the standby L/C) to debit company O (REF. 3.3).

Unfortunately, at the expiry date company O has not settled the due amount.So, within the written deadline on the text, we gave our claim request (REF. 3.1 to3.4) to Bank B, giving them all the documents required in the standby L/C(documents above mentioned listed).

Only at that time, Bank B - instead of proceeding to refund us within 5 workingdays as specified in field no. 78 - began (leaving that the standby expire) to raiseproblems, absolutely not relating to the standby, concerning the documents we gave

them to obtain the payment.

We wish to provide a short summary of what resulted from the correspondencethat occurred with Bank B:

We sent to Bank B the correct documents to cash the invoice within the necessaryrequired deadline and there is no one formal irregularity or mistake on what wasproduced.

Following the referring rule, we know that the bank must be bound by hischecking activity only to the correct (or less) formal aspect of the documents given

for the claim, using as comparison the instructions written on the text of the samestandby L/C.In this case, the text of the standby L/C stated to present the commercial invoice (s)issued by us to company O without any other characters. So, from the text of thestandby L/C it is not resulting that the invoice should have contained any furtherelement.

The text of the standby is fully respecting the elements named in article 18 ofUCP 600 which in facts says:I - that the invoice must be issued from the beneficiary of the standby(OK, company G)

II -that the invoice must be addressed to the applicant of the standby(OK, company O)III - that the invoice must be issued with the same currency of the credit (OK, Euro)

The presence on the invoice of further details not required from the rule orfrom the text of the standby L/C (in this case the name of company D as reference forthe shipped goods) is absolutely not influential for the final conformity declaration ofthe documents, because that presence is not forbidden by any rule.

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Moreover, in the same article 18, it is written that "[T]he description of thegoods, services or performance in a commercial invoice must correspond with thatappearing in the credit". So, the description stated in our invoice is perfectly in lineand corresponding to what article 18 requires.

The further objection concerning the fact that "the invoice is not referring to acommercial sale operation between the two parties" is totally not considerablebecause it's a particular not recalled by the rule. Article 18, often used by Bank B to

justify its position, only asks that the commercial invoice is issued, respecting theabove mentioned elements (I) (II} and (III) and this was regularly made by us.

Moreover, article 4 of UCP 600 says that "[A] credit, by its nature, is a separatetransaction from the sale or other contract on which it may be based" and this totallyconfirms the full validity of our documents.UNQUOTE

ICC Italia provides the following remarks on the issue under discussion.

A) We are dealing with a beneficiary that is requesting payment of the SBLCfollowing the assignment of the credit in his/her favour that a third party has againstthe applicant of the SBLC. Assignment of this credit is something extraneous to theSBLC, but it is significant (and can’t help but be significant) only and to the extentthe invoice presented explicitly uses it as the grounds and reasons for its issuance.Therefore, a bank cannot ignore this fact. Based on this information, one mustconclude that this is not a copy of an unpaid invoice, but a completely differentdocument. This is simply a copy of a request for payment addressed to the debtor asa consequence of the underlying credit assignment, while the real (unpaid) invoicesare those that the real supplier (assignor of the credit) sent to thepurchaser/applicant of the SBLC. This is evidenced by the initial wording in thedeclaration in the so called “invoice”, which reads: “INVOICE DUE TO CREDIT

ASSIGNMENT DTD 11 DECEMBER 2008 FROM [COMPANY D] TO OUR COMPANY……” (See Annex 3.3). Since the SBLC in question requires the presentation of a

declaration of default accompanied by a copy of the unpaid invoice for a supplymade by the beneficiary, the presented document does not comply as it is not a copyof the unpaid invoice connected to the claim contemplated by the SBLC but, asstated above, a wholly different document.

Accordingly, the documents do not constitute a complying presentation since anecessary document is missing; thereby the conditions under sub-articles 7 (a) and 8(a) of the UCP have not been met.

B) We consider that the SBLC, as amended, did not determine the basis of thecontent of the invoice in relation to the shipments and/or goods which were to be

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covered therein.This merely means that any description of goods and or services appearing in theinvoice should be acceptable as there is no data to be compared. However note thatUCP sub-article 18 (c) applies and a "description of the goods, services or otherperformance" must appear in any case as legitimate content of a "commercialinvoice", not as a description of whatever nature.In this case a statement appears - instead of a description of goods or services - whichshows three main reasons not to accept the document.

1) The statement in the invoice that the goods were shipped by company D onbehalf of the beneficiary is in conflict with the issuance of the invoices by same

company D and not by the beneficiary, as should be the case. If company D isan agent of the beneficiary the latter is entitled to issue its invoice, correctlyspecifying that the goods were shipped by its agent and not mentioning otherinvoices issued by the agent.

2) If the document presented is considered an “invoice” we are dealing with asupply invoiced twice in the name of the same buyer (applicant).Consequently, either the invoice presented or the ones issued by company Dare not invoices.

3) The situation is clarified by the statement that the beneficiary is the assignee ofthe credit coming from the (unpaid) invoices issued by company D listed in

the document. For this reason, the document presented is not the "copy ofcommercial unpaid invoice" requested by the SBLC; such unpaid invoicesbeing those issued by company D.

The document presented is not an invoice neither under a commercial point of view (same supply invoiced twice) nor under a legal point of view (paymentrequested under credit assignment and not under a credit coming from a supply of

whatever nature).

C) As the SBLC was issued in order to protect a credit coming from a supplymade by the beneficiary towards the applicant, the absence of this event – expressly

declared by the beneficiary on the presented document – is sufficient reason torefuse payment. It is not the bank’s responsibility to verify the validity of the creditassignment; this is especially true if the assignee (beneficiary) provides evidence thatthe debtor was notified or proves the latter accepted it. The two banks (confirmingand issuing), on the basis of the information set out in the invoice, and therefore onthe incongruity between the identity of the actual creditor (supplier) and the partyrequesting the claim (beneficiary / assignee), legitimately refuse to pay for a claimarising from a transaction different from that for which the SBLC was issued. It is asthough banks were dealing with paying a promissory note.

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Since the declaration evidences that the party who signed the documentpresented is not the issuer of the unpaid invoices (the SBLC requires “COPY OFUNPAID COMMERCIAL INVOICE ISSUED BY [COMPANY G]”), this presentation isnot in compliance as a conflict exists between the identity of the beneficiary requiredunder the SBLC and that of the issuer of the unpaid invoice. Sub-article 14 (d) of theUCP applies.

Conclusion

ICC Italia deems that the discrepancy raised by the two banks is valid on thegrounds of A), B) and C) above. The wording of the refusal messages of both the

confirming and issuing bank is deemed correct under C).

ANALYSIS & CONCLUSION

The standby letter of credit required the presentation of an unpaid invoice ofthe beneficiary (made out in the name of the applicant) and a statement of defaultcertifying as to the non-payment of that invoice (or other invoices) on the due date of60 days after the date of the invoice(s). The standby letter of credit, as amended, didnot determine the basis for the content of the invoice in relation to the shipmentsand/or goods which were to be covered therein. The invoice was dated 12 December2008 and the claim was made on 18 February 2009 (68 days after the date of theinvoice).

The absence, in the standby, of a description to appear on the invoice(s) wouldallow the beneficiary to submit an unpaid invoice that otherwise complies with theterms and conditions of the standby.

The only unpaid invoice that has been presented is the invoice of the beneficiarythat is made out in the name of the applicant. In this context, the refusal notice ofBank B is incorrect in stating that unpaid invoices were issued by company D. Inaddition, the refusal notice of the issuing bank refers to the standby only covering

goods delivered from the beneficiary, when this is not evident from the wording ofthe standby, as re-issued. Both refusal notices are not valid for the reasons stated.

It is the responsibility of the beneficiary to ensure that their invoice meets therequirements of their local law. A bank's responsibility is to examine the invoiceaccording to the requirements of the credit, the UCP and international standardbanking practice.

It is agreed that any assignment that may exist between the beneficiary andcompany D is a matter between those parties, outside the scope of the standby and

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UCP, given that the beneficiary has presented the required documents and,presumably, payment having been requested by the beneficiary is to be made to theiraccount. It should be noted that the wording of the invoice indicates that althoughcompany D shipped the goods to the named applicant, such shipments were madeon behalf of the named beneficiary.

CONCLUSION

The conclusion of the national committee is not agreed.

In the context of the wording of the standby and the documents presented, we

can find no reason to refuse the presentation. Although one would not expect theinvoice to be issued in the manner of completed by the beneficiary or for the form oftransaction that the invoice is professing, the standby did not give an indication ofthe underlying transaction(s) to which it was subject or prohibit an invoice beingissued in the manner that has been made by the beneficiary.





Yours sincerely,


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Mr. Ashok UmmatICC IndiaFederation HouseTansen MargNew Delhi - 110 001India

and

Ms. Svetlana DerkachDirector

ICC Russia21 build 1 Bolshaya Polyanka StreetMoscow 119180Russia

8 February 2010

Subject: Document 470/TA.708rev (UCP600) (Joint Submission)

Dear Mr. Ummat and Ms. Derkach,

Thank you for your joint submission of a query regarding UCP 600. Please findbelow the opinion of the officers of the Banking Commission.

QUOTE

We have received a query from two of our member banks – Bank V (the issuingbank) and Bank S (bank of the beneficiary), presenting a case for an opinion of theBanking Commission regarding the practical application of UCP 600. The same isreproduced below:

Bank V issued three L/C’s that are available with them. Beneficiary has presenteddocuments under all three L/ С’s and they were forwarded to the issuing bank byBank S. After examination of the documents, the issuing bank determined that theydid not constitute a complying presentation because of the discrepancies statedbelow:



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L/C No.1 discrepancies:

Quote1. Port of Discharge in B/L does not correspond with LC terms, Field 44F. As per

L/C terms port of discharge was stated as “Tallinn port, Estonia”, but in the B/Lpresented it was indicated as “Tallinn” only.

2. Seal Nos in comm invoice and packing list do not correspond with seal nos inB/L. The B/L evidenced seal nos, for example 903236, 903233. In theenclosure “Chassis list for final bill of lading” to the commercial invoices andpacking lists seal numbers were indicated as MSC903236, MSC903233.

3. Certificate of origin presented under L/C was issued and stamped by ABC LTD,

although as per L/C terms Certificate of origin must be issued by beneficiarythat is ABC LTD, INTERNATIONAL BUSINESS.

Unquote

Comments of Bank S:

1. As per LC: Tallinn Port, Estonia. As per Bill of Lading: TallinnNot mentioning the name of the country does not in any way make the B/Ldiscrepant.

2. The Seal No’s in the B/L did not show the Prefix ‘MSC’ which is an

abbreviation of the shipping company’s name. The B/L is on the shippingcompany’s letterhead. The prefix MSC i.e., abbreviation of shipping company’sname, is mentioned in invoice and packing list. ISBP, Publication 681paragraph 35, explains that additional information may not be construed as adiscrepancy

3. Name and address of the company has been mentioned correctly in thecertificate of origin. In the exporter’s name column of certificate of origin,name of division – International Business – is appearing. The certificate hasbeen correctly signed for the company - ABC LTD.

Issuing bank’s comments:

1. According to sub-article 20 (a) (iii) of UCP 600, a B/L must appear to indicateshipment from the port of loading to the port of discharge stated in the credit.Thus the port of discharge should be indicated in strict compliance with L/Cterms i.e., “Tallinn port, Estonia”. In the B/L it was indicated the name of thecity and that it is a port (by the pre-printed wording in the B/L), but the nameof the country is missing. This is a discrepancy.

2. The B/L evidenced seal nos, for example 903236, 903233. In the enclosure“Chassis list for final bill of lading” to the commercial invoices and packinglists the seal numbers were indicated as MSC903236, MSC903233. The issuing

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bank considered that all letters and figures included in the seal numberformed an integral part of the seal number and determined that data in thecommercial invoices and packing lists were in conflict with data in the B/L.The data concerning seal numbers, if indicated in the enclosure “Chassis listfor final bill of lading” to the commercial invoices and packing lists should be

written as in the B/L or in a way that allows the issuing bank to determine, onits face, that it is not in conflict with the B/L. When examining the documents,on their face, the issuing bank could not come to the conclusion, withoutadditional investigation and explanations, that the seal numbers MSC903236and 903236 mean the same. This is a discrepancy.

3. L/C required, as per Field 46A (Documents Required) “certificate of origin

issued by beneficiary”, as per Field 59 of the SWIFT MT700 the name of thebeneficiary is shown as “ABC LTD, INTERNATIONAL BUSINESS”. Certificate oforigin was issued and stamped by ABC LTD. When examining the certificate oforigin, the issuing bank could not determine on its face, and should notinvestigate to determine whether the beneficiary, required in the L/C andindicated in the certificate of origin, is the same company or two differentcompanies.

According to sub-article 14 (a) of UCP 600 “A nominated bank acting on itsnomination, a confirming bank, if any, and the issuing bank must examine apresentation to determine, on the basis of the documents alone, whether or

not the documents appear on their face to constitute a complyingpresentation”. According to article 34 of UCP 600 banks assume no liability or responsibilityfor the legal effect of any document, or for the general and particularconditions stipulated in a document or superimposed thereon. The names“ABC LTD, INTERNATIONAL BUSINESS” and “ABC LTD”, when considered inthe context of the examination of documents, on their face, belong to twodifferent companies. Therefore, the certificate of origin is discrepant.

L/C No. 2 discrepancies

Quote1. Port of Discharge in B/L does not correspond with LC terms in Field 44F. Portof discharge was stated in L/C as “St. Petersburg, Russia”, but in the B/Lpresented port of discharge was indicated as “St. Petersburg, Ru.

2. Seal Nos in comm invoice and packing list do not correspond with seal nos inB/L. The B/L evidenced seal nos, for example 9072496, 9072464. In theenclosure “Chassis list for final bill of lading” to the commercial invoices andpacking lists seal numbers were indicated as APL9072496, APL9072464.

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3.

Certificate of origin presented under L/C was issued by ABC LTD, although asper L/C terms Certificate of origin must be issued by beneficiary that is ABCLTD, INTERNATIONAL BUSINESS.

4. CTR Number does not correspond with LC terms. In the commercial invoicepresented the number of contract was indicated twice and differently. In thedescription of goods it was stated 0404044401, but when indicated together

with the country of goods’ origin the number of contract was stated: “Countryof goods origin: the name of the country. Contract number 04040044401Dt.XX.XX.2007”.

5. Notify party’s address does not correspond with LC terms. As per L/C terms innotify party‘s address it should be stated “St. Petersburg, Russia”, but in the

B/L presented in notify party’s address there was indicated “At. Petersburg,Russia”.

Unquote

Comments of Bank S:

1. As per LC: St. Petersburg, Russia. As per BL: St.Petersburg, RuShort form of the name of the country does not in any way make the BLdiscrepant.

2. The Seal No’s in the B/L did not have the Prefix APL, which is an abbreviation

of the shipping company’s name. The B/L is on the shipping company’sletterhead. The prefix APL i.e., abbreviation of shipping company’s name, ismentioned in invoice and packing list. ISBP, ICC Publication 681, paragraph35 explains that additional information may not be construed as adiscrepancy.


4. This is a very generic discrepancy that has been pointed out. It does not statein which document there is a discrepancy. However, we would like to

mention that in the invoice, in the description of goods CTR number and date was given exactly as it appears in the LC. The contract no. is once again givenin the invoice where it has been mentioned as 04040044401 as against thenumber 0404044401 as per LC.

5. As per LC: St. Petersburg. As per BL: At. Petersburg.This is a typographical error and does not have any material effect on thecredit condition and should not be considered as a discrepancy

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1. According to sub-article 20 (a) (iii) of UCP 600, a B/L must appear to indicateshipment from the port of loading to the port of discharge stated in the credit.Thus, the indication of the port of discharge should be in strict compliance

with L/C terms, without any abbreviations. UCP 600 and ISBP do not permitthe indication of information about the port of discharge by using codes or“short forms” instead of writing out the name in full. The name of the countryshould be stated as Russia or Russian Federation.The abbreviation “Ru” is not the internationally applied code or “short form”of the name Russia. The document is discrepant.

2.

The B/L evidenced seal no’s, for example 9072496, 9072464. In the enclosure“Chassis list for final bill of lading”, to the commercial invoices and packinglists, seal numbers were indicated as APL9072496, APL9072464. The issuingbank considered that all letters and figures included in the seal numberformed an integral part of the seal number and determined that data in thecommercial invoices and packing lists were in conflict with data in the B/L.The data concerning seal numbers, if indicated in the enclosure “Chassis listfor final bill of lading” to the commercial invoices and packing lists, should be

written as in the B/L or in a way that allows the issuing bank to determine, onits face, that it is not in conflict with the B/L. When examining the documents,

on their face, the issuing bank could not come to a conclusion, withoutadditional investigation and explanations, that seal numbers APL9072496 and9072496 mean the same. This is a discrepancy.

3. L/C required, as per Field 46A (Documents Required) “certificate of originissued by beneficiary” and according to Field 59 the name of the beneficiary is“ABC LTD, INTERNATIONAL BUSINESS”. Certificate of origin was issued andstamped by ABC LTD. When examining the certificate of origin the issuingbank could not determine, on its face, and should not investigate todetermine whether the beneficiary, required in the L/C and indicated in thecertificate of origin, is the same company or two different companies.

According to sub-article 14 (a) of UCP 600 “A nominated bank acting on its

nomination, a confirming bank, if any, and the issuing bank must examine apresentation to determine, on the basis of the documents alone, whether ornot the documents appear on their face to constitute a complyingpresentation”.

According to article 34 of UCP 600 banks assume no liability or responsibilityfor the legal effect of any document, or for the general and particularconditions stipulated in a document or superimposed thereon. The names“ABC LTD, INTERNATIONAL BUSINESS” and “ABC LTD”, when considered inthe context of the examination of documents, on their face, belong to two

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different companies.Therefore, the certificate of origin is discrepant.

4. L/C stipulated, in field 45A (description of goods) number of contract as0404044401 and also the indication of the country of goods, origin andnumber of contract in the commercial invoice (“Commercial invoice for thefull value of the actually shipped goods, signed by the beneficiary indicatingthe country of goods’ origin, number of the contract and number of the letterof credit”).In the presented commercial invoice, the number of the contract wasindicated twice and differently. In the description of goods it was stated as0404044401 (as per L/C), but when indicated together with the country of

origin the number of the contract was stated not as per L/C: “Country of goodsorigin: the name of the country. Contract number 04040044401Dt.XX.XX.2007”.

According to sub-article 14 (d) of UCP 600 data in the document must notconflict with each other or the credit. The number of the contract, if stipulatedby the L/C and stated in the commercial invoice more than one time, shouldbe written as per L/C terms and should not be indicated differently. It is adiscrepancy.

5. The indication of the address is the significant part of the informationconcerning the notify party. L/C terms do not stipulate that misspellings are

acceptable. Thus notify party‘s address should be stated as in L/C: “St.Petersburg, Russia”.In the B/L, the notify party’s address was indicated as “At. Petersburg, Russia”that does not allow the issuing bank to identify the name of the city.The document is discrepant.

L/C No. 3 discrepancies:

Quote1. Port of Discharge in B/L does not correspond with LC terms, Field 44F. Port of

discharge was stated in L/C as “St. Petersburg, Russia”, but in the B/L

presented port of discharge was indicated as “St. Petersburg, Ru.2. Seal Nos in comm invoice and packing list do not correspond with seal nos inB/L.The B/L evidenced seal nos, for example 9105045, 9105028. In the enclosure“Chassis list for final bill of lading” to the commercial invoices and packinglists seal numbers were indicated as APL9105045, APL9105028;

3. Certificate of origin presented under L/C was issued by ABC LTD, although asper L/C terms certificate of origin must be issued by beneficiary that is ABCLTD, INTERNATIONAL BUSINESS.

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4.

L/C stipulated DHL courier receipt evidencing dispatch of one originalcommercial invoice and 1/3 original B/L document to consignee (Company T.H. DEF). DHL courier receipt evidenced dispatch of the set of original invoiceand 1/3 B/L to CJSC DEF.

Unquote

Comments of Bank S:

1. As per LC : St. Petersburg, Russia. As per Bill of Lading : St. Petersburg, RuShort form of the name of the country does not in any way make the BLdiscrepant.

2.

The Seal No’s in the B/L did not have the Prefix APL, which is an abbreviationof the shipping company’s name. The B/L is on the shipping company’sletterhead. The prefix APL i.e., abbreviation of shipping company’s name, ismentioned in the invoice and packing list. ISBP Publication 681, paragraph 35explains that additional information may not be construed as a discrepancy.


4. The DHL courier receipt is consigned to the exact address as mentioned in the

credit and was consigned to CJSC DEF.


1. According to sub-article 20 (a) (iii) of UCP 600, a B/L must appear to indicateshipment from the port of loading to the port of discharge stated in the credit.Thus, the indication of the port of discharge should be in strict compliance

with L/C terms, without any abbreviations.UCP 600 and ISBP do not permit the indication of information about the portof discharge by using codes or “short forms” instead of writing out the namein full. The name of the country should be stated as Russia or Russian

Federation. The abbreviation “Ru” is not the internationally applied code or“short form” of the name Russia. The document is discrepant.2. The B/L evidenced seal no’s, for example 9105045, 9105028. In the enclosure,

“Chassis list for final bill of lading” to the commercial invoices and packinglists, the seal numbers were indicated as APL9105045, APL9105028. Theissuing bank considered that all letters and figures included in the sealnumber formed an integral part of the seal number and determined that datain the commercial invoices and packing lists were in conflict with data in theB/L.The data concerning seal numbers, if indicated in the enclosure “Chassis list

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for final bill of lading” to the commercial invoices and packing lists, should be written as in the B/L or in a way that allows the issuing bank to determine, onits face, that it is not in conflict with the B/L. When examining the documents,on their face, the issuing bank could not come to the conclusion, withoutadditional investigation and explanations, that the seal numbers APL9105045and 9105045 mean the same. This is a discrepancy.

3. L/C required, as per Field 46A (Documents Required) “certificate of originissued by beneficiary”. According to Field 59, the name of the beneficiary is“ABC LTD, INTERNATIONAL BUSINESS”. Certificate of origin presented underthe L/C was issued and stamped by ABC LTD. When examining the certificateof origin, the issuing bank could not determine on its face, and should not

investigate to determine, whether the beneficiary required in the L/C, andindicated in the certificate of origin, is the same company or two differentcompanies.

According to sub-article 14 (a) of UCP 600 “A nominated bank acting on itsnomination, a confirming bank, if any, and the issuing bank must examine apresentation to determine, on the basis of the documents alone, whether ornot the documents appear on their face to constitute a complyingpresentation”.

According to article 34 of UCP 600 banks assume no liability or responsibilityfor the legal effect of any document, or for the general and particular

conditions stipulated in a document or superimposed thereon. The names“ABC LTD, INTERNATIONAL BUSINESS” and “ABC LTD”, when considered inthe context of the examination of documents, on their face, belong to twodifferent companies. Therefore, the certificate of origin is discrepant.

4. A DHL courier receipt, to fulfill its function, is to confirm the dispatch ofdocuments as indicated in the L/C, to the consignee stipulated in the L/C.

According to L/C terms consignee was indicated as Company T. H. DEF. Whenpresented, the DHL courier receipt evidenced dispatch of the documents toCJSC DEF. The name of the consignee in the DHL courier receipt differs fromthe name of the consignee required by the L/C. L/C terms concerning the

dispatch of the documents to the named consignee were not fulfilled. DHLcourier receipt evidenced that documents were sent to a party not stipulatedin the L/C and that makes the document discrepant.

We will greatly appreciate receiving your opinion on the above at the earliest.

ANALYSIS

L/C No’s. 1, 2 and 3:

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Discrepancy 1 – As stated in the analysis to ICC Opinion TA.701, there is norequirement in the UCP or international standard banking practice for the countryname to appear against a stated city shown as the place of receipt, port of loading,port of discharge or place of delivery. Absence of the country name is not a reasonfor refusal, notwithstanding that such words are stated in the credit. In respect ofL/C’s 2 and 3, the use of ISO country code RU instead of Russia does not create aconflict of data.

Discrepancy 2 – The seal numbers were those of the shipping company thatissued the bill of lading i.e., MSC or APL. Sub-article 14 (d) states “[D]ata in adocument, when read in context with the credit, the document itself and

international standard banking practice, need not be identical to, but must notconflict with, data in that document, any other stipulated document or the credit.” Inthe context of the documents presented, the data relating to the seal numbers is notidentical, but there is no conflict with the number itself. The insertion of MSC or APLin front of the seal number, on the commercial invoices and packing lists, should notbe seen as a reason for refusal.

Discrepancy 3 – The name of the beneficiary is ABC Ltd. International Businessis a designation of a division and not necessarily part of the name of the company.The certificate of origin is signed by ABC Ltd. The document was issued by the

beneficiary and there is no discrepancy.

L/C No.2:

Discrepancy 4 – The contract number was quoted twice on the commercialinvoice, once incorrectly (by the addition of an extra “0”). The contract reference wasstated correctly in relation to, and describing, the description of the goods.

Sub-article 14 (d) states “[D]ata in a document, when read in context with thecredit, the document itself and international standard banking practice, need not beidentical to, but must not conflict with, data in that document, any other stipulateddocument or the credit.”

ISBP Publication 681, paragraph 25 states “[A] misspelling or typing error thatdoes not affect the meaning of a word or the sentence in which it occurs does notmake a document discrepant.” In the context of this discrepancy, it is clearly atypographical error that has occurred.

Whilst the additional insertion of the contract number was incorrect, in thecontext of the commercial invoice the information had been stated correctly and thesecond reference to the contract number was somewhat superfluous.

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Discrepancy 5 – Sub-article 14 (j) includes “[H]owever, when the address andcontact details of the applicant appear as part of the consignee or notify party detailson a transport document subject to articles 19, 20, 21, 22, 23, 24 or 25, they must beas stated in the credit.”

Issues relating to the application of sub-article 14 (j) were covered in ICCOpinion TA.696 which included in its analysis “[T]he first sentence of sub-article 14(j) allows some latitude when the address of the [beneficiary and/or] applicantappear on documents i.e., that it may be the same address as that which is stated inthe credit or a different address but within the same country. The position in the lastsentence is that the address of the applicant must be that which is stated in the credit

when it appears, as in this case, as part of the notify party detail. However, this doesnot mean that it must be identical but merely that it must not appear to conflict.”

In this particular issue, there can be no doubt that the address, whilst notexactly that which is stated in the credit, is the same. ISBP Publication 681, paragraph25 would also apply here. Therefore, there is no discrepancy.

L/C No. 3:

Discrepancy 4 – The credit required an original commercial invoice and 1/3 billof lading to be sent to the named consignee. Whilst the documents were couriered tothe correct address, the name of the company on the courier receipt was not thenamed consignee. The courier receipt is discrepant.

CONCLUSION

L/C No. 1 - The documents are compliant and the issuing bank must honour.

L/C No. 2 - The documents are compliant and the issuing bank must honour.

L/C No. 3 – The documents are discrepant in respect of discrepancy 4 only.



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Yours sincerely,


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Mr. Wilko GunsterSecretary GeneralICC NetherlandsPostbus 95309, 2509 CH Den HaagBezuidenhoutseweg 12, 2594 AV DenHaagThe Netherlands

4 January 2009

Subject: Document 470/TA.709

Dear Mr. Gunster,


QUOTE

We would like to seek an official opinion from the Banking Commission on theacceptability of insurance documents with a date of issuance which is later than thedate of shipment, that indicate cover “from warehouse to warehouse” and no furtherindication of a date as to when the cover is effective.

Within our National Group of Experts there is a difference of opinion whethersuch an insurance document is acceptable or not.

UCP 600 sub-article 28 (e) reads “The date of the insurance document must beno later than the date of shipment, unless it appears from the insurance documentthat the cover is effective from a date not later than the date of shipment.”

Some opine that such an insurance document is acceptable, based on “unless itappears from the insurance document that the cover is effective from a date not laterthan the date of shipment” of the afore-mentioned sub-article. Under a “warehouseto warehouse cover” the goods are so covered from the time they leave the shipper’s

warehouse to the time of arrival at the warehouse of destination.



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This opinion is also supported by Official Opinion R234 (issue 2) which statesunder its analysis: “The so-called "Transit Clause" indeed covers the goods,uninterruptedly, from end-to-end until the final point of destination, not later than60 days after being unloaded from the carrying ship. Therefore, it is only the date ofthe taking charge of risks that should be considered, and not the date of thecessation of risks at the place of destination.” (emphasis added).

Others opine that such an insurance document is not acceptable based on thesame UCP 600 sub-article: “The date of the insurance document must be no laterthan the date of shipment,” and UCP 600 sub-article 14 (a) which reads that apresentation must be examined, on the basis of the documents alone, to determine

whether or not the documents appear on their face to constitute a complyingpresentation. Meaning, that a document checker is not expected to examine detailsof cover to ascertain the effective date of cover.

It is recognized that ICC Publication No. 680 (Commentary on UCP 600) is apublication not approved by the Banking Commission, but it seems that there wasalso a discussion about this topic within the Drafting Group as evidenced by the texton page 132 “Some ICC national committees suggested that the date of an insurancedocument which is later than the date of shipment should be acceptable, since theInstitute Cargo Clauses cover the "Transit Clause" as indicated in the policy. The

insurance attaches from the time the goods leave the warehouse or place of storageat the place named therein for the commencement of the transit. However, the principle of examining a presentation to determine, on the basis of the documentsalone, whether or not the documents appear on their face to constitute a complying

presentation, applies. In respect of sub-article (e), a document examiner is notexpected to check details of the specific Institute Cargo Clauses to ascertain theeffective date of cover .”

ANALYSIS

Sub-article 28 (e) contains a fundamental rule that is to be applied, amongst

others, to the examination of an insurance document i.e., that the date of theinsurance document must be no later than the date of shipment. However, this ruleis qualified to the extent that an insurance document dated later than the date ofshipment is acceptable, if it appears to indicate that cover was effective from a dateno later than the date of shipment.

An insurance document dated after the date of shipment will be acceptable ifthe insurance document indicates that cover has been effected from warehouse to

warehouse. For example, an insurance document indicating ‘from WarehouseLondon to Warehouse Hong Kong’ or ‘insurance effected warehouse to warehouse’

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or similar wording, evidences that the goods have been insured from the momentthat they were delivered into the stated warehouse. In these circumstances, itmatters not as to when the insurance document was dated, as the coveragecommenced prior to the date of shipment.

Document examiners are not required to know whether specific insurance risks,such as Institute Cargo Clauses (A), contain warehouse to warehouse provisions. Aninsurance document must clearly indicate that coverage has been made ‘warehouseto warehouse’ to be compliant under sub-article 28 (e), when the date of theinsurance document is later than the date of shipment.

It should also be noted that an insurance document can also appear to indicatethat cover is effective from a date no later than the date of shipment, by specific

wording to this effect. For example:

A bill of lading is dated 22 December 20xx and the insurance document is dated23 December 20xx. However, the following data (or wording of similar effect) isindicated on the insurance document “Insurance effective as of 22 December 20xx”.

CONCLUSION

An insurance document that is dated later than the date of shipment, but clearlyindicates that coverage has been effected on a warehouse to warehouse basis isacceptable.




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Yours sincerely,


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Mr. Ahsan AzizChairmanICC Pakistan Banking Commission

V.M. House, West Wharf RoadP.O. Box 4050Karachi 74000Pakistan

4 January 2010

Subject: Document 470/TA.711rev

Dear Mr. Aziz,

Thank you for your query regarding URC 522. Please find below the opinion ofthe officers of the Banking Commission.

QUOTE

We have an issue regarding non-payment against our export collection

documents.

Export documents for USD11,200.00 were sent for collection by one of ourbranches, to Bank A in Country K. Documents were dispatched to the bank on July17, 2009. Meanwhile, the buyer approached Bank A for issuance of a delivery orderagainst a copy of an air waybill faxed to them by our client (exporter). The goods

were consigned to Bank A. Bank A issued the delivery order and the goods werereleased.

Later, the original documents were returned by Bank A, unpaid, underinstructions of their client/buyers. However, we are insisting that Bank A make

payment against our documents on the plea that as the buyer has received the goodsthen what is the justification for returning the documents? Since Bank A has beeninstrumental in releasing the goods to the drawee, we hold them responsible formaking payment. The actions of the bank in returning the documents are totally

wrong, unjustified and against international banking rules. This is especially so whenthe buyers have taken delivery of the goods against a delivery order issued by Bank A.It is true that under URC 522 banks are not liable to make payment against collectiondocuments, yet in this case Bank A has involved itself in the transaction by issuing thedelivery order and has become directly responsible for making payment against the



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documents. We request you to examine this issue and intimate to us if our stance iscorrect. Bank A is not responding to any of our communications in this respect.

ANALYSIS

Unless the consigning of the goods to the bank was agreed with Bank A, thisshould not occur (URC 522 sub-article 10 (a)).

The buyer approached Bank A for the issuance of a delivery order based on thefact that the goods were consigned to Bank A. Bank A was not in possession of thecollection instruction at that time, but should have enquired as to the nature of the

transaction before agreeing to the request for issuance of a delivery order. Bank Ahad the option of declining the request and to await the receipt of the collectioninstruction before proceeding further.

The URC do not include any rules relating to the release of cargo through ashipping guarantee, delivery order or the like. However, article 9 does require thatthe banks involved in the collection instruction act in good faith.

When issuing a delivery order or shipping guarantee and the like, the collectingbank should, as a matter of best practice, simultaneously take an instruction, fromthe buyer, to the effect that the collection will be honoured upon presentationnotwithstanding any errors or defects in the documents or contestation of the buyer.

CONCLUSION

The collecting bank having issued a delivery order, without taking an instructionfrom the buyer to honour the underlying collection instruction may be liable underthe applicable law.




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Yours sincerely,

Thierry Senechal

Policy ManagerBanking Commission

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Mr. Ahsan AzizChairpersonICC Pakistan

V.M. House, West Wharf RoadP.O. Box 4050Karachi 74000Pakistan

26 January 2010


Dear Mr. Aziz,


QUOTE

1. Bank E, Country R issued thirteen (13 ) irrevocable documentary credits,subject to UCP 600, for various amounts totalling USD1,786,207.00 throughBank D, Country G to advise through Bank A, Country P. Bank A was anominated bank. Despite this request, Bank D forwarded the credits to theirCountry P Office who advised them directly to the beneficiary.

Payment terms were deferred payment at 60 days from B/L date, for elevenL/Cs and 90 days from B/L date for the other two.

2. Beneficiary presented to Bank A 13 sets of shipping documents totaling USD1,736,609.44 which were forwarded to Bank E who accepted the documentsand advised the due dates. Due to non-receipt of funds on the due dates Bank

A sent reminders to Bank E by SWIFT and e-mail for which no response was

received.

3. In December 2008, in response to a telephone call, Bank E informed Bank Athat Country R Central Bank had placed Bank E under Temporary

Administration for six months, with effect from October 29, 2008. The aboveconversation was followed by a SWIFT message dated December 18, 2008confirming that the Regulator had appointed a State Agency for stabilization ofthe Bank’s financial situation and overseeing the use of credit funds providedby the Central Bank. They also mentioned that the temporary administration

was carrying out a revision of outstanding obligations and other banking



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activities and a positive decision on all L/C payments will be made shortly inour favor.

4. We strongly believe that Bank E should honour its obligation / liability underthe documentary credits and, as such, we made constant and protractedfollow-up through reminders by SWIFT messages and letters to Bank E, theCentral Bank and the State Agency. We requested them to expedite paymentof our export proceeds with good value as per their “Advice of Payment”,reminding them about their “liability” under UCP 600 and not to defer withthe future strategy. Bank A received some messages including the following:

•

SWIFT message dated January 29, 2009 from Bank E mentioning thatthey “have already informed us of the reasons for non-payment on18.12.08, since then there was no change in the present state of affairsin the bank”.

• SWIFT message dated February 19, 2009 from the State Agencyinforming Bank A that the Temporary Administration will perform itsduties until April 29, 2009 and thereafter a possible change ofshareholder structure is expected in the following 1-2 months. L/Csettlements with the concerned applicant were the reasons for the

economic losses of Bank E. They advised Bank A that Bank E hassuspended all current payments under the L/Cs. However, they assuredus of the true intention of the Bank to solve this problem, consideringinterests of all parties involved. After the changes in investors / newshareholders they will define their future strategy and they might take adecision on settlement of outstanding obligations under the L/Cs. Theyrequested Bank A’s understanding and patience and expressedcommitment to a positive resolution of the present situation.

• SWIFT message dated June 11, 2009 from Bank E informing Bank A ofthe new management taking over and that they are carrying out a

revision of outstanding obligations and claims under L/Cs. They assuredBank A of their “commitment to settle the matter of payments under theL/C’s in Bank A’s favour at the earliest possible date”.

• Letter dated July 15, 2009 and SWIFT message dated July 16, 2009 fromState Agency and Bank E, respectively, with almost the same text. Theymentioned that L/Cs opened by the applicant with them were of an‘unsecured type” without any collateral or liquid pledge, nor did thebank carry out qualitative or quantitative risk assessment of the effectedtransactions. About half of overdue debt will likely not be repaid. They

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believe that L/C transactions of the applicant represent a scheme forstealing the bank’s money. They reiterated that criminal charges againstsome ex-managers of the bank were filed with “investigations” also onmoney laundering and terrorist financing. They concluded thatrepayment of the bank’s obligations under the L/Cs is possible only afterthe legal review on the concluded transactions is carried out.

5. Bank A totally disagrees with their intention for deferring the payment for anindefinite period due to any mismanagement or unlawful activities in theirbank by some ex-managers. Bank A has nothing to do with any default by theircustomer. As it is purely their internal affair Bank A kept on reminding all

concerned parties in Country R of their obligations under UCP 600, but to noavail. It appears that they are trying to avoid their liability by using delayingtactics. On August 27, 2009, the new management and / or stakeholders ofBank E changed the name of the bank and re-named it “Bank P”. Needless tomention that Bank E was originally established in 1990 with the same name.

6. Bank A therefore seek your kind assistance in helping us by using your goodoffices to convince the management / owners of Bank E now renamed as“Bank P” and the Central Bank of Country R to honour their obligations undertheir documentary credits. They should immediately arrange to remit

proceeds, with interest at prevailing rate, losses and out of pocket expenses toBank A, without further delay.

ANALYSIS

Bank E, now known as Bank P, confirmed that the documents complied withthe terms and conditions of the 13 credits and advised the due dates in respect ofeach drawing made thereunder. As a consequence, Bank E had an obligation tohonour on the due dates that were advised to Bank A.

Issues relating to the circumstances under which the credits were issued and the

seemingly lack of controls that existed in Bank E, are outside of the scope of UCP butdo not detract from the obligations of Bank E that are created within the UCP and, inparticular, article 7. It should also be noted that legal and regulatory issues areoutside the control of the ICC and the ICC cannot offer any position in this respect.

Despite the above, it must be recognized that the involvement of the CentralBank and an appointed State Agency, to oversee the bank’s affairs will, as a matter ofnecessity, postpone or at the very least defer the payments that are due under thesecredits, pending finalization of their investigation.

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CONCLUSION

Bank E issued 13 documentary credits and Bank A apparently acted in goodfaith in handling those transactions. There is no inference in the query that Bank A

were aware of any issues such as those discussed in the query i.e., money launderingand terrorist activity.

Bank E (now Bank P) has an obligation to honour the drawings and it must behoped that the Central Bank and the State Agency of Country R will do everything intheir power to bring this matter to a swift conclusion recognizing the responsibilitiesthat befall an issuing bank under the UCP and the credit itself.

The actions of the applicant and/or the previous management of Bank E shouldnot be an influence or deciding factor over whether Bank A receives the proceeds ofthe 13 drawings. Presuming that Bank A acted on their nomination, Bank A shouldbe reimbursed for the drawings, plus delayed payment interest at the prevailingrates. If Bank A did not act on their nomination, Bank E is obligated to pay thebeneficiary who has presented complying documents.

The question of and determination of, losses and out of pocket expenses, willneed to be proven and agreed between Bank E (now Bank P) and Bank A.




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Yours sincerely,

Thierry SenechalPolicy Manager

Banking Commission

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Mr. Pavel AndrleSecretaryBanking Commission ICC CRThunovska 12,118 00 Prague 1Czech Republic

26 January 2010

Subject: Document 470/TA.713

Dear Mr. Andrle,

Thank you for your query regarding URC 522. Please find below the opinion ofthe officers of the Banking Commission.

QUOTE

We are repeatedly acting as a remitting bank under documentary collections“documents against acceptance” drawn by the same drawer, on the same drawee,and being subject to URC 522. The collections are sent through Bank B, Country Gacting both as collecting and presenting bank. Regarding payment of charges, thecollection instructions expressly state the following:

“Your charges and settlement charges of all banks involved are for drawee’saccount. These charges may not be waived, if refused, do not deliver documents.”

The collection instructions also contain the following clause:“Please confirm acceptance of the bill by authenticated swift as soon as it isaccepted.”Following acceptance tracer repeating the request (“Pls inform us by return if a/m

bills of exchange were accepted.”) we received acceptance by MT412 SWIFT.

Upon payment, the proceeds were subject to deduction of ‘SWIFT charge’ GBP15.00 (each collection). We demanded that collecting bank refund the SWIFT charge,reminding them that the collection instruction expressly stated that all their charges

were for account of drawee and they were not allowed to waive these charges.Collecting bank replied as follows: “You stated all our charges for drawee which wehave. GBP 15.00 is your charge, as you requested a SWIFT reply when acceptanceactioned. This incurred a charge of GBP 15.00 for the SWIFT. We will not berefunding this.” We replied that our collection was subject to URC 522 and under



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sub-article 26 (c) (ii) “The collecting bank must send without delay advice ofacceptance to the bank from which the collection instruction was received.” Weargued consequently that sending acceptance advice is a standard of collectionprocessing under URC 522 and that we requested nothing beyond a requirementthat is already contained in URC 522. We insisted that all charges under ourcollection were for drawee’s account and were not allowed to be waived, hence allcharges connected with standard processing of the collection must be claimed fromdrawee, the deduction was not authorised and the amount must be returned. Thecollecting bank replied, inter-alia that “Under URC 522 this charge is for youraccount, not the drawee, we will therefore not be refunding the charges and our filesremain closed.” URC 522 sub-article 26 (c) does not expressly require that these

advices be sent by SWIFT, however, we expressly requested SWIFT advice because wemust consider this to be the most convenient, efficient and cheapest advising methodin this case.

We would like to seek your opinion on the following question:

Was the collecting bank entitled to deduct their “SWIFT charge”, although allcharges were for account of the drawee and were not allowed to be waived, i.e. is therequest for SWIFT advice of acceptance to be considered as a request by a remittingbank for an “additional” service chargeable to the remitting bank, although URC 522

expressly state that collecting bank must send advice of acceptance? This question would also apply to payment advice – under URC 522 sub-article 26 (c) (i) where thecollecting bank is also required to send a payment advice.

ANALYSIS

Sub-article 21 (b) states “Where the collection instruction expressly states thatcharges and/or expenses may not be waived and the drawee refuses to pay suchcharges and/or expenses, the presenting bank will not deliver documents and willnot be responsible for any consequences arising out of any delay in the delivery ofthe document(s). When payment of collection charges and/or expenses has beenrefused the presenting bank must inform by telecommunication or, if that is not

possible, by other expeditious means without delay the bank from which thecollection instruction was received.”

Sub-article 26 (c) (1) reads “The collecting bank must send without delay adviceof payment to the bank from which the collection instruction was received, detailingthe amount or amounts collected, charges and/or disbursements and/or expensesdeducted, where appropriate, and method of disposal of the funds.” and sub-article26 (c) (2) “The collecting bank must send without delay advice of acceptance to thebank from which the collection instruction was received.”

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CONCLUSION

An advice of payment or acceptance of a collection is required to be sentaccording to sub-articles 26 (c) (1) or (2) of the rules. In most circumstances, thesending of this advice by SWIFT is the most common, efficient and cost effectivemanner.

Given the instructions to the collecting / presenting bank in relation to the

charges, and the express indication that if refused documents were not to bereleased, the collecting / presenting bank has a choice to charge the SWIFT fee to thedrawee or advise the remitting bank that the charges are refused and that thedocuments remain with the collecting / presenting bank pending furtherinstructions.

Having released the documents to the importer, the collecting / presenting bankhas indicated their willingness to comply with the instructions in the collectionschedule and the rules contained in URC 522.

The SWIFT charge of GBP15.00 should not have been deducted from theproceeds.



If this query relates to a matter currently under consideration by the

courts, the ICC Banking Commission will refrain from considering it foradoption as an opinion.

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Yours sincerely,

Thierry SenechalPolicy Manager

Banking Commission

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Ms Elena FilatovaPolicy DirectorICC Russia21/1 Bolshaya Polyanka Str.119180 MoscowRussia

26 January 2010


Dear Ms. Filatova,


QUOTE

A problem has occurred between our bank and Bank M, Country I. We appealfor your help in this matter and to provide us with your opinion as to which bank iscorrect. We are pleased to present the following facts:

On 20.12.07 we issued an irrevocable L/C, subject to UCP latest version, for EUR14,656,000.00 under the instructions of Company S, Country R in favour ofCompany I, Country I.

Field 41A: Available with Bank M by paymentField 46A (as amended on 27.12.07) included:

1. 60 PCT of contract value (EUR10,992,000.00) payable at sight againstpresentation of a set of documents (commercial invoice, packing list,original bill of lading);

2.

20 PCT of contract value (EUR3,664,000.00) payable against aProvisional Acceptance Certificate attesting completion ofcommissioning and start-up. In case such certificate is not presented

within 12 months from last shipment date the amount will be payableagainst Beneficiary’s Declaration in which they confirm that they havecompleted in full their obligations under Contract dd 16.04.2007 withthe applicant



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Field 47A: A post financing facility to be granted by Bank M for EUR14,656,000.00Field 49: ConfirmField 31D: (as amended on 22.02.08): 090430, City M, Country I.

30.04.08 was the date of the last shipment under the L/C.

On 20.04.09 Bank M emailed us a scanned copy of Beneficiary’s Declarationdated 16.04.09 in which the beneficiary confirmed that they had completed in fulltheir obligations under Contract dd 16.04.2007 with the applicant. The Declaration

was issued well before the period stipulated in the L/C for the presentation of the

Provisional Acceptance Certificate had elapsed. On our request, Bank M tried, butfailed to get any comments from the beneficiary and just advised us by e-mail letterthat the beneficiary insisted on payment.

On 29.04.09 we sent the following SWIFT message to Bank M: “We are informedthat beneficiary presented Declaration claiming on 30 April 2009 payment of EUR3,664,000.00 being 20 PCT of LC amount designated for payment of commissioningand start up. This Declaration contains statement that Company I have completed infull their obligations under the Contract dd 16.04.2007 with Company S. In thisregard we officially state that this Beneficiary’s Declaration contains false statement.

The Contract as well as LC terms envisage that this payment should be made uponcompletion of commissioning and start up. We have full evidence that these servicesare not completed. More than that, they have not even been initiated. As a proof ofour statement we have sent to Mr. C by electronic mail a set of photos made on theconstruction site on 14.04.2009. In this situation, we see claim for payment ofEUR3,664,000.00 as an act of fraud. Our decision about honoring this presentation

will be based on this argument. Also we reserve the right to initiate appropriate legalprocedures against the beneficiary in accordance with Country R law. We also thinkthat formal approach in this situation cannot be applied…”

Later the same day (i.e., 29.04.09) we received SWIFT message MT 799 from

Bank M stating: “PLS be informed that on 29/04/09 we se