Published in partnership with BAFT

January 2019Volume 23, Number 1

20 FEATURE

CHINESE CASE ON UCP600

DOCUMENT EXAMINATION

STANDARDS

One key element for examination of

documents changed when the “inconsistent

with” test of UCP500 was reformulated to

the “must not conflict with” standard of

UCP600. Whether this reconfigured

phrasing has led to a reduction of

discrepancies has been disputed. In DBS

Bank v. Wuxi Humei, Chinese courts

addressed the question whether banks need

to examine additional data not required by

an LC, but data which seems to be in

conflict with the LC or other documents. In

her summary, Jun XU explains this and

other important questions taken up in this

case and analyzes how the trial court and

the Supreme People’s Court of China

interpreted UCP600 Article 14(f) and 14(d).

IIIIIn This Issue...

■ 3 UPDATES: ICC ExCo Paves Wayfor Drafting of Digital Trade FinanceRules; 2019 ICC Banking CommissionAnnual Meeting Agenda Set; PriceChecking Controls, Dual Use GoodsTargeted Topics in Upcoming Papers;Ontario Requires Standby LC from CannabisCandidates; China Banking Association Turns toBlockchain for Trade; Technology Update; InternationalUpdates; Islamic Supply Chain Financing; The First“Brexit” in Documentary Credit Rules

■ 10 READER REACTION:■ Drafts under Documentary Credits■ Beneficiary-Controlled Payment and ExaminationRequirements, Revisited■ Discrepant Documents and the Decision to Sue

■ 14 INTERVIEW: Kamola MAKHMUDOVA

■ 17 LITIGATION DIGEST:■ ACR Systems, Inc. v. Woori Bank■ United Petroleum Pty Ltd

v. Bonnie View Petroleum Pty Ltd (In Liq)

■ 28 ARTICLES:■ “The Impact of InternationalJurisdiction in Letter of CreditDisputes” by Dr. Karl MARXEN■ “When the Term ‘Disregard’ DoesNot Mean ‘Disregard’: An Analysisof UCP600 and ISBP Treatment ofNon-Documentary Conditions” byA.T.M. Nesarul HOQUE

■ 36 LC STATISTICS: US Banks (3Q18)

2 Documentary Credit World ■ January 2019

Editorial Advisory Board

Lena AnderssonGlobal Product SpecialistSEB (Sweden)

Pavel AndrleTrade Finance ConsultantCzech Republic

Hasan Apaydin (Turkey)

Michael Evan Avidon, PartnerMoses & Singer LLP (NY)

Buddy BakerVP, Investment Banking DivisionGoldman, Sachs & Co. (Chicago)

James G. Barnes*Baker McKenzie (Chicago)

Abdulkader BazaraTrade Finance Structuring HeadAbu Dhabi Islamic Bank (Abu Dhabi)

Jack ChanHong Kong

Dr. Alan Davidson, Senior LecturerTC Beirne School of LawUniversity of Queensland (Australia)

Roger D. Fayers, LLBBarrister (UK); Department of Trade& Industry, Soliciter’s Dept. (retired)

Clyde Fletcher, Documentation ManagerFonterra Limited

Xiang GaoDean & Professor of Law, China Univ.of Political Science & Law (Beijing)

Paula GreavesSVP & Global Trade OperationsProcedures & Technical ConsultantBank of America Merrill Lynch (Seattle)

A.T.M. Nesarul HoqueVice President,Mutual Trust Bank (Bangladesh)

Professor Katsuto Iida(retired, Tezukayama Univ., Japan)

Dean Rafael Illescas OrtizUniversity Carlos III de Madrid (Spain)

Chris JenkinsChief Information OfficerStandard Chartered Bank (Thai) PCL

Jin Saibo, PartnerBeijing Jincheng Tongda & NealLaw Firm (China)

Carter Klein, PartnerJenner & Block (Chicago)

Michelle Kelly-LouwProfessor in Banking LawUniversity of South Africa

*Denotes Editorial Board member

Dr. Karl MarxenOstfalia University of AppliedSciences (Germany)

Khalil MatarAssistant General ManagerAlinma Bank (Saudi Arabia)

David MeynellOwner, TradeLC Advisory

Neal MillardMusick, Peeler & Garrett LLPAdjunct Professor, USC Law School

K. NizardeenFIB (Dubai, UAE)

Vincent O’Brien, Technical Trade AdvisorChina Systems Corporation

Janis S. Penton, Assistant General CounselMUFG Union Bank, N.A.

Gabriel ShamTrade Finance ConsultantSingapore

Kim SindbergExecutive AdviserNordea Trade Finance (Denmark)

Donald R. Smith*President,Global Trade Advisory, Ltd.

Soh Chee Seng, Technical Consultant,Trade Finance Issues, the Associationof Banks in Singapore (Singapore)

Chang-Soon Thomas Song, First Expert,Trade and Services Department,KEB Hana Bank (Seoul)

Lorna K. StrongDeputy General CounselHSBC Global Trade & ReceivablesFinance (London)

Hugo VerschorenConsultant, goVer Trade TechnologiesBelgium

Jun XuDeputy General ManagerBank of China, Jiangsu Branch (China)

KK YeungHong Kong

Alexander Zelenov, DirectorBank for Foreign Economic Affairsof the USSR (Moscow)

Published by Documentary Credit World, Inc. ISSN 1520-0221. Copyright © 2019 by Documentary Credit World, Inc.All rights reserved. No part of this journal may be reproduced in any form, including microfilm, xerography orotherwise, or incorporated into any information retrieval system, without the written permission of the publisher.Single subscription price: $595 per year. Global license information available upon request. This publication is designedto provide accurate and authoritative information in regard to the subject matter covered. It is sold with theunderstanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legaladvice or other expert assistance is required, the service of a competent professional should be sought.

ocumentary Credit World (DCW) is published monthly by Documentary Credit World, Inc.

Opinions expressed in it do notnecessarily reflect the official positions ofthe publishers of DCW, its EditorialBoard, Editorial Advisory Board, or theorganizations with which they areassociated. Authors, editors, members ofDCW’s Editorial Board and EditorialAdvisory Board, and the institutions withwhich they are associated often areactively involved in the field as lawyers,advisers, parties, consultants, or expertwitnesses in many of the mattersaddressed in DCW. The publication oftenreflects and sometimes adopts theirviews. Notwithstanding positionsexpressed in DCW, every effort will bemade to publish differing viewpoints andcontributions expressing such views arewelcomed.

The support of the Journal ofInternational Commercial Lawis gratefully acknowledged.

DDDDD

Documentary Credit World

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Gaithersburg, MD 20879 USA

phone: +1-301-330-1970

fax: +1-301-926-1265

e-mail: info@doccreditworld.com

website: www.doccreditworld.com

FounderProfessor James E. Byrne

Contributing EditorsVincent MaulellaVincent O’BrienSoh Chee Seng

Executive EditorChristopher S. Byrnes

Correspondent EditorLisa V. Chin

Case EditorMatthew J. Kozakowski

Scam Survey EditorJacob A. Manning

DesignersMario Escalera, Christopher V. Sandler

Student Research Associate

Emeritus Board Members

DCW is grateful to prior members ofits Board and appreciates their pastservice. Emeritus Board Members arerecognized on the DCW website at:www.doccreditworld.com

Kelly E. CroweJames KimWilliam Mabry IV

January 2019 ■ Documentary Credit World 3

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

ICC ExCo Paves Way for Drafting of DigitalTrade Finance Rules

T he ICC Banking Commission’s Executive Committeedecided on 5 December 2018 to authorize itsDigitalisation Working Group to commence work on

developing new Uniform Rules for Digital Trade. In a statementreleased 30 January 2019, the ICC Banking Commission offeredbackground regarding its decision to move forward and itsobjective for creating such rules.

Citing how swiftly evolving technology is challengingexpectations how trade and supply chain finance should beconducted, the ICC posits that businesses are seeking “solutionsthat will deliver greater control and visibility within their supplychain ecosystem.” To address this need for financing, banks aswell as non-banks are searching for ways to offer appropriatetechnology-enabled solutions that will simultaneously fulfillregulatory compliance requirements and optimize capital use.

The ICC’s objective for creating Uniform Rules for DigitalTrade is to provide a high-level framework in which “consortia”who are currently engaged in developing proofs of concept in theareas of traditional trade and supply chain finance “can operateby referencing the rules in their establishment and execution offinancial obligations within their own unique process andtechnology constructs.”

The statement released by ICC also explains why limitationsinherent in the Uniform Rules for Bank Payment Obligations(URBPO) prevent it from being a suitable option foraccommodating this new environment and why a URBPO revisionto obtain technology independence is unworkable.

A Drafting Group and Consulting Group are being assembledto formulate the Uniform Rules for Digital Trade. The DraftingGroup, chaired by David Hennah (Intellect), will be creating aframework of rules under which digital trade can occur. TheConsulting Group, co-chaired by Eric Henry (BNP Paribas) andDavide Sant (UniCredit), will be responsible for reviewing theDrafting Group’s work to provide feedback and anyrecommended changes to the rules prior to their distribution tothe National Committees for their input.

4 Documentary Credit World ■ January 2019

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

2019 ICC Banking Commission Annual Meeting Agenda Set

T he agenda has been released and registration opened for the ICC Banking Commission’s2019 Annual Meeting, 8-11 April, at the China World Summit Wing in Beijing. Coincidingwith the 100th year of ICC’s existence, the 2019 Annual Meeting will highlight ICC

achievements over the past century and explore ways the ICC can actively support and shape thefuture of trade finance.

Presenters offer views on the outlook for global trade and take up discussion of access to tradefinance, regulatory and compliance issues, and the increasingly transformative role of technology ontrade finance. The meeting will deliver updates about ongoing work stream initiatives as well asstatus reports on the e-compatibility of ICC rules. Attention will also be given to areas ofcontroversy and guidance in documentary credit practice, financial crime, and discussion of ICCdraft opinions.

Attendance in the event’s Plenary Meeting is open to ICC members and non-members alike. Forprogramme and registration details, visit the ICC Banking Commission Annual Meeting page of theICC website.

Price Checking Controls, Dual Use Goods Targeted Topics in Upcoming Papers

F ollowing remarks made at the October 2018 ICC Banking Commission Technical Meeting inGeorgia, the ICC’s Financial Crime Risk and Policy Group is advancing its efforts to producetwo papers with the intention of submitting them to ICC for publication consideration. One

paper takes up the topic of financial crime control checks on the price of goods in trade transactionsand assesses the question of whether price checking controls are plausible. The second paperexamines how financial institutions can mitigate risk and guard against proliferation financing,including consideration of dual use goods.

Ontario Requires Standby LC from Cannabis Candidates

As authorized by the Government of Ontario (Canada), the Alcohol and Gaming Commissionof Ontario (AGCO) held an Expression of Interest Lottery on 11 January 2019 to select 25individuals who may apply for cannabis retail operator licenses. Lottery winners then had

five days to submit a Retail Operator License Application, CAD 6,000 non-refundable fee, and a CAD50,000 standby LC using a required form.

January 2019 ■ Documentary Credit World 5

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

Among its provisions, the Standby Letter of Credit form states:

“This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits(2007 Revision) of the International Chamber of Commerce (ICC Publication No. 600) the(“UCP”) with the exception of Articles 18-30 inclusive (other than Article 29a, which shall apply)and Articles 31b, 31c and 32 except to the extent, if any, inconsistent with the express terms ofthis Letter of Credit. Notwithstanding Article 36 of the UCP, if this Letter of Credit expiresduring an interruption of business as contemplated in Article 36, we shall honour any demandmade under this Letter of Credit prior to the expiration date, within 30 days after the date inwhich such interruption of business ends (and we shall notify you promptly when it does so end.For matters not covered by such publication, it shall be governed by and construed in accordancewith the laws of the Province of Ontario.”

Available on the AGCO website is full text of the AGCO-required standby LC form.

China Banking Association Turns to Blockchain for TradeChina Banking Association Turns to Blockchain for TradeChina Banking Association Turns to Blockchain for TradeChina Banking Association Turns to Blockchain for TradeChina Banking Association Turns to Blockchain for Trade

T he Chinese Banking Association (CBA) has reportedly begun using blockchain to standardizeand digitize information about interbank transactions, including trade finance products. TheCBA cited pilot projects for LC issuance and asset-backed securities completed by ICBC and

China Merchant Bank as successful tests contributing to its decision to use the blockchain platform.The CBA indicated that PeerSafe and other Chinese fintech companies provide technical support tothis enterprise.

Technology UpdateFintech company Ripple has added 13 financial institutions to its global payment network,

RippleNet. Among its new entrants is Euro Exim Bank, a St. Lucia-based financial institution with arepresentative office in London which offers LCs, standbys, bank guarantees, “instant letters ofcredit”, and other trade finance instruments. Through use of RippleNet, Euro Exim Bank will havethe option to use the XRP digital asset for on-demand liquidity needed for cross-border payments.

International UpdatesBANGLADESH: Bangladesh Bank, the country’s central bank, issued FEPD Circular No. 02 on

27 January 2019 in which it asked banks to refrain from opening letters of credit backing importationof goods prohibited from entering Bangladesh though specific land ports. Banks were asked tofollow a National Board of Revenue regulatory order specifying approved items. In some cases,certain goods require specific equipment and port capacities and cannot be brought through certainland ports.

INDIA: Improved US-China trade relations are being blamed for harming Indian exporters ofcotton yarn. Indian exporters contend that Chinese importers and bankers have defaulted,renegotiated previously confirmed orders, halted shipments, or cancelled LCs on at least 10contracts without justification, according to an unnamed official cited by The Economic Times (India).

PAKISTAN: Government agencies attempting to crack down on money laundering and taxevasion are targeting a number of inporters believed to have engaged in widespread underinvoicing

6 Documentary Credit World ■ January 2019

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

of imported cargoes to facilitate the transfer of significant amounts currency into bank accountsoutside Pakistan. Federal Board of Revenue sources contend that importers are using LCs and mis-declaring goods at customs in order to conceal the actual value of goods, as reported by The News(Pakistan). According to an Inland Revenue Office official, banks have been contacted to identifyimporters “not traceable” who maintain accounts for their imports.

SINGAPORE: Standard Chartered Bank-Singapore has completed of its first blockchain-enabledtrade finance transaction. According to The Business Times, the technology involved digitallygenerating trade documents for Singapore-based Agrocorp International to route a shipment ofchickpeas from Australia to purchaser, BSM Global of Bangladesh. Data shared along the supplychain network reportedly included details about the origin of commodities and farming practicesutilized. ■

Islamic Supply Chain Financing

Question: How is Supply Chain Finance (SCF) is done in Islamic Finance space?

Answer: Supply Chain Finance (SCF), also known as reverse factoring, is a solution thatoptimizes cash flow by allowing purchasing businesses to lengthen their payment terms tosuppliers (mainly for SME customers) to get paid upfront. This enables buyers to optimizeworking capital and suppliers to generate additional operating cash flow, thus minimizing riskacross the supply chain.

Islamic Supply Chain business is a huge potential market but currently only handful of playersare actively involved. There is a big opportunity for Islamic Banks to enter and provide the much-needed financing required to boost this industry. For example, Halal food (meat and poultryslaughtered in accordance to Shariah and food and beverages free from alcohol and pork) is acrucial part of daily life for Muslims worldwide. Since the estimated 1.7 billion Muslim populationis spread across all continents and with over 50 Muslim countries, their purchasing power cannotbe underestimated. Many international companies like KFC, Mc Donald’s, Nestle, and Unileverhave entered this vibrant market and offer products under Halal labelling.

SCF means timely financing to the seller and this is the main feature of goods Murabaha inIslamic banking as well. Under goods Murabaha, the bank buys the goods from the seller and theseller gets paid immediately. Here, the Islamic Bank (IB) buys the goods and sells to theircustomer with a profit mark-up (cost plus profit). Under Murabaha, the Islamic Bank receives aPromise to Purchase from its customer upfront. Then the bank later takes constructive or physicalpossession of goods. This scenario mostly involves physical possession with appropriateinspection. The bank inspects and takes possession of the goods and delivers them to theircustomer (ultimate buyer) upon signing the Murabaha Sales Contract with a suitable paymentterm.

January 2019 ■ Documentary Credit World 7

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

The following simple structure was used to finance suppliers of a Large Corporate Company(LCC) entity (IB’s customer) which was similar to conventional SCF offering. Here too in thisinstance Murabaha was used under an agreement with the buyer (LCC) that it will sign andacknowledge receipt of goods by an appointed authorised official to counter signing the invoice &delivery order and to assign the respective payments to the IB (at maturity). The IB will keepthis assignment of payment as a security and effects payment at sight to the suppliers under aShare Murabaha (Tawarruq), the net invoice value after deducting the profit and charges.

The above structure, however, should be used only with top-tier corporates as the IB is totallyrelying on the corporate buyer’s risk and providing facilities to its suppliers without recourse.Appropriately, a credit risk exposure assessment has to be done and a limit for such payablesneeds to be in place since the buyer may not agree to block his limits. It is indeed a big businessopportunity for Islamic banks.

In another scenario, a buyer was willing to facilitate with his limits to support selectedsuppliers under project financing. In this instance, we were able to use Goods Murabaha directlyby inspecting, taking possession, and delivering the goods to our customer. The Murabahas werebooked under our customer by signing a Murabaha Sales Contract. We also used a standby LC-backed Murabaha structure to facilitate SCF-type transactions.

Next month, I will compare factoring and Islamic Invoice Financing.

— K. Nizardeen, FIB, Dubai/Malaysia, and EXCO Member of the ICC Banking Commission.

8 Documentary Credit World ■ January 2019

The First “Brexit” in Documentary Credit RulesBrexit is really one of our trending topics regarding international trade. How will it affect free

trade and international rules governing trade? I sincerely hope that our UCP rules continue to beaccepted as uniform rules and that Brexit will not have any adverse influence on them.

However, I would contend the first “Brexit” in documentary credit rules occurred with releaseof ICC Brochure No. 74. Approved in Amsterdam on 13 July 1929, it was known as the UniformRegulations for Commercial Documentary Credits (1929 URCDC).

Looking at this Publication and other related historical information contained in a 2007 bookedited by Credimpex Italy, we find evidence of the first “Brexit” in a final paragraph titled“Reservations” by the British Delegation based on accepted banking practice in Great Britain.

The 1929 URCDC contained in its Section C, paragraph 2 (titled “Bills of Lading”): “Banks mayaccept when bills of lading are required ‘received for shipment’ or ‘alongside’ bills of lading.” TheBritish Delegation wrote: “Received for shipment” or “alongside” bills of lading are not acceptableby British banks as good delivery unless specifically authorized.

The second reservation made by the British Delegation regarded insurance. The 1929 URCDCstated in its Section C, paragraph 10 (“Insurance”): “Banks have the right to accept eitherinsurance policies or underwriter’s insurance certificates, unless insurance certificates areexpressly, excluded.” The British Delegation countered with the reservation: “It is not the practicein London to accept a certificate of insurance without specific instructions (the British Courtshaving decided on more than one occasion that a certificate of insurance was not a good deliverywhere a policy of insurance was called for).”

We find in this second reservation a conflict between law and rules, just as today where we findmany examples.

A third reservation was made by the British Delegation. The 1929 URCDC provided in SectionD, paragraph 2 (“Partial Shipments”) that: “Unless otherwise instructed, banks may pay for partialshipments even if their pro rata value cannot be determined.” The reservation made by the BritishDelegation: “This paragraph should be worded as follows: ‘Unless otherwise instructed banksmay not pay for partial shipments.’”

Starting in 1933 with UCP82 and in all UCP versions since, we have had the possibility tomodify the rules or exclude articles, but with Brochure 74 this was not possible.

Dear readers, I hope the Brexit will not affect to our international trade rules. God save theQueen, free trade, and our UCP rules.

— Xavier FORNTProfessor at ESCI and Barcelona School of Management

University Pompeu Fabra (Spain)

UPDAUPDAUPDAUPDAUPDATESTESTESTESTES

ANNUAL SURVEY OF LC LAW & PRACTICEtampa

21-22 March 2019

The Institute of International Banking Law & Practice

10 Documentary Credit World ■ January 2019

READER REACTIONREADER REACTIONREADER REACTIONREADER REACTIONREADER REACTION

DRAFTS UNDER DOCUMENTDRAFTS UNDER DOCUMENTDRAFTS UNDER DOCUMENTDRAFTS UNDER DOCUMENTDRAFTS UNDER DOCUMENTARARARARARY CREDITSY CREDITSY CREDITSY CREDITSY CREDITS

Mr. Zahoor Dattu wrote a super article on “Availability andRequirements for Drafts under UCP600” (September 2018 DCW18). Within this very short article he makes every scenariosurrounding drafts perfectly clear and by his own admission thisis a fairly straightforward subject to begin with.

I have taped Dattu’s remarks to the water dispenser in ourtrade processing operations centre for all my red-eyed checkersto read and benefit from. Like the water dispenser, his article hasa very cooling effect on regularly overheating document checkers.

However, it seems others relish in making things unnecessarilycomplex. In early January 2019, my line superior forwarded me a32-page guidance paper on drafts issued by the ExecutiveCommittee of the ICC Banking Commission with instructions tomake our processing staff fully conversant with the contents ofthis document. I was immediately curious to read the documentas it did not feel natural for such a mundane, simple subject towarrant a paper from the ICC Executive Committee.

After reading it, this ICC guidance asks more questions than itanswers. It is also strange that a document intended to addclarity to a very simple part of UCP600 is lengthier than the fulltext of the UCP600 itself. I know that the world has gone on aregulatory and compliance binge, but I was perplexed to see theword ‘regulatory’ used so often in this paper. Regulatoryrequirements for drafts is a new one for me but I am the first toadmit something new can be learnt in this letter of creditbusiness, each and every day.

Speaking of repetition, it was also interesting to see that theExecutive Committee recommended that the paper be distributedglobally to fix problems: “It is recommended that banks arrangefor this Guidance Paper to be distributed throughout theirnetwork, and particularly to their legal departments. It can alsobe circulated to clients and, if considered appropriate, to courtsand regulatory authorities. Sharing this Guidance Paper on awider basis will help ensure amelioration of any problems.”

What problems, if any, Dattu already solved with his article.

– Practitioner Feedback

January 2019 ■ Documentary Credit World 11

BENEFICIARBENEFICIARBENEFICIARBENEFICIARBENEFICIARYYYYY-CONTROLLED PA-CONTROLLED PA-CONTROLLED PA-CONTROLLED PA-CONTROLLED PAYMENT AND EXAMINAYMENT AND EXAMINAYMENT AND EXAMINAYMENT AND EXAMINAYMENT AND EXAMINATIONTIONTIONTIONTIONREQUIREMENTS, REVISITEDREQUIREMENTS, REVISITEDREQUIREMENTS, REVISITEDREQUIREMENTS, REVISITEDREQUIREMENTS, REVISITED

READER REACTIONREADER REACTIONREADER REACTIONREADER REACTIONREADER REACTION

(Editor’s Note: The following communication exchange relates to a scenario outlined in Nov/Dec 2018 DCWReader Reaction by Arshad H. Siddiqui.)

Dear Mr. Arshad H. Siddiqui, In response to your question and in my opinion this SBLC if constructed as mentioned (of course

we do not have the whole picture) will be a ‘badly’ constructed SBLC, based on the belowexplanation/logic.

1) According to UCP600: Article 1 – The rules are binding on all parties unless expressly modified.Article 2 - A complying presentation means a presentation in accordance with the terms and

conditions of the credit, the applicable provisions of these rules and ISBP. Honour means to pay atsight if the credit is available by sight payment.

Article 14(b) – Calls for 5 banking days for examination of documents following the date ofpresentation.

Article 15(a) – Calls for immediate honour once the presentation is considered as complying. 2) The Issuing Bank should insist for the needed clarification as provided at least “after

determining that demand for payment is in order” BUT in case all efforts to amend the terms fail,then in my opinion the issuing bank by accepting to include:

“Payment will be made hereunder no later than 5:00 p.m. local time on the first Business Day

following the date on which such demand for payment is presented” (these are the terms andconditions of the credit) has already committed itself to payment as per LC terms ALWAYS providedthere is a complying presentation, as the articles mentioned above are not deleted and are stillapplicable. Also Article 16(b) that calls for waiver and 16(c)i that calls for refusal notice are effective!

3) According to ISBP and Preliminary Considerations iii, the parties unfortunately may not have

considered the implications of their contract and payment terms agreement vs the use of a SBLCunder UCP600.

Finally, I would assume that the Issuing Bank at least in the Payment/Reimbursement terms will

state somewhere the words, ‘complying document’ or ‘complying presentation’, even though it is notactually needed! I would kindly ask you to share your thoughts about my logic and understanding.

Kindest regards,

Lakis PantelidesManager Trade Services DepartmentBank of Cyprus, Nicosia, Cyprus

12 Documentary Credit World ■ January 2019

Dear Mr. Pantelides,

Thanks for your interest and feedback provided. I appreciate your taking time out and offeringyour personal opinion.

After reading your comments, I concluded that we both feel the pain of this poorly drafted LC.While your recommendations are valid, unfortunately there was no room for making any changes tothe LC. (The usual, every day dilemma of an LC professional). That is the reason why I raised theissue for discussion.

However, I opine a little different when it comes to interpretation of words “presentation” and”complying presentation”. They are two different animals altogether, in my view. An ordinarybeneficiary on the street will assume that presentation means complying presentation. If thatwas the case, a banker would not have to insert their engagement clause stating “we herebyengage with the drawer to honor their demand for payment if found in order.” E.g., look at theArticle 14(b).

Arshad H. SiddiquiHead of Trade Finance Dept.Handelsbanken, New York Branch

READER REACTIONREADER REACTIONREADER REACTIONREADER REACTIONREADER REACTION

January 2019 ■ Documentary Credit World 13

DISCREPDISCREPDISCREPDISCREPDISCREPANT DOCUMENTS AND THE DECISION TO SUEANT DOCUMENTS AND THE DECISION TO SUEANT DOCUMENTS AND THE DECISION TO SUEANT DOCUMENTS AND THE DECISION TO SUEANT DOCUMENTS AND THE DECISION TO SUEThe November/December 2018 edition of DCW has an article by Chang-Soon Thomas Song

(“How Jurisdiction is Decided in Letter of Credit Litigation”) in which he confuses the issuesomewhat. In the first paragraph he states that “traders and negotiating banks send complyingshipping documents to an issuing bank overseas” and then states “oftentimes the issuing bank pointsto various discrepancies in the shipping documents”. So were the documents complying or not? Didthe negotiating bank correctly check the documents to determine compliance and is he asserting thatthe discrepancies claimed by the issuing bank were spurious and false?

Anyone reading the second paragraph would assume he contends that the “trader” (beneficiary?)or the negotiating bank can sue the issuing bank if time constraints prevent cure of discrepantdocuments. Why should that be so? The documents are discrepant, the issuing bank acts inaccordance with UCP600 article 16(c), the beneficiary cannot cure the discrepancy in time, and if theapplicant chooses not to waive the discrepancies then the issuing bank has no obligation at all tohonour the discrepant presentation. Surely legal action against the issuing bank in such a case wouldbe doomed to failure? The article then goes on, ending with a judgement that was surely inevitableas regards jurisdiction but adds no clarity or justification to the assertion in the second paragraph.

– Bob RonaiImport-Export Services Pty Ltd

Kewarra Beach, Australia

(Editor’s Note: For further writing inspired by Mr. Song’s article, see page 28 of this DCW issue.)

READER REACTIONREADER REACTIONREADER REACTIONREADER REACTIONREADER REACTION

48 Documentary Credit World ■ January 2019

Additional 2019 events, dates, and locations are pending and will be announced. For the most currentinformation, visit:www.iiblp.org For a complete list of resources available, please contact the Institute.

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2019 EDUCATIONAL CALENDAR

REFERENCE MATERIALSThe Institute offers the most comprehensive collection of reference materials in the industry. It also regularlyconducts seminars on topical issues, general educational forums, and custom training for bankers, lawyersand corporate financiers. All of these products are designed to assist the letter of credit professional with thepractical issues you face on a daily basis. Its newest and most popular reference materials include:

Full Day Focus on LC Practice,Forms, and Litigation Issues

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TRADE BASED FINANCIALCRIME COMPLIANCEAn in-depth look at howspecialists canmonitor, detect,and preventinstances of financial crime.

2018 SUPPLEMENT TO UCP600:AN ANALYTICAL COMMENTARYDrawing on recent ICCOpinions and judicial decisions,this Supplement updatesthe industry’s definitiveanalysis of the UCP.

LC RULES & LAWSCRITICAL TEXTS FORINDEPENDENT UNDERTAKINGSRevised 7th edition containseverything you need: Your all-in-one reference guide for LCs andguarantees.

Confronting Topics at the Intersectionof Trade Finance & Compliance

Guarantee & Standby ForumSE ASIA: Singapore – 17 July 2019CHINA: July 2019AMERICAS: New York – October 2019

Letter of Credit Law SummitSE ASIA: Singapore – 18 July 2019AMERICAS: New York – October 2019

Annual Trade Finance Compliance ConferenceMIDDLE EAST: Dubai – 12-13 March 2019EUROPE: London – 16-17 May 2019