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Case Study No.1

Revocable Letter of Credit under UCP 600

Article 2 defines that a credit is an irrevocable undertaking of the

issuing bank.

Question

Can an issuing bank issue a revocable Letter of Credit under UCP 600 ?

Answer

Whilst UCP 600 does not cover the issuance of revocable Letters of Credit,

there is no reason why one could not be issued subject to UCP 600. The

issuing bank would need to insert. within the credit, all the terms and con-

ditions of the revocability i.e. the wording that formed the basis of UCP 500

article 8.

By stating in field 47A that the credit was revocable and establishing the basisunder which it can be revoked, this would modify the rule regarding 'A credit is

irrevocable .... ' in article 3 and would not require any specific exclusion of the

definition of 'Credit '.

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Case Study No.2

Double transfer under UCP 600

An applicant of a credit, at the alleged request of the first benefiCiary, asked

for a transferable credit to be issued stating that the second beneficiary would

be allowed to transfer the credit to a subsequent beneficiary, arguing that the

allowance in article 1 (unless otherwise expressly modified or excluded by the

credit) overruled sub-article 38 (d). The transferring bank refuses to transfer

the credit on behalf of the second beneficiary to a subsequent beneficiary

and refers to article 38 (d) which states:

'A transferred credit cannot be transferred at the request of a second bene-

ficiary to any subsequent beneficiary'.

Question

Can the transferring bank decline to effect a double-transfer by referring to

article 38 (d) ?

Answer

The rule in sub-article 38 (d) reflects the standard position in relation to

transferable credits, i.e. that it may be transferred once only.

'Mlere there is a need for the transferred credit to also be made transferable,

the original credit must include a condition to the effect that the 'transferred

credit may also be transferred'.

This wording would be in line with the content of article 1 which allows for

each rule to be modified or excluded by the terms and conditions of the credit.

Sub-article 38 (a) makes it quite clear that a bank is under no obligation to

transfer a credit except to the extent and in the manner expressly consented

to by that bank. This includes the right of the bank to decline any request for

transfer especially where the transferrred credit was alao deSignated to betransferable.

ICC Official Opinion TA639rev. Unpublished UCP 600

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Case Study No.3

When is an UC amended?

Beneficiary receives an amendment in which the means of transportation is

changed from 'by sea' to 'by air' and air waybill is requested to be presented

instead of bills of lading. Two days later, the beneficiary presents documents

including one set of bills of lading because the beneficiary has already arranged

the shipment by sea.

Ten days later, the beneficiary presents another set of documents including air

, waybill under the same credit (partial shipment is allowed).

Questions

1 . Has the amendment been rejected by the beneficiary upon his

first presentation?

2. Has the credit been amended as of the moment of the second

presentation ?

Answer

Sub-article 10 (c) does not speak of the event of rejection. It says that 'presen-

tation that complies with the credit and to any not yet accepted amendement

will be deemed to be notification of acceptance by the beneficiary of such

amendment. As of that moment the credit will be amended.'

The beneficiary presented documents complying with the terms of the original

: credit. That does not imply, in itself, an automatic rejection of the amendment.

. The nominated bank may wish to contact the beneficiary for such clarification

but it does not impact that drawing. For the next drawing, the beneficiary complies

with the credit and the amendment.

As of that moment the credit is amended.



Case Study No.4

Time period for examination of documents

An issuing bank asked in a credit that documents to be delivered in two lots

and the second lot to be despatched three calendar days after the first sending

The first set of documents has been despatched on 1 January. and the second

set of documents on 4 January. The issuing bank raised a discrepancy on

9 January (the first set of documents arrived at issuing bank on 2 January).

I Question

Is it reasonable for an issuing bank to raise the discrepancy on 9 January ?

Answer

In most countries. between 2 and 9 January there would be two non-banking

days for a weekend, Le. 5 January was a Saturday and 6 January a Sunday.

On this basis, the refusal on 9 January was made on the 5th banking day following

the day of presentation. The maximum period of 5 days is banking days.

Where documents are split into two mails, the issuing bank is required to commence

the examination process based on the receipt of the first mailing. which should in-

clude at least one of each required document.

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Case Study No.5

Does a requirement in the UC that all documents must be issued in

English language preclude a document stamped in another language?

A Letter of Credit includes the following:

- 3 /3 full set bill of lading marked 'freight prepaid' issued to the order of the

issuing bank

- All required documents must be in English.

The presented bill of lading is issued in English by a Russian shipping line.

For authentication the shipping line has signed the document, and stamped it

with their company stamp. This stamp is in Russian language (Cyrillic).

Question

Does the Russian stamp constitute a discrepancy, considering the credit require-

ment that all documents must be in English language?

. Answer

The stipulation in the credit that 'all documents must be in English language' relates

to the data thereon that would evidence compliance with the terms of the credit and

the relevant provisions of the UCP.

Given that a Russian shipping line issued the bill of lading, it would not be unreason-

able that the evidence of the name of the company by stamp would be in Russian.

Provided the data otherwise complied with the terms of the credit and article 20 in

the completion of the bill of lading there would be no discrepancy.

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Case Study NO.6

A certificate of origin from a local Chamber of Com01erce

A Letter of Credit calls for a certificate of origin from a local chamber of

commerce.

Question

Does local chamber of commerce mean where the beneficiary is based orwhere the product originates?

Answer

The answer lies in the content of an interpretation in article 3 of UCP 600.

Therein it is stated: 'terms such as 'first class', 'well known', 'qualified',

'independent', 'official', 'competent' or 'local' used to describe the issuer

of a document allow any issuer except the beneficiary to issue that document.'

Applying this interpretation in the context of this query, any chamber of

commerce may issue the certificate of origin.

Official Opinion TA652rev. Unpublished UCP600

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Case Study No. 7

Whether a document was discrepant because it did not contain a

date of issuance and whether the shipped on board date would

constitute the date of the bill of lading

Among other documents to be presented, a credit required presentation

of a full set of bill of lading. The beneficiary presented a full set of original

marine bill of lading with pre-printed wording that goods had been 'received

for shipment'. The Bill of Lading did not bear a separate issuance date.

There was no pre-printed field on the BtL providing for such a date to be

filled out.

The issuing bank refused acceptance of documents, on the grounds that the

BtL is a transport document and must therefore, in accordance with para-

graph 13 of ISBP 681, be dated. They argued that in case of a 'received for

shipment Bill of Lading' the two dates are always required - one to show the

date of issuance and one to show the date when goods were loaded on board.

The issuing bank did not note any further discrepancies.

Question

Was this refusal of acceptance of documents in line with UCP 600 ?

Please explain your answer

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Case Study No.7

Answer

The presented document is not discrepant.

I From the example of the bill of lading presented, there is no field for a place

and/or date of issue. There is only a field 'received for shipment' with the

corresponding date filled in. The structure of a transport document is not

governed by the UCP; this is for each shipping company or agent to determine.

From the details relating to this particular bill of lading, there is no requirementfor a date of issuance; therefore, completion of the shipped on board date

serves two purposes: '

1. The date of issuance of the document

and

2. The date that the goods were shipped on board. I/'

: A document issued in the format provided is not discrepant if it does not contain

. a.date of. issuance. The shipped on board date would con~itute the date of the

bIll of ladmg for the purpose of ISBP681 paragraph 13/

ISBP 681 Paragraph 13

Drafts, transport documents and insurance documents must be dated even if a

credit does not expressly so require. A requirement that a document, other than

those mentioned above, be dated may be satisfied by reference in the document

to the date of another document forming part of the same presentation (e.g.,

where a shipping certificate is issued which states 'date as per bill of lading

number xxx" or similar terms). Although it is expected that a required certificate

or declaration in a separate document be dated, its compliance will depend on

the type of certification or declaration that has been requested, its required

wording and the wording that appears within it. Whether other documents require

dating will depend on the nature and content of the document in question.iOfficial ICC Opinion TA62S - Unpublished UCP 600

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Case Study No.8

When a signature, mark, stamp or label is placed on a document, is

the UC complying even if the document states 'legalized' instead of

: 'certified' ?

: A letter of credit required, amongst other conditions, presentation of 'a commercial

invoice to be certified by chamber of commerce and legalized by xxx embassy Iconsulate. ' The negotiating bank accepted a commercial invoice presented under

the above mentioned LlC which was legalized by signature only instead of certified

by the chamber of commerce, arguing that UCP 600 article 3 (4th paragraph)

prescribes:

'A requirement for a document to be legalized, visaed, certified or similar will be

satisfied by any signature, mark, stamp or label on the document which appears

to satisfy that requirement. '

Question

Can the issuing bank refuse to accept the commercial invoice?

Please explain your answer.

Answer

The issuing bank can refuse acceptance of the commercial invoice, as this docu-

ment is clearly discrepant.

The terms of the credit contain two distinct requirements:

- that the invoice be certified by a chamber of commerce and

- that the document then be legalized by an embassy or consulate.

The wording in UCP 600 article 3 (4th paragraph) reflects the interpretation

of the words 'certified' and 'legalized' where the credit does not provide specific

requirements to evidence compliance with a request for certification and I orlegalization.



Case Study No.8

Answer - cont'd.

The wording in UCP 600 article 3 (4th paragraph) reflects the interpretation

of the words 'certified' and 'legalized' where the credit does not provide

specific requirements to evidence compliance with a request for certification

and I or legalization.

There is no requirement that the words 'certified', 'legalized' or 'visaed' etc.

appear on the commercial invoice. A chamber of commerce will generally

add its stamp and signature to the document. The stamp and any wordinglinked to the signature may not be in a language understood by the issuing

bank, e.g., it is in the language of the country of the beneficiary. Similarly.

the language used in any legalization statement or stamp is generally that

of the importing country.lt is for these reasons that the UCP provides for

banks to accept any form of signature, stamp. mark or label that appears to

satisfy a requirement for certification or legalization.

Official ICCOpinion TA640 - Unpublished UCP600

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Case Study No.9

Whether banks need to be concerned with the routing of

the goods or their delivery .

An applicant in country A opened an irrevocable credit for USD 400.000,00 in

favour of a beneficiary in country B. A partial shipment was made for USD

180.000,00 within the stipulated time. The negotiating bank received a

message from the issuing bank pointing out certain discrepancies in the

documents. Subsequently the negotiating bank received another messaqe

from the issuing bank stating that the buyer had agreed to accept the

documents on the basis of a payment of USD 5.500,00 in full and finalsettlement. The negotiating bank was requested to obtain the consent of the

beneficiary. The beneficiary did not agree and the issuing bank was informed

accordingly. Delivery of the goods to the buyer has already taken place by

virtue of the goods being consigned to him and the credit calling for an airway

bill. The buyer of the goods has not returned the goods.

Question

Is this an acceptable practice?

Answer

The bank's responsibilities are to check the documents against the terms ofthe credit and to establish from the information contained therein whether or

not they conform.

The fact that the goods may have already been delivered to the applicant is

of no concern to the banks; it is a matter between the applicant and the

beneficiary to resolve the event of dispute.

Having checked the documents, identified that discrepancies exist, and

having therefore provided a notice of discrepancies in accordance with

sub-article 16 the issuing bank has complied with the requirements of

UCP 600.

Please see Case R 306 ICC Publication No.632 UCP

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Case Study No. 10

Does a waiver from the applicant bind the issuing bank to accept

the documents ?

A beneficiary presented discrepant documents to the issuing bank along with

a letter from the applicant waiving all discrepancies.

The issuing bank rejected the documents within the five banking days

following receipt of documents, mentioning all discrepancies.

The beneficiary claimed that the issuing bank had no right to reject the

documents due to the applicant's waiver. The beneficiary stated that the

waiver of the applicant binds the issuing bank to accept the documents.

Question

Does applicant's waiver bind the issuing bank?

Answer

Provided Article 16 UCP 600 is complied with by the issuing bank and a valid

rejection of documents is given within the five banking days following receipt

of the documents, the issuing bank is relieved from its undertaking to effect

payment.

The receipt of a waiver from the applicant via the beneficiary does not bind

the issuing bank to accept the documents. The decision of whether or not to

comply with the waiver is one for the issuing bank to decide in its sole judge-

ment.

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Case Study No. 11

Bank's business hours for the purpose of UCP 600 sub-article 14 (b)

The business hours of the issuing bank on Saturday are 09:00 a.m. to 01.00

p.m. The mail center of the issuing bank, which operates 24 hours a day,

received the documents from the negotiating bank at 01.30 p.m., after

business hours.

The UC-Department of the issuing bank picked up the documents on Monday,

the following business day.

Question

Which is the date of receipt, Saturday or Monday?

Answer

Article 33 UCP 600, in effect, allows a bank to refuse the presentation of

documents after the close of their banking hours. Accepting a presentation

of documents outside the bank's normal banking hours would mean that,

in this case, Saturday would count as the day of receipt of the documents

for the purpose of sub-article 14 (b).

The only exception to the above would be where the Letter of Credit speci-

fically requested that presentation be made to the documentary credit

department rather than just to the bank - in which case the period would

commence from the day the department received the documents.

A bank cannot act on the information from an authority or from the bene-

ficiary which is, or may be, in contradiction or additional to the requirements

expressed in the credit.

The checking of documents falls under article 14 (f) and a statement to the

effect that 'the goods are not fit for human consumption' would not be a

reason to reject.

Reference is also made to article 5 (,Banks deal with documents

and not with goods ....... ).

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Case Study No. 12

Conflict between the invoice and the certificate of quality

An applicant instructs his bank to refuse documents covering meat for the

following reasons:

The invoice states 'item No. 020071400' which, according to International

Harmonized System, corresponds to goods fit for human consumption but

at the same time the certificate of quality states that the goods are unfit forhuman consumption.

The letter of credit called for a certificate of quality without specifying details

of its content and it called for an item no. to be indicated in the invoice but

does not explain the meaning of this number.

Question

Are the documents discrepant as stated by the applicant?

Answer

A bank is not required to be conversant with any specific code item numbers

that are specific to various standards including the International Harmonized

System. If the applicant required the bank to ensure that a certain standard

was shipped, the Letter of Credit should have included a special requirement

rather than a statement that the invoice was to show the item number.

A bank is merely required to ascertain compliance on the basis of the fact

that the documents appear to comply on their face with the terms and

conditions expressed in the credit.

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