26. Case Study A documentary credit subject to UCP 600 called for "Full set of 3/3 clean on board original marine/ocean bills of lading evidencing shipment from Houston to Shanghai made out to order and blank endorsed, marked freight prepaid, notifying applicant ". The presented bill of lading, bearing a title of "Mermaid Shipping Company S.A., Geneva", was manually signed with a signature chop reading "Carrier - Mermaid Shipping Company S.A., Geneva". The "Place and Date of Issue" box contained a statement: "New Orleans - Mermaid Shipping Company (USA) Inc., 17 July 2007 12:12:22 pm". Is this bill of lading acceptable? Please state your reasons. 27. Case Study Upon request by the applicant, the issuing bank finally waived the previously advised valid discrepancy for the first instalment shipment made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three instalment shipments. However, the issuing bank did not clarify whether or not the DC was still valid for subsequent instalment shipments. After a period of time, the beneficiary presented compliant documents for the second instalment shipment made according to the shipping schedule stated in the DC. The issuing bank denied payment according to UCP 600 article 32. The beneficiary sued the issuing bank for payment dishonour and negligence. I. The expert's report from the beneficiary states that the confusion is created by the issuing bank that should have clarified in its waiver notice whether or not the DC is still valid for the
Transcript
26. Case Study
A documentary credit subject to UCP 600 called for "Full set of 3/3 clean on board original marine/ocean bills of lading evidencing shipment from Houston to Shanghai made out to order and blank endorsed, marked freight prepaid, notifying applicant". The presented bill of lading, bearing a title of "Mermaid Shipping Company S.A., Geneva", was manually signed with a signature chop reading "Carrier - Mermaid Shipping Company S.A., Geneva". The "Place and Date of Issue" box contained a statement: "New Orleans - Mermaid Shipping Company (USA) Inc., 17 July 2007 12:12:22 pm". Is this bill of lading acceptable? Please state your reasons.
27. Case Study
Upon request by the applicant, the issuing bank finally waived the previously advised valid discrepancy for the first instalment shipment made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three instalment shipments. However, the issuing bank did not clarify whether or not the DC was still valid for subsequent instalment shipments.
After a period of time, the beneficiary presented compliant documents for the second instalment shipment made according to the shipping schedule stated in the DC. The issuing bank denied payment according to UCP 600 article 32.
The beneficiary sued the issuing bank for payment dishonour and negligence.
I. The expert's report from the beneficiary states that the confusion is created by the issuing bank that should have clarified in its waiver notice whether or not the DC is still valid for the second and the third instalment shipments. So the issuing bank should bear the serious consequences for its negligence and should effect payment of the second instalment shipment, since the documents are all compliant.
II. The expert's report from the issuing bank states that: a. There is no stipulation in the UCP 600 that requires the issuing
bank to state its intention/decision on the validity of the balanced instalment shipments after waiving the discrepancy in the first instalment shipment.
b. Discrepancy and waiver are two separate issues. The wavier cannot change the nature of a discrepancy. A discrepancy always remains a discrepancy, whether being waived or not.
c. The discrepancy will trigger the following two consequences: i. To dishonour payment according to UCP 600 articles 7, 14
ii. To make the DC no more available for all future instalment shipments according to UCP 600 article 32.
d. So the wavier only waives the first consequence regarding payment but the second consequence affecting balanced instalment shipments remains unwaived.
e. As a result, the issuing bank has no payment obligation for the second and the third instalment shipments.
If you were the Judge, what would you adjudicate? Please state the reasons of your judicial decisions.
28. An Insurance Policy Not Indicating Number of Originals Issued
A DC subject to UCP 600 calls for full set of insurance policy but is silent on the number of originals issued. The issuing bank refuses to pay due to the insurance policy presented does not indicate number of originals issued. Is the issuing bank correct in naming this as a discrepancy?
29. Port of Loading Different from DC
The DC subject to UCP 600 requires port of discharge to be "Alexandria (Free Zone)" whereas in the "port of discharge" box in the bill of lading, it states only "Alexandria". However, the same bill of lading also has information "CFR Alexandria Port Free Zone" appearing in other area.
Is the bill of lading discrepant?
30. Signature in a Bill of Lading Not In the Signature Box
In a bill of lading presented under a DC subject to UCP 600, the signature box is empty. However, in other area of the same bill of lading, there is a signature of the master with the name and capacity of the master given. Is this bill of lading compliant?
31. An insurance policy is issued on 10 August 2007 and the DC specifies the latest shipment date as 15 August 2007. The loaded on bard date in the bill of lading is 9 August 2007. Is the insurance policy discrepant under UCP 600?
32. Partial Shipments
The DC subject to UCP 600 called for supply of freshly cut logs and prohibited partial shipments. It specified port of loading "Any Malaysian port". Goods were shipped on the same vessel loading at different ports in Malaysia at different time periods under the same voyage number for the same destination. Different sets of bills of lading and related documents (certificates of inspection etc) were presented under the same DC. The issuing bank refused to pay due to following reasons:
a. Bills of lading show more than one port of loading whereas the DC calls for only one port of loading, namely "Any Malaysia Port" and not "Any Malaysian portS".
b. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC.
c. Partial shipments made and this is not allowed in the DC.
Is the issuing bank correct in its refusal?
33. Consignee Different from DC Requirement
The DC subject to UCP 600 required the Consignee of a negotiable bill of lading made to the order of Party A but the negotiable bill of lading presented was consigned to the order of Party B. However, there was an endorsement from Party B to the order of Party A on the face of the bill of lading. The issuing bank dishonoured due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy?
34. Reasons for changing the name of consignee as specified in the DC
Please state your reasons why the bill of lading is not made out straight to the order of Party A as specified in the DC under the above case "Consignee Different from DC Requirement"?
A DC subject to UCP 600 specified a reimbursement instruction that reads:
"Upon receipt of full set of documents in conformity with the letter of credit terms and conditions, we will effect payment as per your instructions".
Compliant presentation was made to the nominated negotiating bank that had given value to the beneficiary and claimed for reimbursements. The documents were however lost in transit by the courier company. The issuing bank refused reimbursement because reimbursement would only be effective "upon receipt of documents" as specified in the reimbursement instruction quoted above.
Is the issuing bank correct in its refusal decision?
36. DC Number missing
A DC subject to UCP 600 specified that the DC number must be quoted in all documents presented. The commercial invoice did not quote the DC No. and the issuing bank refused payment.
Is the issuing bank correct in its refusal?
37. Documents not consistent
In a DC subject to UCP 600, the issuing bank gave a refusal notice that read:
"We refuse payment due to following discrepancies:
The commercial invoice and the bill of lading are not consistent with each other.
Meanwhile we hold documents at your risk and disposal".
In a DC subject to UCP 500, the issuing bank gave a refusal notice that read:
"We refuse payment due to following discrepancies:
The commercial invoice and the bill of lading are not consistent with each other.
Meanwhile we hold documents at your risk and disposal".
Is this refusal notice valid?
39. Interpretation of CIF
An LC subject to UCP 600 was issued on 1 August 2007 stating the total value of the goods as "USD 200,000 CIF Hong Kong" and a commercial invoice stating "USD 200,000 CIF Hong Kong Incoterms 2000" was presented.
The Issuing Bank considered this as a discrepancy. The reasons are:
i. "CIF" does not exist only in Incoterms. It is also found in other trade terms, such as the USA Trade Definitions, the Warsaw Trade Terms and the like. The Applicant may not mean Incoterms.
ii. Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms 2000.
Is the Issuing Bank correct in its determination of this discrepancy? Please state your reasons.
40. Port of Loading & Port of Discharge
A DC issued in Hong Kong and confirmed by a bank in Taiwan subject to UCP 600 requires a port-to-port bill of lading showing:
Port of Loading: Come by Chance, CanadaPort of Discharge: Any port in China
A port-to-port bill of lading is presented showing:
Port of Loading: Come by Chance, CanadaPort of Discharge: Kaohsiung
The Confirming Bank in Taiwan rejected the bill of lading stating:
i. "Come by chance in Canada" means "Any port at which the goods happen to be discharged in Canada". Come by Chance is not the name of a port. The Port of Loading should show the name of a port in Canada, such as Toronto, as required by UCP 600 sub-article 20 (a) (iii).
ii. Republic of China (Taiwan) is an independent country and not part of "China" according to President Chen Shui-bien ( 陳 水 扁 ) and the Democratic Progressive Party (民主進步黨). Accordingly "China" should mean "People's Republic of China".
iii. Hence "Any port in China" should mean any port in People's Republic of China, such as Shanghai and not any port in Republic of China (Taiwan), such as Kaohsiung.
Is the Confirming Bank right in its rejection? And why?
41. Transport documents issued by freight forwarder not acceptable
The L/C subject to UCP 600 states "Transport documents issued by freight forwarder not acceptable" and a port-to-port bill of lading signed by freight forwarder as a carrier is presented. Is the bill of lading acceptable?
42. Freight Forwarder's Bill of Lading Acceptable
The DC subject to UCP 500/600 states "Freight Forwarder's Bill of Lading not acceptable" and the bill of lading presented is issued by a freight forwarder in the capacity of a carrier. Is the bill of lading acceptable?
43. Negotiation by A Confirming Bank
An acceptance L/C subject to UCP 600 was confirmed by a confirming bank with drafts drawn on the confirming bank at 180 days after shipment date. The issuing bank, upon request by the applicant, who accepted the request from the beneficiary, later amended the L/C to be available for negotiation by the confirming bank. The confirming bank then requested the issuing bank to amend the L/C for drafts to be drawn on the issuing bank.
Q1 Is this a violation of international standard banking practice where the drafts should be drawn on the confirming bank after confirmation was added?
Q2 What is the intent of the confirming bank for making such a request?
Q3 What is the risk for the issuing bank after accepting such a request?
44. Bill of Lading Consigned to Order of Issuing Bank
A DC subject to UCP 600 required presentation of copy of a set of original bills of lading consigned to order of Issuing Bank in country A with full set of originals sent directly to the Applicant, quoting DC No. on bills of lading.
The Issuing Bank refused payment due to valid discrepancies by giving valid notice of refusal.
Meanwhile a third party sent for D/A collection under URC 522 full sets of same original bills of lading to another Branch of Issuing Bank in country B (now acting as Remitting Bank) to endorse to another Collecting Bank to facilitate delivery after acceptance of drafts.
The Beneficiary claimed payment from the Issuing Bank due to its endorsement on the original bills of lading, resulting the goods being delivered by the Applicant. Should the Issuing Bank be liable for this claim?
45. Extension of Confirmation After An Amendment
A DC, subject to UCP 600, available for 30-day deferred payment of USD200,000, covering furniture items of Reconnaissance design shipped from Hong Kong to Jeddah, Saudi Arabia was confirmed by the Advising & Nominated Bank. An amendment added USD100,000 for framed oil paintings with pornographic themes. The Confirming Bank advised the amendment without adding confirmation to USD100,000 because pornographic works would be confiscated by the Saudi Arabian import authorities due to religious reasons. The Beneficiary argued that (a) DC deals with documents not with goods (b) A bank should not speculate the intention of the parties in international trade and (c) since both the Issuing Bank and the Applicant agreed to the amendment, they were the parties to take this risk, not the Confirming Bank that could claim reimbursement from the Issuing Bank regardless as whether the goods were confiscated or not, according to UCP 600 articles 7 (c) and 12 (b).
i. Does the Confirming Bank have a right to do so under UCP 600? ii. Would your answer be the same if it were DC transfer other than
confirmation?
46. Restricted Endorsement on Bills of Lading
The DC subject to UCP 600 required presentation of one set of original bills of lading endorsed to the order of the applicant whilst the set of original bills of lading presented was endorsed in blank. Is this acceptable?
47. Open Endorsement on Bills of Lading
The DC subject to UCP 600 required presentation of one set of original bills of lading made out to order and endorsed in blank. A set of original bills of lading was presented made out to order of the beneficiary endorsed to the order of the applicant. Is this acceptable?
48. Freight Receipt
A DC subject to UCP 600 required presentation of a freight receipt without specifying its issuer and data content. A freight receipt issued by the beneficiary was presented, certifying that the freight was received by the carrier. Is it acceptable?
49. Is an issuing bank obligated to transfer if the nominated transferring bank refuses to transfer?
A credit subject to UCP 600 provides transfer restricted to a nominated paying bank T that does not agree to transfer. The beneficiary asks for transfer by the issuing bank I, regarding that since bank I chooses to provide transfer by a nominated bank T and that bank does not wish to transfer, then bank I should have the obligation to transfer. Otherwise why bank I provides transfer in the first
place if it does not wish to do the transfer? Also a principle should carry out the task refused by its nominated agent.
Is the first beneficiary right in its statements?
50. Can an issuing bank refuse presentation of complying documents from a second beneficiary through a transferring bank?
A credit subject to UCP 600 is totally transferred to a second beneficiary S. The first beneficiary F fails to substitute the invoice and drafts upon demand. The transferring bank T presents the complying documents from the second beneficiary S to the issuing bank I for honour. The issuing bank I refuses to honour based on the following reasons:
a. The presentation is not from the first beneficiary F. b. The unit price in the invoice is smaller than that stated in the credit. c. The total value (in both the drafts and invoice) is less than that stated in
the credit, creating under drawing.
51. Change credit currency from USD to CAD in a transfer
In a credit subject to UCP 600, the first beneficiary requests the transferring bank to change the currency from USD to CAD in its transfer to the second beneficiary.
Q1 Should the transferring bank accept such request?Q2 If the transferring bank nevertheless accepts the request, what measures
should the transferring bank take?
52. UCP 600 uses terms like "banks", "banking days" and "international standard banking practice". Would this imply that UCP 600 couldn't be applicable to credits issued by non-banks?
To answer this question we have to go back to the original intent of the UCP 600 Drafting Group.
53. Is "advance or agree to advance funds" in the definition of "negotiation" in UCP 600 article 2 same as "giving of value" or "undertaking an obligation to make payment" in ICC Position Papers No. 2?
Negotiation is one of the most misled terms in UCP operations because the meaning of negotiation may be different from one region to another, such as North America, Europe, Middle East and Asia. Hence it is almost impossible to create a perfect definition for "negotiation" in UCP.
As a result, the definition of "negotiation" in article 2 of UCP 600 is not perfect and is still subject to disputes during the drafting stage as well as after approval by the ICC National Committees. For example, some bankers start asking ICC Banking Commission to provide the definition of "purchase" used in article 2 of UCP 600. The more new words are introduced, the more clarification will be requested.
54. A credit subject to UCP 600 is fully transferred to a second beneficiary without any reduction in unit price and total value. The issuing bank has been notified for the details of this transfer by the transferring bank. Meanwhile the first beneficiary has also received outside the credit operations an agreed amount from the second beneficiary as its reasonable share of profits in the underlying transaction. In this arrangement, it is obvious that there is no need for substitution of documents by the first beneficiary. Then can the second beneficiary bypass the transferring bank and make direct presentation to the issuing bank?
55. Master Air Waybill v. House Air Waybill
According to ICC Document 470/TA.621, if a credit requires expressly a master air waybill, a house air waybill is also acceptable based on the following reasons:
i. Wordings like "HAWB (house air waybill) No. XXXXX" in an air waybill is acceptable even if the credit expressly requires a "master air waybill" .
ii. The intent of this condition (requiring presentation of a master air waybill in a credit) is unclear.
iii. Under Article 27 of UCP 500, as far as the air waybill is signed by a "carrier", it is acceptable. UCP 500 does not care whether the carrier is an actual carrier or a contracting carrier.
iv. This "master air waybill condition" does not prohibit signature by a freight forwarder.
v. This ICC decision is based on ICC Opinion No. R 221 (where the credit does not expressly require a master air waybill).
Do you agree with this ICC decision?
56. Lost of letter of credit advice
If a credit advice by local mail is lost, is this advice duly given by the advising bank?
A credit advice has been lost in local mail.
Q1 Is such an advice considered as sent by the advising bank?Q2 Is such advice considered as received by the beneficiary?
57. What Is A Banking Day?
After a long holiday, a letter of credit document checker Bob went to his office to work overtime on Sunday 6 July 2008 in Hong Kong. His old classmate Jim called his mobile phone to invite him to lunch. When Jim knew that Bob was working in his office, he went to Bob's office to pick him up for lunch at a restaurant just two blocks from Bob's office. He went into Bob's room and handed over Bob one set of documents presented under a local letter of credit subject to UCP 600 where the issuing bank was Bob's bank branch. The presentation consisted of a simple set of stipulated documents.
The notice of refusal was sent by fax on Monday 14 July 2008 pointing out 7 valid discrepancies. Jim's boss Don demanded payment from Bob's bank because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600. Bob's office is not open on Saturday and Sunday.
Q1 Is Don correct in his demand?Q2 What should Don have done to claim payment?
58. Bank I invited its VIP customer C to attend a real estate mortgage promotion campaign held on Tuesday 8 July 2008 on board a 100 feet yacht near Lantau Island, Hong Kong, where the Hong Kong Disneyland is located. C met D on the yacht. D was a letter of credit document checker for Bank I. C handed over to D one set of documents presented under a local letter of credit subject to UCP 600 where Bank I was the issuing bank. The presentation consisted of a simple set of stipulated documents.
The notice of refusal was sent by fax on Wednesday 16 July 2008 pointing out 5 valid discrepancies. C demanded payment from Bank I because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600. Bank I was open on Tuesday 8 July 2008 but is not open on Saturday and Sunday.
Q1 Is C correct in his demand?Q2 What should C have done to claim payment from Bank I?
59. Presentation to an Overseas Branch of a Bank
A credit subject to UCP 600 issued by the head office of an Indian international bank in New Delhi stated in SWIFT MT700 field 31D:
“Presentation to us on or before 1 July 2008”.
After being aware that there was not enough time to send the stipulated documents by courier to the head office of the issuing bank in New Delhi, the beneficiary presented them to its branch in Hong Kong. When the documents arrived the head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to presentation after expiry.
The beneficiary argued that “us” on its face should include all branches of the Indian bank. If the issuing bank did really mean presentation exclusive to the head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings.
Q1 Should the issuing bank honour the presentation under such circumstance?
A credit subject to UCP 600 issued by State Bank of India head office in New Delhi stated in SWIFT MT700 field 31D:
“Presentation to us on or before 1 July 2008”.
Field 41a states:
“Available with the State Bank of India by sight payment”.
After being aware that there was not enough time to send the stipulated documents by courier to the New Delhi head office of the State Bank of India, the beneficiary in Bangalore presented them to its branch in Bangalore, India. When the documents arrived the New Delhi head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to (i) presentation to the wrong branch and (ii) after expiry.
The beneficiary argued that “us” in field 31D and “State Bank of India” in field 41a, on their face, should include all branches of the State Bank of India. If the issuing bank did really mean presentation exclusive to the New Delhi head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings.
Q1 Is the argument by the beneficiary valid?
61. Article 14 (l) allows any party, beneficiary included, to issue a transport document. What measures should an issuing bank take to avoid the potential risks?
According to this sub-article 14 (l) of UCP 600, any third party may issue a transport document as a carrier, master, owner, charterer, or their agent. A beneficiary may also do so if he prefers. In other words, this sub-article would provide a legitimate platform for creation of fraudulent transport documents.
62. What qualifies "indication" of a charter party bill of lading under article 22 (a) of UCP 600?
UCP 600 article 22 (a) states: "A bill of lading, however named, containing an indication that it is subject to a charter party (charter party bill of lading)..."
Bankers are frustrated as to the precise interpretation of the word "indication" quoted above. Due to lack of knowledge on charter party operations, bankers do not have an effective means to determine which bill of lading is a charter party bill of lading as most of the bills of lading look like the same on the face page, sharing many identical data contents and boxes.
Q1 How would you determine a charter party bill of lading on its face?
63. Does an oral waiver constitute an amendment?
In USA the issuing bank dishonoured by naming a valid and incurable discrepancy (executing the first instalment shipment after latest date for shipment as stated in the instalment shipment schedule) in its notice of refusal. After an exchange of long distance telephone calls, the applicant finally agreed to waive this discrepancy in an email to the beneficiary.
A copy of the waiver was sent to the issuing bank. An officer of the issuing bank tried to comfort the beneficiary on the phone by serving a diplomatic message: “Please do not worry. There should be no problem with the discrepancy with our bank.” Later, the issuing bank dishonoured despite giving the “verbal waiver” as regarded by the beneficiary and the “wavier in writing” from the applicant. The beneficiary sued the issuing bank and the applicant.
Who is going to win the case, the beneficiary, the applicant or the issuing bank?
64. In the Total Energy v. Standard Chartered Bank Hong Kong case, (a) a fax stating discrepancies alone in the morning followed by (b) a phone in the afternoon stating refusal and disposal of documents, would comply with UCP 500 Articles 13 & 14. Is this court decision valid in UCP 600 where "a single notice" is required?
According to the judicial decisions of the captioned case provided by the Hon. William Stone J.,
a. sending a copy of the discrepancies checklist used by the bank internally, listing all the discrepancies in the morning, followed by
b. a phone call in the afternoon to the same person in the beneficiary's company, advising the bank's decision to refuse documents and asking for disposal of documents
Q1 Is this court decision valid in UCP 600 where "a single notice" is required under article 16 (c)?
65. Insurance problems in a transferable DC
A DC subject to UCP 600 calls for goods of CIF Dubai value of USD1,100,000. Shipment is by sea from Shanghai to Dubai. The first beneficiary in Hong Kong intends to transfer the full DC quantity to a second beneficiary in Shanghai for CIF value of only USD220,000. The issuing bank that provides the financing insists that the insurance policy must cover a minimum CIF value of USD1,100,000 to protect the bank's interests. The first beneficiary hesitates to ask the second beneficiary to do this insurance cover, as the second beneficiary will then know the price that the first beneficiary sells to the applicant in Dubai. The second beneficiary will be very unhappy after knowing the huge profit the first beneficiary makes.
What is the best solution to make the first beneficiary and the second beneficiary both happy?
66. CIF insurance problems in a transferable DC
What is the best solution in Exercise No. 65 if the first beneficiary is not from Hong Kong but from a small country in Africa, which is in severe short of foreign exchange?
As a result, this African country does not allow exports in FOB or CFR terms or imports in CFR or CIF. The only term allowed in exports is CIF and imports in FOB in order to earn more foreign exchange in its international trade. In a nutshell, for both imports and exports, freight and insurance costs must be paid in this African country.
The benefit for the African country is that, for exports, the country can earn more foreign currency such as USD and for imports, it can avoid paying in foreign currency, such as USD that it has not enough reserve to meet the foreign exchange obligations.
67. Can an issuing bank negotiate when the nominated negotiating bank refuses to negotiate?
In a DC subject to UCP 600 without providing confirmation, available by usance drafts at 60 days after shipped on board date in bill of lading, the beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v) when the nominated negotiating bank refuses to negotiate. The issuing bank refuses to negotiate.
Q1 Is the issuing bank correct in its refusal?Q2 What should the beneficiary do under the circumstance?
68. Can an issuing bank negotiate or discount when the nominated confirming bank refuses to negotiate?
In a DC subject to UCP 600, available by negotiation with usance drafts drawn on the confirming bank at 60 days after shipped on board date in bill of lading. The confirming bank refuses to negotiate due to discrepancies. However, the issuing bank finds the presentation compliant. The beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v). The issuing bank refuses to negotiate.
Q1 Is the issuing bank correct in its refusal?Q2 Can the beneficiary ask the issuing bank to discount?Q3 What can the beneficiary do under the circumstance in order to receive
payment before maturity?
69. Problems with drafts drawn on an applicant in a credit subject to UCP 600
Despite the provision of UCP 600 sub-article 6 (c), a credit subject to UCP 600 is however available by negotiation of usance drafts drawn on the applicant at 60 days after shipment date. The applicant refuses to accept the drafts relying on fabricated discrepancies disagreed by the issuing bank and the beneficiary. The issuing bank however disagrees to honour or negotiate the compliant presentation.
Q1 Is the issuing bank obligated to honour or to negotiate under the UCP 600?Q2 If the credit is confirmed, is the confirming bank obligated to honour or to
negotiate under the UCP 600?Q3 What should the beneficiary have done to avoid such risk?
70. Terms like "purchase", "advancing funds", "agreeing to advance funds" and "prepay " are used in UCP 600 articles 2, 7 (c), 8 (c) and 12 (b). What do they really mean?
Q1 What are the origin, focus and implication of these terms?Q2 What are the actions that these terms refer to under UCP 600?Q3 In the market place, do these terms share the same meaning as they are
interpreted under UCP 600?
71.72. Multimodal Transport Document On Board Notation 1
An L/C subject to UCP 600 specifies:
A multimodal transport bill of lading;
Place of receipt: Macau;
Place of final destination: West Orange, New Jersey.
The multimodal transport bill of lading shows:
Place of Receipt Vessel Name
Macau Casino RoyalePort of Loading Intended Vessel Name
Hong Kong ChopsticksPort of Discharge Place of Final Destination
New York West Orange, New Jersey
The issuing bank refuses payment due to one discrepancy:
“An on board notation is required because Chopsticks is an intended vessel only.”
Is this discrepancy valid?
73. Multimodal Transport Document On Board Notation 2
Shenzhen, China Container Haulage Motor Truck No. HK 8228
Port of Loading Vessel Name
Hong Kong Port ChopsticksPort of Discharge Place of Final Destination
New York West Orange, New Jersey
The issuing bank refuses payment due to one discrepancy:
“The on board notation has not shown the vessel name and the port of loading.”
Is this discrepancy valid?
75. Loss of documents in a back-to-back credit situation
The documents presented under a baby letter of credit subject to UCP 600 were lost during transit. Nevertheless, Bank IB, the intermediate bank that issued the baby credit, paid the ultimate supplier according to the provisions of UCP 600 article 35. Certified true copies of documents, including the bills of lading, other than drafts and commercial invoices that were replaced with originals, were presented to Bank IA, the issuing bank of the master letter of credit that was also subject to UCP 600.
Could Bank IA refuse the otherwise compliant presentation according to UCP 600 17 (a), relying on the following reasons:
i. The two credits, although both subject to UCP 600, are in fact separate payment undertakings.
ii. The originals are lost in another presentation (under the baby credit) and not in the same presentation (under the master credit), and
iii. Most of the documents (other than drafts and commercial invoices) are not originals?
76. Is an “UPS waybill” a courier receipt or an air waybill under UCP 600?
In a credit subject to UCP 600, an “UPS waybill” is presented, showing air carriage of vintage collection series Lamborghini remote control titanium toy cars of CIP value USD20,000 stowed in 20 packages of size 24 x 12 x 10 inches.
The issuing bank dishonours because in the “UPS waybill”, the carrier is not identified as required under UCP 600 article 23.
The negotiating bank disagrees and says that the “UPS waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit.
Q1 Is an “UPS waybill” a transport document under UCP 600?Q2 Under which article, article 23 or 25 in UCP 600 should this document be
