CASE STUDY FOR UCP 600, ICC

1. A documentary credit subject to UCP 500 bears a title "Irrevocable Documentary Credit" has a special condition as follows:

"This documentary credit will become inoperative upon receipt of a cable to this effect from the issuing bank after issuance."

After receipt of such a cable advice, the beneficiary made a presentation nevertheless. The issuing bank sent a refusal notice by SWIFT pointing out a discrepancy as follows:

"Documents presented after expiry of the documentary credit render the presentation discrepant."

Is the issuing bank correct in its refusal?

What would be the situation if the same credit is subject to UCP 600?

2. Is the following refusal notice acceptable for a DC subject to UCP 600?

"We refuse the documents and have found the following three discrepancies in the presented documents:

1. The port of discharge in the B/L is not the same as that stated in the DC. 2. Presentation after expiry. 3. Corrections in the certificate of origin are not authenticated by the

issuer." 3. What is an "unconfirmed letter of credit" under UCP 600? Give example 4. Is it possible that a confirmed letter of credit subject to UCP 600 becomes an

unconfirmed letter of credit without the consent of the beneficiary? 5. Is the following refusal notice acceptable for a DC subject to UCP 600?

"We have found the following three discrepancies in the presented documents:

1. The port of discharge in the B/L is not the same as that stated in the DC. 2. Presentation after expiry. 3. Corrections in the certificate of origin are not authenticated by the issuer.

Meanwhile we are holding the documents at your disposal and risk."

6. An applicant informed the issuing bank that the goods were rubbish and asked the issuing bank to freeze payment under a DC subject to UCP 500/600 due to trade frauds although the documents presented were all compliant. Should the issuing bank follow the instructions from the applicant?

7. Is this refusal notice acceptable for a DC subject to UCP 600?

"We refuse to pay you due to the following three discrepancies:

1. The commercial invoice does not meet the terms and conditions of the DC. 2. Third party B/L presented. 3. Unclean B/L presented.

Meanwhile we are holding the documents at your disposal and risk."

8. A DC subject to UCP 500 issued by Bank I was confirmed by Bank C expiring on 1 September 2002. There was no restriction on the presentation. The beneficiary presented the documents to Bank I on 29 August 2002. Is this the best practice? What are the risks?

If the DC were subject to UCP 600, would your answer be the same?

9. A presenting bank had the following messages in its covering letter/schedule dated 24 July 2007 presented against a DC subject to UCP 600.

"We have found the following discrepancies in the documents:

1. The port of discharge in the B/L is not the same as that stated in the DC. 2. Presentation after expiry. 3. Corrections in the certificate of origin are not authenticated by the issuer.

The documents are now presented for collection. Please approach the applicant for a waiver and give us your authority to negotiate by SWIFT message."

The issuing bank sent its refusal notice as follows:

"After consulting the applicant, we determine to refuse the documents due to the three discrepancies with the underlying reasons as stipulated in your covering letter/schedule dated 24 July 2007.

Meanwhile, we are holding the documents at your disposal and risk."

10. A nominated paying bank sent three refusal notices on the same day under a DC subject to UCP 600. The first notice was sent by fax listing all the discrepancies with reasons; the second notice made by telephone advising payment dishonour and the third notice sent by telex advising that documents were returned to the presenter by local courier. Is this acceptable? Please state your reasons.

11. UCP 600 article 3 states that:

"Branches of a bank in different countries are considered to be separate banks."

UCP 500 Article 2 states that:

"For the purpose of these Articles, branches of a bank in different countries are considered another bank."

Charles del Busto explained in ICC Publication No. 511 "UCP 500 and 400 Compared" that the underlying reason is because branches of the bank in different countries may be subject to different jurisdictions. What is legal for the head office of a bank may not be also legal in its branches in different countries.

Hong Kong was a British territory before 1 July 1997. After 1 July 1997, Hong Kong became part of the People's Republic of China (PRC) but it practises "One Country Two Systems" whereby the applicable law in Hong Kong is the Basic Law (Common Law) whereas that of PRC is Civil Law.

On 24 July 2007, a documentary credit subject to UCP 600 issued by Bank ABC Beijing Head Office was advised by its branch in Hong Kong. There were disputes on the discrepancies between the Beneficiary and the Bank ABC Head Office. The Beneficiary's law firm served a strong letter to Bank ABC Hong Kong Branch showing its intent to sue it in Hong Kong unless payment was made within 14 days. Bank ABC Hong Kong Branch replied as follows:

"Due to different jurisdictions between Hong Kong and PRC, we are in fact a different bank according to the provisions of UCP 600 article 3, based on the interpretation of Charles del Busto in ICC Publication No. 511 "UCP 500 and 400 Compared". Hence as an advising bank we have no payment obligations. Your client, as a beneficiary, should sue our Head Office in Beijing instead."

Is the defence of Bank ABC Hong Kong Branch correct?

12. The applicant showed to the beneficiary a written undertaking from the issuing bank for its agreement to issue a letter of credit subject to UCP 600. However, due to change in financial position of the applicant, the issuing bank later decided not to do so. The beneficiary wrote to the issuing bank to force its commitment in writing. Is the beneficiary successful? Please give your reasons.

13. Under which condition that a confirmed letter of credit subject to UCP 600 may become unconfirmed without the consent of the beneficiary?

14. In determination of the compliance of a refusal notice with the UCP 600, should the stipulations of UCP 600 articles 14 and 16 be read separately for (a) document examination for compliance, (b) determination of refusal or acceptance and (c) sending of the refusal notice respectively?

15. One set of Drafts drawn on the drawee bank presented under a documentary credit subject to UCP 600 expiring on 30 August 2007 was accepted on 30 July 2007 for 30 days deferred payment but was unpaid on maturity 30 August 2007. According to UCP 600 article 7 (a) (iv) the beneficiary made a new set of "replacement" Drafts drawing on the issuing bank on 3 September 2007. The issuing bank refused to pay the Drafts because they were drawn and presented after expiry of the DC. Is the issuing bank correct in its decision? Please state your reasons.

16. An issuing bank sent its refusal notice on the 5th banking day after receipt of the documents presented under UCP 600. In fact a simple set of documents was presented for sales of kitchenware, consisting of a total of 12 pages of documents. Is this refusal notice sent within reasonable time?

17. An issuing bank sent its refusal notice to a presentation under UCP 600 to a presenting bank overseas by courier. Is this acceptable?

18. Under UCP 600, can a beneficiary, through a presenting bank, have the right to present documents against a confirmed letter of credit directly to the issuing bank?

19. A standby letter of credit subject to UCP 600 was issued to back up an "open account" transaction where payment was made only 30 days after the "shipped on board" date. The standby required presentation of Drafts in duplicate, one Default Statement signed by the Beneficiary, one copy of Commercial Invoice and one copy of "shipped on board" B/L. It also specified that no presentation could be made until after default in payment. The Issuing Bank sent its Refusal Notice as follows:

"We refuse to pay due to the following discrepancy in the B/L:

The copy of B/L was presented more than 21 days after shipment, which is against the stipulation in UCP 600 article 14 (c)."

Is the Issuing Bank correct in its refusal decision?

20. For a DC subject to UCP 600, what should the presenting bank advise the beneficiary who asks for direct presentation to the issuing bank, thereby by-passing the confirming bank?

21. A standby LC issued by Bank I was confirmed by Bank C expiring on 1 September 2002. There was no restriction on the presentation. The beneficiary presented the documents to Bank I on 29 August 2002 but was wrongly dishonoured on 2 September 2002 relying on invalid discrepancies, such as the commercial invoice was not marked "original" whereas the standby LC did not ask for such marking. The documents were returned to the beneficiary that received them on 5 September 2002. The beneficiary presented the same documents without any alteration to the confirming bank on 6 September 2002. The refusal notice from the confirming bank stated:

"We refuse to pay due to presentation made after expiry of the standby LC. Meantime we are holding the documents at your disposal and risk."

Is the confirming bank right in its refusal under ISP98?

22. Case Study

A beneficiary put in its purchase agreement a special condition: "Payment by a confirmed letter of credit" and a "confirmed letter of credit" subject to UCP 600

was advised by the advising bank, which was also the nominated paying bank for at sight payment with reimbursements subject to URR 525 by an independent reimbursing bank. When the issuing bank in country A was ordered by the local government to freeze payment due to foreign exchange control, the beneficiary presented the compliant documents (later certified by the ICC DOCDEX Decision) to the nominated paying bank in country B, but no payment was made. What are the reasons?

23. A beneficiary made a compliant presentation under a documentary credit subject to UCP 600. The applicant showed to the issuing bank that the same beneficiary had made fraudulent presentation under another documentary credit issued by another bank and instructed the issuing bank not to pay the beneficiary. The issuing bank did not follow the instruction and paid the beneficiary. The applicant refused to reimburse the issuing bank. Is the applicant right in doing so? Please give your reasons.

24. Is the nominated paying bank in question 10 subject to the sanction under UCP 600 Article 16 (f)?

25. A DC subject to UCP 600 has the following stipulation:

"Purchase Contract No. 123456 dated 24 July 2007 attached herewith forms an integral part of this documentary credit."

Is this stipulation acceptable and what are the risks?

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:

1. To dishonour payment according to UCP 600 articles 7, 14 & 16, and

2. 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:

1. 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".

2. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC.

3. 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"?

35. Reimbursement instructions

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".

Is this refusal notice valid?

38. Documents not consistent

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:

. "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.

i. 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, Canada

Port of Discharge: Any port in China

A port-to-port bill of lading is presented showing:

Port of Loading: Come by Chance, Canada

Port of Discharge: Kaohsiung

The Confirming Bank in Taiwan rejected the bill of lading stating:

. "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).

i. 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".

ii. 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).

Questions:

0. Does the Confirming Bank have a right to do so under UCP 600? 1. 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.

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. Under UCP 600 can a transferring bank change the credit currency

from USD to CAD in its transfer?

In a credit subject to UCP 600, the first beneficiary requests the transferring bank to change the currency of the credit from USD to CAD in its transfer to the second beneficiary.

Q1 Can the transferring bank accept such request?

Q2 If the transferring bank nevertheless accepts the request, what terms and conditions 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. The scope of application for UCP 600 article 38 (k)

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. 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:

a. The two credits, although both subject to UCP 600, are in fact separate payment undertakings.

b. The originals are lost in another presentation (under the baby credit) and not in the same presentation (under the master credit), and

c. Most of the documents (other than drafts and commercial invoices) are not originals?

56. If examination of documents by a nominated bank constitutes "acting on its nomination" under UCP 600 article 14 (b)?

The beneficiary presented documents to a nominated bank N under a credit subject to UCP 600 available for deferred payment 60 days after date of bill of lading. Negotiation is restricted to nominated bank N.

As bank N is the beneficiary's banker, the beneficiary requested bank N to examine the documents for compliance. Bank N found the documents compliant and forwarded them to the issuing bank in USA. Ten banking days after receipt of presentation by the issuing bank, there was no notice of refusal received. Two week before the payment maturity date, the issuing bank applied for Chapter 11 protection due to lack of liquidity.

On payment maturity date, the beneficiary demanded payment by Bank N based on following reasons:

1. Bank N is the nominated bank, having examined the documents and found them compliant.

2. Bank N never showed any intention to refuse the nomination before the payment maturity date.

Is bank N obligated to pay the beneficiary?

57. Beneficiary's Certification in Commercial Invoice

A credit subject to UCP 600, amongst other documents, asks for one original commercial invoice certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F.

The commercial invoice presented has no such certification but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.

Should missing the certification in commercial invoice be a valid discrepancy under the circumstance?

58. Beneficiary's Certificate

A credit subject to UCP 600, amongst other documents, asks for one original beneficiary's certificate certifying that one set of documents has been sent to the

forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F.

The beneficiary's certificate is not presented but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.

Should missing the beneficiary's certificate be waived under the circumstance?

59. A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The credit prohibits partial shipments. Three sets of original bills of lading loaded on the same vessel under the same voyage number, discharging at Dubai are presented. The issuing bank dishonours due to following discrepancy:

Partial shipments are made as evidenced by presentation of three sets of original bills of lading and the credit prohibits partial shipments.

Is this discrepancy valid?

60. A credit subject to UCP 600 requires goods of Japanese origin. It does not ask for any certificate of origin. The invoice shows that the goods are made in South Korea.

The issuing bank dishonours due to following discrepancy:

“Invoice shows that the goods are of South Korean origin whereas the credit asks for goods of Japanese origin”.

The beneficiary disagrees, saying that Japanese origin is a NDC (non-documentary condition) since the credit does not ask for any document to reflect this. According to UCP 600 article 14 (h), country of Japanese origin can be ignored. As a result of this, the bank need not check for the origin of the goods. Hence there should be no discrepancy.

Who is correct?

61. A bill of lading presented under a credit subject to UCP 600 is signed as follows:

“By authority of Master, Captain ABC:

(Manual signature)

XYZ Shipping Company Ltd. as agent”

The issuing bank rejects this bill of lading because the agent has not stated whether it is signing for the master or for the carrier.

Is this discrepancy valid?

62. A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid.

A FCR is signed by a chop as follows:

“For and on behalf of:

(Manual signature)

XYZ Freight Forwarding Company Ltd.”

The issuing bank rejects this FCR as XYZ Freight Forwarding Company Ltd. does not indicate whether it signs as a carrier or as an agent of the carrier or as an agent of the master.

Is this discrepancy valid?

63. A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid.

A FCR is signed by a chop as follows:

“For and on behalf of:

(Manual signature)

XYZ Godown Company Ltd.”

The issuing bank rejects this FCR as XYZ Godown Company Ltd. is only a godown or warehouse and cannot sign as an issuer of the FCR that should be signed by a forwarder only.

Is this discrepancy valid?

64. A credit subject to UCP 600 asked for presentation of “One original and 2 copies of certificate of origin evidencing China origin” for sales of 10,000 MT steel goods from Hong Kong to Dubai. A certificate of origin issued by a Chamber of Commerce in China covering 30,000 MT of steel goods was presented, showing shipment from Hong Kong to Dubai.

The issuing bank regarded the certificate of origin discrepant because:

Q1 It covers 30,000 MT instead of 10,000 MT of steel goods.

Q2 The issuing date of the certificate of origin is two months before the credit issuing date.

65. A credit subject to UCP 600 from the purchasing department of a department stores chain in USA, purchasing goods based on FOB Yantian China terms, asked for “One original forwarder's cargo receipt (FCR) consigned to USA port determined by the forwarder marked freight collect”. A FCR was presented, inter alia, marked “consigned to USA port determined by the forwarder, freight collect”.

The issuing bank rejected the FCR because no port of discharge was specified based on ICC Banking Commission opinion R368, which states that a bill of lading must specify the port of discharge even if the credit asks for “any Country K port(s)” as the port of discharge.

Is ICC opinion R368 applicable to the present case?

66. In a transferred credit subject to UCP 600, the substituted drafts from the first beneficiary had discrepancies. The transferring bank sent notice to the first beneficiary to correct the discrepancies but the first beneficiary had caused some delay in return of the corrected drafts. Meanwhile the transferring bank did not wait for the return of the corrected drafts and presented the documents from the second beneficiary (for a smaller drawing amount) to the issuing bank in accordance with article 38 (i). Hence the payment was only adequate to cover payment to the second beneficiary. As a result, the first beneficiary was not paid.

The first beneficiary sent a protest to the transferring bank and opined that the second part of article 38 (i) only covers the invoice, not drafts. As a result, the transferring bank has no right to present the documents from the second beneficiary without waiting for the first beneficiary to correct the discrepancies in the drafts.

Q1 Is the first beneficiary right in his protest?