trade issues.docx

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1- Application of U.C.P.

Company A has opened a stand by L/C through a C bank for bad bank of their affiliateslocated in overseas. When establishing the L/C, they did not indicate the revocablepossibility. As the company A became dishonored, the C bank sent a cancellation cablewithout an agreement of the A company which is the beneficiary.However, when C.M.B, the bank which provided bad bank based on the stand by L/C inoverseas requested the payment to the C bank, the C bank turn the payment request downsaying since the credit did not indicate revocable possibility, they are considering the creditas revocable credit therefore, sent cancellation without an agreement.

Case study In the case, it is necessary to see if a standby L/C is U.C.P.(Uniform Customs and Practice forCommercial Documentary Credits) applicable. If U.C.P. is applicable, the question now iswhether to assume the standby credit without the revocable indication as a revocable creditor a irrevocable credit. And the applicable range of U.C.P. for the standby credit could also beanother consideration.

1. Condition to apply U.C.P. on standby creditAccording to the 1 of Uniform Rules for contract Guarantee 500, the rule can be also appliedon the standby credit to the extent to which they may be applicable. The problem now isthen, what is "to the extent to which they may be applicable" and it means, on the base ofthe nature of the matter, all the terms that the standby credit can be applied can be

applicable with this rule.

2. A standby credit without irrevocable indicationAccording to the U.C.P 500, a standby credit without the irrevocable indication is consider asa revocable credit. However, according to the U.C.P. 400, since it can be considered as arevocable credit and now that the case is applicable with U.C.P. 400, the cancellation can bedone without the consent of the beneficiary.(I.C.C. pub 489. Case NO. 168)

3. The extent to which the U.C.P. may be applicable on standby credit.A standby credit is not preconditioned of the shipping. Therefore, the rules of the U.C.P. forthe shipping documents regarding related rules, payment taking over, usance methods arenot be considered as the applicable rules.

CautionsWhen opening a standby credit, you must mention applicable clauses of U.C.P.and stand byL/C rather than a simple Guarantee clauses.unlike a standby credit, a Demand Guarantee of Guarantee must have a applicable clauses(Uniform Rules for contract Guarantee. pub 325)" and in terms of D/A or D/P transactions,there must be a clause mentioning "Uniform rules for collection I.C.C pub 522"

2-Meaning of Credit

A headquarter issued guarantee to make direct payment when a affiliate request paymentguarantee for bad bank purpose. The problem is, if it is ok to consider the company's foreignguarantee as a stand by L/C. There was a question ff the guarantee's title was "Stand byLetter of Credit" than could it be a Stand by L/C.

Case study1. Credit promisorAccording to the Uniform rules for collection, it says a bank agrees to pay. (Refer to the 2 ofU.C.P.).Therefore, unlike a bank, a general company can not be a promisor of credit.Although it used a word 'Credit', it is not a credit but a written guarantee. As a result, theGuarantee issued by the headquarter is a mere Guarantee and not a stand by L/C.

2. The title of creditThere is no need to use a term 'Credit' to process L/C. And you may use 'Documentarypayment order" term. You don't need to use term 'documentary' even though you are usingthe term 'credit' It is acceptable to use just "Letter of Credit. (I.C.C. pub 459. Case No.3)

3. A definite promise of paymentI means a agreement of a payment, undertaking purchasing and usance if a document meetsall the condition for the credit. As long as such payment agreement is made by a bank, it can



be regarded as a credit of U.C.P.

Cautions A credit must be Banking Letter of Credit issued by a bank. But at this point, the definition fora bank is not clear. Moreover, a credit from some foreign countries are sometimes issued byan organization that does not have a banking mechanism. Also, a definition for a bank isdifferent from each country therefore, the domestic general merchant banks should be alsoincluded in the category of a financial agency. Since the details for a bank or a financialagency are diverse in each country, you will need to find out whether a bank is apt to issue acredit through referring to the Banking Directory.Given that fact, you should take into consideration when dealing with a credit issued by abank that doesn't have a correspondent agreement because there is no way to confirm thepresence of authenticity against the credit.

3-Credit v. Contracts

Case 1The product description written on the credit reads "Java white granulated sugar". But thebeneficiary issued and presented a original B/L that reads "Java white sugar" as a productdescription. As of a result, the opening bank rejected to meet payment due to the productdescription of the original B/L is discord to the terms of the credit. But the negotiating bankinsisted that since the description "Java white sugar" is conforming to the product of the salescontract, they instituted a return demand lawsuit of the payment against the credit.

Conclusion All the documents must be prepared based on the terms of a credit, not on the basis of asales contract otherwise it would be consider as Discrepancy.

Case 2 The product description on a credit reads "Woman's Jacket" and it says "details as per offerno SB340". The seller indicated "Woman's Jacket" on the invoice and accurately prepared thesizes, quantities and all the types based on the offer sheet and sent it with other purchaseddocuments to the opening bank. However, the opening bank rejected to meet paymentdeclaring one of the item indicated in the commercial invoice conflicts against a item shownin the offer sheet.

Case studyThis case can not be a dishonor case in accordance with Independence Principle of the Credit.As prescribed by the Sub-Article 3(b) of Uniform rules for collection, a credit is a separatetransaction from a sales contract or other contracts that it basis on, and a bank has noconcern with such contract although there is an indication of reference s on a credit and italso stipulates that there is no binding whatsoever.In practical affairs, you should not open a credit that goes by a product offer sheet or acontract as product details. There are some cases where you have to attach a sales contractor a product offer sheet to open up a credit. In this case, you should thoroughly review onthe mutual consensus and make sure of the result.

Case 3 When opening a credit, a seller appointed and requested a "A" bank as a advising bankhowever, an opening bank unilaterally appointed a "C" bank as an advising bank and notifiedit to the seller. Hereupon, the seller complaint and requested to the opening bank to changethe advising bank to the "A" bank. Then the prior opened credit was canceled and issued anew credit that appoints the "A" bank as a advising bank.The seller requested purchase to the "C" bank according to the prior credit disregardingAmendment to Letter of Credit and presented shipping documents to the opening bank. Theopening bank rejected to meet payment declaring breach of contract.

Case studyAs prescribed by the Sub-Article 3(a) of U.C.P., a opening bank is not dominated by anyclaims or plea insisted base on the relations with an applicant, a opening bank and abeneficiary.

Furthermore, since an unilateral amendment by the opening bank without a consent of thebeneficially is impossible, it seems there is no pro

4-Document v. Goods/Service/Performances.

A credit is requesting an experts' inspection certificate and the seller was notified that



the advising bank is "ANZ Bank". The seller submitted a false inspection certificate thatfits the credit to the opening bank. When received shipping documents, the debtorrejected to meet payment declaring that the quality of the product is not conforming tothe sample as per a expert's inspection. For this, the negotiating bank demanded forthe payment declaring the shipping documents conforms to the credit terms however,the demand was not fulfilled and dispute has occurred.

Case study1. Payment rejection based on the quality of products.

Since the transaction is based on the document, not on a product in doing a credittransaction, the payment rejection can not be accepted unless there is a problem withthe documents. The No. 4 of Uniform Rules for contract Guarantee stands as a groundfor this matter. Such a principle is referred as "Abstraction Principle of the Credit"

2. Payment rejection after custom clearancePayment rejection is not acceptable once the products passed custom clearance.Because in order to reject payment, you need to return the document to the seller butyou need to submit the document to a freight company also to clear the custom.

3. ConclusionIn this case, you can not reject payment grounded on the credit and the purchaserwould have to institute a lawsuit against the seller based on the sales contract. You can

not put liability on the opening bank either.

5-Instruction to Issue/Amend Credits.

The credit requires a inspection certificate and the certificate has to be sent to the openingbank and the certificate confirmed by the opening back has to be submitted. And the creditterms also stipulates that the purchases has to be made within the 3 days of the inspectionconfirmation date. Even though the term was FOB, it didn't required to submit insurancedocument nor appointment of the advising bank or negotiating bank. The seller falselyforgery the signature of the prior inspection certificate. They even forgery the confirmationsignature of the bank then purchased from a local "C" bank and sent it to the opening bank.The opening bank rejected to meet payment declaring submission of falsity document thatwas forgery on the inspection certificate and for the shipping mark disagreement on theinsurance document.

Case study 1. Excessive details of a creditIt is very difficult to purchase all the necessary documents and sent it to a opening bank for aconfirmation within 3 days of inspection certificate was issued between different countries.You should mutually discuss for amending such excessive terms to avoid further dispute.

2. Unclear instructionIt would be no problem for a opening bank to issue a instruction when there is no instructionby a advising bank or negotiating bank (reimbursing bank). If the shipping condition is FOB

term, there must be a clause in the document declaring that a seller needs to buy insuranceand submit the insurance document to purchase.In some cases, there is a request to submit an experts' inspection certificate. For an example,if there is a clause saying "experts inspection certificate are required", you wouldn't knowwhat kind of person can be the expert and whether the expert has to be one person or twoperson. Like such, some instructions can be very unclear. Therefore, it is your best interest tomake the terms simple and clear for further time.

6-Revocable v. Irrevocable Credits.

Company "A" opened a usance credit through a "C" bank. But the credit didn't have clausewhether it is revocable or irrevocable credit. After awhile the company "A" notified to theseller of the unilateral cancellation of the credit through the opening bank "C". However, the

seller refused to consent on the cancellation and demanded payment for the exportedproducts as per agreement. But the opening bank rejected to meet the payment declaringthat the unilateral cancellation is possible since the credit had no indication for revocable norirrevocable clauses.

Case study1. Credits permitting revocable or irrevocable



Opened revocable and freely negotiable credit but a debtor requested credit cancellationtherefore, the cancellation notification was notified to the seller through the advising bank.Regardless of the cancellation, the seller shipped the goods, prepared the shippingdocuments and inquiry purchase through other bank than the advising bank.without knowing the cancellation, the negotiating bank requested the payment to the openingbank after purchasing however, payment for the credit was rejected.

Case study 1. If purchased was made prior to the cancellation notification of the opening bank.In no doubt, the negotiating bank can request for the payment to the opening bank if thepurchase was made before the notification of the cancellation of the opening bank.(The Sub-Article 9(b) of U.C.P.)

2. If purchase was made after the cancellation notification was made by the opening bank.In this case, if the negotiating bank knowingly purchased, the negotiating bank can no bereimbursed for the payment. If the negotiating bank purchased a document that correspondsto the terms of credit without knowing the cancellation of the credit, the act of negotiatingbank can be regarded as a good intention purchase and under the I.C.C.(I.C.C. pub 459. caseNo.10)., the payment can be reimbursed.At this point, the negotiating bank will have to support evidence that the bank was not awareof the cancellation of the credit at the time of purchasing.

10-Types of credit.

Case 1 The bank "A" opened irrevocable and freely negotiable credit and there were 3 conditions tothe terms of credit. First, it is available by payment of the beneficiary's draft on X Bank.Second, the negotiating bank should notify the actual NEGO on the NEGO date by cable orswift to the opening bank. Third, the credit's expiration of validity will be expired on May28th. The Seller prepared the shipping documents based on the terms of credit, NEGO with a"D" bank on May 27th, and re-submitted to the "X" bank on May 28th. And the "X" bankagain re-submitted this documents to the opening bank on May 30th.However, the opening bank notified rejecting to meet payment declaring delay in submission.For this, the "D" bank which is negotiating bank insisted that the documents were submittedwithin the validity time to the "X" bank which is paying bank.

Case study1. Usage method according to the types of creditBased on the U.C.P, there must be a nominated bank that can be used per the types of creditbut for the freely negotiable credit, all the banks can be the negotiable bank. (The Sub-Article10(b) of U.C.P. 500)So for this case, a negotiable bank was selected as a freely negotiable credit, and the bankalso acted as a reimbursing bank.

2. The expiration date of the validity time with creditFor this particular case, since the paying bank is additionally appointed, the validity periodshould be expired at the nominated bank although the credit is a freely negotiable credit(I.C.C. pub 459. case No.34).

3. Presenting documents to a different bank other than the nominated bankThe "X" bank which is the nominated bank and the paying bank should make immediatepayment and since the documents were submitted within the validity period, it is reasonableto demand compensation to the "A" bank which is the opening bank.

Case 2 Both opening bank and advising bank for the restricted credit was "CMB". The seller receivedrelease letter from the "CMB" which is the advising bank. Then the seller NEGO through a "J'bank and submitted the release letter to the opening bank. However, the opening bankrejected to meet payment declaring delay in document submitting.

Case study

1. The definition of restricted creditA restricted credit restricts NEGO only to a advising bank or other certain banks. Theillustrates for such restricted credit is as following. "The negotiation of this credit is restrictedto CMB Seoul"

2. Process of restricted credit(1) Re-NEGO process



When a seller is making payment for NEGO through the seller's bank, he first NEGO throughhe's own bank and this 1st negotiating bank usually request re-NEGO to a restrictednominated bank. This re-NEGO process is generally processed based on the re-NEGO contractdrew up between the banks.

(2) Direct NEGO processGo to a restricted nominated bank, get release letter, attached it with re-NEGO credit andNEGO at one's bank directly and submit documents at a opening bank.

3. View of I.C.C.

I.C.C made following authoritative interpretation to a direct NEGO that is attached with arelease letter. With a restricted credit, a NEGO based on a release letter through a non-nominated 3rd bank, it is consider as a NEGO without authorization of a opening banktherefore, exempt from a compensation per the Sub-Article 10(d) of U.C.P. In order toreceive compensation from a opening bank, there must be prior approve from a openingbank. However, if the documents submitted by a non-nominated 3rd bank are consistent tothe credit's validity period and submit was directly made to a opening bank within thesubmission validity period per the 43 of U.C.P., the opening bank is responsible to makepayment.(I.C.C. pub 489. case No.196).

4. CautionThe opening bank's payment rejection in this case is reasonable. Because the submissionvalidity period has to be the base on the standard of the opening bank.

11-Teletransmitted and pre-advice credits.

Case 1 A company "D" received a credit through a Telex and it had following clauses. "Advice ourirrevocable credit...all other details are followed as soon as possible)." Thereafter, the "D"company urged the advising bank about the Telex but fail to receive any reply from theopening bank. As of a result, the "D" company gave up to receive the Telex, completed theshipping and requested the payment in collection method through one's bank. Because ofthis, the shipping documents arrived later than the products, emurrage charge and additionalcharge for import tax have occurred therefore, the beneficiary demanded the compensationfor the expenses. However, the opening bank insisted on sending the Telex and tried to buckpass which eventually created a dispute.

Case study1. A credit without a tele-transmissionAccording to the Sub-Article 10(a-jj) of U.C.P., "if there is a clause declaring that it doesn'tconsider a operative credit instrument or a operative changes validates a telex dispatch orpost confirmation, the credit is not regarded as a valid changes or valid credit". If a credit isissued containing such informity, the opening bank should forward a telegram notificationrequiring a valid credit certificate.

2. When a telex was dispatchedIf there is a telex dispatching arrival following a short cable credit, only the telex dispatchingbecomes the valid credit.

3. Responsibility with a telex dispatching not deliveredAccording to the 16 of U.C.P., there is an exemption clauses for a bank if there is a problemwhile delivering declaring that a bank holds absolutely no responsibility. Therefore, thisparticular case is not applicable to request responsibility on the opening bank according tothe U.C.P. regulation. As of a result, both the seller and the debtor should request damagebased on the sales contract. (Reference: I.C.C. pub 489 case No.197).

Case 2 After drawing a contract, Y trading company received a preliminary notification of the creditopened. Thereafter, the company urged for opening a credit but since there was nonotification, the seller had to warehoused the products, delaying for one month which causedhim a monetary damage. The seller requested the compensation of the damage to the debtor

and to the opening bank but there was no response. The case requires for an answer toI.C.C.

Case study1. Preliminary notification in opening a creditA preliminary notification in opening a credit is a pre-notification by a opening bank notifyinga seller about the key information about the credit amount, credit number and the product



information. Such notification is only a mere pre-notification notifying the bank is furtheropening a credit based on the information therefore, it shouldn't be consider as a operativecredit instrument. The purpose of this pre-notification is for a seller to be confident aboutfurther to prepare products, manufacturing and to secure a intended vessel.

2. Preliminary notification - Responsibility of a opening bankAccording to the Sub-Article 11( c) of U.C.P., it regulates that the opening bank is allowed tosend a preliminary notification only when there is an intention to open a operative creditinstrument or to change the operative credit, and once the preliminary notification isproduced, the opening bank is responsible to immediately send a operative credit whichwouldn't contradict with the preliminary notification. For this case, the opening bank seems tobe reasonably responsible to make compensation against the damage that occurred from notopening a credit. Except, if the sending bank of the preliminary notification wants to beexempt from not opening a operative credit, the exemption clauses must be indicated in thepreliminary notification.(I.C.C. pub 459 case No.39).12-Incomplete or Unclear Instructions.

A credit was a sight bill but there wasn't a negotiating bank appointed and no clause forfreely negotiable credit. A question was made whether the credit can be regarded as a freelynegotiable credit but the opening bank had no response so the question was officially inquiredto I.C.C.

Case study1. Usage location indication for creditAccording to the Sub-Article 10(b) of U.C.P,, unless a credit is not limiting the usage to theopening bank, all the credit must designate indication of paying, taking over or negotiatingbank and whether accepting the freely negotiating credit.

2. Incomplete or unclear instructionsWhen there is a incomplete or unclear instruction with a credit, it must go through a advisingbank and inquiry to a opening bank to clarify the instruction.

3. Responsibility of a advising bank with incomplete instructionsWhen there is a incomplete or unclear instruction with a credit, the advising bank mustconfirm with a opening bank of the fact instead of notifying it as is. If being requested to

notify it as is, there must be a clause declaring that the bank has no responsibility in notifyingthe instruction and that the offering is just an act to providing a information.

4. Responsibility of a opening bankIf being requested as a opening bank to provide necessary information because there is aincomplete or unclear instruction, the opening bank must provide the information requestedat once. (The 12 of U.C.P. 500)According to the I.C.C. pub 489 case No.191, this case is sentenced as a general practice toregarded as a freely negotiating credit.

13-Standard For Examination of Documents.

Case 1 The weight indication of the credit shows 12,000MT(metric ton) and 5% More or less allowedwas the term attached. But when received the shipping documents, each weight indication ofthe documents were different.On the original B/L, it indicated 12,600,000kgs, on the weight certificate it reads12,600,000kg, on the commercial invoice it reads 12,600MT and on the grain inspectioncertificates, it reads 12,600,000tons. As of a result, the payment was rejected because ofdiscrepancy in credit and discrepancy in shipping documents.

Case study1. Standard for examinationAccording to the Sub-Article 13(a) of U.C.P., the standard for examination for the documentsrequested by the bank's credit has to be determined based on the International StandardBanking Practice. It regulates that the contradictions of the documents' context can beregarded as a discrepancy. The international Standard Banking Practice is the standard forexamination in this case and according to the I.C.C. bank committee's note, the StandardBanking Practice in credit has to be "the most honest, skillful and predictable practices".

Examples of International Standard Banking Practice1) Miss typed address in the original B/L and missing square in a stamp is not discrepancy.



2) It is possible to indicate product details in general terminology that would not creatediscrepancy against a credit on all kinds of documents other than a commercial invoice(I.C.C. pub 459 case No.43).3) If there is no stamp or category number on a credit, it is discrepancy to the original B/Land stamp category number of origin certificate. This can not be rejected or accepted.(I.C.C.pub 459 case No.199)4) It is regarded as a discrepancy If 40PKGS (bags) is indicated in the original B/L and40M/TONS(metric ton) in the commercial invoice.(I.C.C. pub 489 case No.200)5) It can be regarded as a discrepancy if 4 of the commercial invoices out of 5 are indicatingthe weight of products as 85,162MT and 88,162MT on one. (I.C.C. pub 489 case No.202)

2. DiscrepancyAccording to the Sub-Article 13(a) of the U.C.P., this case can be regarded as a discrepancybecause the weight unit on the credit is indicated as MT(metric tons) but the weight unit onthe original B/L is in kg.The banks have no responsibility to accurately convert the units of metric tons, tons andkgs.A decimal points (,), period(.) and a half point (,) discrepancies are not regarded as adiscrepancy documents. (I.C.C. pub 459 case No.40)

ConclusionIt is reasonable to reject payment for this case because the case can be regarded as adiscrepancy documents.

Case 2 Bank "D" has received a documentary credit issued dated on May 13th. The shipping terms ofthe credit was C&F(Existing, CFR term). The bank processed NEGO the shipping documentson May 30th, but the original B/L, insurance documents and all the other documents weredated as May 8th.After negotiated the documents the bank submitted it to the opening bank but rejected thepayment declaring that the coverage date of insurance is discrepancy. The bank "D" insistedon the rejection since the insurance policy is not a document required by the credit.

Case study1. Documents not requested by a creditAccording to the Sub-Article 13(a) of the U.C.P., it stipulates "A bank don't examinate adocument that is not regulated in a credit". And it also stipulates if "received suchdocuments, it should be returned to the sender or sent back to the sender without furtherresponsibility".

2. Discrepancy of a document that was never requestedA bank has no responsibility to examine a credit that was never requested by a credit.Therefore, a bank can not reject entire documents just because such documents containsdiscrepant details to the credit. (I.C.C. pub 489 case No.204)

Case 3 On the cover of the shipping documents reads that the sender is sending a document as aapproval based according to the U.C.P regulation, so a bank never rejected the payment

thinking that the documents were sent as collection. 2 weeks after receiving documents,notified payment rejection to the negotiating bank but a reply came back saying they denyrejection because the time period for the examination of documents was expired. As of aresult a dispute occurred whether the time period for the examination is applicable toapproval base.

Case study1. The time period for the shipping documents examinationAccording to the U.C.P. 500, The issuing Bank. have a reasonable time not to exceed sevenbanking days following the day of receipt of the document. (The Sub-Article 13(b) of U.C.P.).Accordingly, the time period for the shipping documents examination by the opening bankshould be done within seven banking days from the date received the shipping documents.

2. The details of approval baseThe approval base means, when a negotiating bank sends documents with collection requestbecause there is a discrepancy with documents which a seller has submitted under thereserve so that a opening bank to get an admission from a opening requester. The meaningof approval base has different meaning from collection base where it represents a letter ofguarantee or letter or reserve. The U.C.P. is applicable in this case so it has to follow the time



period for the examination regulated by the U.C.P.

3. The difference of approval base and collection baseIn a broad sense, the approval base include collection base however, it allows a letter ofguarantee negotiation using approval base while applying U.C.P. Accordingly, if a cover of theshipping document indicates that is follows the U.C.P. it should be interpreted as a letter ofguarantee and if it indicates the U.C.P. applicable about collection, it should be interpreted asa collection base. (A judicial precedent of the U.S. : Alaska Textile co., Inc v. Lloyed williamsFashion case 777 sup 1139).

ConclusionEven though it advent a shipping document as approval base it indicates "We send you thedocuments for approval under reference to U.C.P. 500". So it is applicable with the Sub-Article 13(b) of U.C.P., the shipping documents have to be examined within the sevenbanking days from the document was field. (I.C.C. More case study on documentary credit1991. p48-50).

14-Discrepant Documents and Notice.

Case 1 A credit opening bank filed shipping documents of a credit on May 22, but since there were adiscrepancy, the bank requested to the seller to fix the problem but no response, so on May30, the bank sent the payment rejection to a negotiating bank. But the negotiating bankinstitute a law suit for the payment declaring the expiration date of the shipping document'saccepting period.

Case study1. The examination period for the shipping documentsFor the opening bank's shipping documents examination period, the U.C.P. indicates, if aopening bank decided to reject the documents, they should immediately by using promptmeans of method in sending rejection notification within seven banking days from the datethe document was received (The Sub-Article 14(d-i) of U.C.P.). Accordingly, the seventh daywould be May 29th starting from May 23rd and since May 24th is Sunday, the documentsshould arrived to the other party by May 30th. But it was sent on May 30th by a telegrammeaning it will get to arrive on June 1 but it is Sunday again so at last, it will arrive by June2nd.

2. The payment rejection of the other partyIf the payment rejection of the other party received the documents through a bank, he/sheshould notify to the bank and if received personally from the beneficiary, the paymentrejection must be notified to the beneficiary. (The Sub-Article 14(d-i) of U.C.P.).

Case 2 A opening bank rejected to meet payment declaring the unit price on the commercial invoicedated August 5th is not consisting with the credit terms amendment dated May 14th and thenumber on the Master L/C of the original B/L as well as Bank to Bank L/C are left out. Thenegotiating bank submitted after entirely completing the discrepancy before the expatriationdate send notification rejecting the payment but the opening bank sent payment rejectionnotification declaring that the credit number is missing on the inspection and product of origincertificates. Accordingly, the negotiating bank insisted that the rejection is against the No. 14clause of U.C.P. creating a dispute.

Case study1. Indicating discrepancy when payment is rejectedAccording to the U.C.P.,, the opening bank is required to indicate all the list of discrepancy forthe payment rejection. (The Sub-Article 14(d-jj) of U.C.P.) That is, the opening bank is toindicate entire list of discrepancy at one time in the unpaid notice and prohibited to makeadditional discrepancy notice. (I.C.C. pub 459. case No.52)

2. Additional discrepancy notice after the discrepancy have been complementedA opening is responsible to make payment if a negotiating bank complement the discrepancy

when the discrepancy was notified and received within the credit's documents valid period. Atthis time, hostility about other discrepancy by a opening bank is not acceptable. (I.C.C. pub459. case No.53)

3. Complementing after the expiration date of the presenting timeA negotiating bank has right to complement the discrepancy for request however, it isacceptable if completed within the validated period of the documents presenting time against



a credit. If the presenting period is overdue, a opening bank may reject the payment for theexpiration of presentation time. (I.C.C. pub 459. case No.53)

Case 3 A opening bank rejected the payment declaring the discrepancy and sent only the twooriginal B/L and other orignal copies of documents. The other original B/L was never sent.Debtor already cleared the custom using directly sent original B/L and ran away, so the otheroriginal B/L couldn't be sent back. As of a result, a original bank rejected the paymentinsisting on the other 3 original B/L and created dispute.

Case study1. Return documents when payment is rejectedAccording to the U.C.P., if a opening bank or a confirming bank decided to reject documentacceptance, the banks should either process it right to dispose or reserve under the control ofthe suggester or send them back. If not possible to send the documents back, payments cannot be rejected. (The Sub-Article 14(e) of U.C.P. 500) However, a opening bank hasabsolutely no responsibility to the documents never presented to the bank and when adocument is directly sent to a seller. (I.C.C. pub 459. case No.55)

2. Consignee of original B/LIf a consignee of the original B/L is a debtor, the debtor with the directly received documentsmay process customer clear directly at a custom instead of going through a bank. On theother hand, if a consignee is appointed to a named order, it must be processed through a

opening bank, obtain assignment and endorsement to clear custom. If a shipper neglect thisorder, and the consignee offer products to the seller with a document belong to a openingbank, the consignee is responsible to the opening bank.

3. Custom cancellation after products are clearedThere is a problem if it is possible for a consignee to obtain original B/L and reject thepayment after products are cleared from a custom because the products are bad. Theopening bank seems to be willing to accept documents if a custom clear was done after thedocuments and original B/L was delivered to the debtor, therefore, the opening bankshouldn't reject the payment.

Case 4 A debtor "U" opened a credit, obtained L/G and cleared imported cargo. Upon inspecting thegoods, the quality was poor and the price went down on the imported cargo. Upon arrival ofthe orignal documents, the debtor rejected to meet payment declaring delay of shipping anddocument presenting. But the negotiating bank found out of the customer clear on theproducts, insisting it can not be the reasonable cause for payment rejection creating dispute.

Case study1. Payment rejection based on the U.C.P.According to the Sub-Article 14(b) of U.C.P.,in order for a opening bank to reject payment,First, they must promptly reject within seven banking days from the date a document wasreceived,Second, they need to indicate entire inconsistency of the documents and the credit for thepayment rejection and

Third, either declare to send back the documents or indicate whereabout of the documents orwhether to put under the right to dispose or reserve.

2. Payment rejection after L/G is issuedThere is no clear statement in the U.C.P. as to if a payment rejection after L/G is issued. Butinferencing according to the Sub-Article 14(b) of U.C.P., the payment can not be rejected ifcustom is cleared after L/G is issued because the original B/L can not be returned. Howeverthere is a concern if cancelation is possible after inspecting the goods and return the orignaldocuments. But the term was to accept entire discrepancy of the document when acquiring ittherefore, even in the payment rejecting period, the payment can not be rejected.

3. L/C agreementAccording to the definite promise of the L/C it states, "Regardless of any discrepancy to thecredit terms, I'll accept the documents regarding imported cargo" therefore, based on theagreement, the debtor may not request payment rejection to a opening bank when L/G isissued.

15-Disclaimer on Effectiveness of Documents.

Original B/L and other inspection certificates were requested by credit but the inspection



certificate is requesting a signature of a company "ABC" which is a debtor's affiliates. But theseller attached a forgery inspection certificate by "ABC" company for NEGO. But it created apayment rejection because the signature was inconsistent. As of a result, a negotiating bankinstitute a law suit declaring that the authenticity of a document's signature is not the dutyfor a bank.

Case study1. Bank's duty for document inspectionAccording to the Article 15 of U.C.P., a bank has no responsibility with formality, sufficiency,accuracy, authenticity, forgery or legal effectiveness on any documents.

2. View of I.C.C on a forgery documentA bank is exempt from a forgery or changes in documents according to the Article 15 ofU.C.P. But if a bank has commit an error while inspecting documents, a bank can beresponsible in accordance with a judgement of a court. (I.C.C. pub 459. case No.59)

3. Prior recognition of a forgery documentA bank can be responsible if found to commit an error while inspecting documents orrecognized the forgery or changes of a document.

16-Disclaimer on the Transmission of Message.

After shipping goods as credit, the NEGO for the documents have been requested to "D"

bank, and the "D" bank NEGO the documents and inquiry the delivery through a expressdelivery company. The express delivery company sent the documents to the affiliates of theimporting country and upon receiving the documents, the same affiliates did not delivered tothe debtor who is the applicant of the credit but to the originator party according to theoriginator party's request. And the originator party submitted the documents to a custom andbecame dishonor after receiving the goods.

Case study1. Missing, delay and damage while delivering shipping documentsAccording to the U.C.P, a bank has absolutely no responsibility of the missing, delay anddelay, damage while dispatching shipping documents. (The Article 16 of U.C.P. 500).Therefore, a negotiating bank has no responsibility on the mis-delivery of documents but theexpress delivery company is responsible for the damage.

2. Compensation against a express deliverly service companyInstituting a lawsuit against a delivery company is possible if it is registered as a independentcorporation but if it is registered as a agency of a overseas company, a deed is on the headoffice therefore, a law suit should be made against the head office.

3. Violating express delivery instructionI.C.C. interpreted that if such action is inconsistent to a credit terms if a document is supposeto be sent out using express delivery but if the instruction was neglected. The instruction ismade by a opening bank to the paying, take over and negotiating bank. Therefore, if asending bank used different method to send documents, it has nothing to do with abeneficiary so this is not regarded as inconsistent act.(I.C.C. pub 489. case No.219).

17-Force Majeure.

A confirming bank failed to receive payment because a war broke out in the openingbank's region. The confirming bank request redemption for the payment to a sellersince the opening bank was not making payment. However, a dispute was developedbecause the seller insisted that the confirming bank is also the negotiating bank andthe confirming bank t the same time which do not have a right to redemption.

Case study1. Bank responsibility for Force majeureA credit becomes null if the credit validity expires due to Force majeure, strike and job

suspension and the opening bank bears no responsibility. (The Article 17 of U.C.P. 500)Even when a opening bank resume the business, the bank has no responsibility withpayment - take over - differed payment - NEGO for the credit that was expired withvalidity period. The rule applies the same to the opening bank about a strike andbusiness discontinuance.



2. Business discontinuance of a opening bank and the responsibility of a confirmingbankEven if a opening bank's business is interrupted due to Force majeure , if there is aconfirming bank to present documents, the payment should be made as long as thedocuments are consistent to the documents terms since the confirming bank confirmedseparate independent undertaking of payment. The confirming banks are also includedin the Article 17 of U.C.P. Therefore, a confirming bank is exempt from responsibility ifthe business is interrupted due to Force majeure , but if there is a opening bank, theopening bank should be responsible.

Conclusion The opening bank has no responsibility to make payment because the business wasdiscontinued due to the war. Even if the war is over and the bank resume the business,the bank is no longer responsible to make payment for the expired credit. But thevalidity of the credit's expiration period is still not over even after the war is over, thebank has the responsibility for the payment.

18-Disclaimer for Act an instructed party.

"A" bank which is a advising bank and a confirming bank at the same time requested abeneficiary of the confirming and advising service fee for the credit notification using EDImethod. But the beneficiary became dishonor and couldn't make service fee payment. So therequest was sent to the opening bank but the opening bank insisted that since all the servicefee is responsible by the beneficiary, the bank rejected the request and created a dispute.

Case study1. Notification - The responsibility of a confirming bank's actionThe opening bank is responsible for the confirming and advising service fee of the advisingbank and the confirming bank. Although there is a article declaring "all banking chargesoutside are beneficiary's account", when the beneficiary is incapable to make payment, theopening bank is entitled to make the payment finally. (The Sub-Article 18(c) of U.C.P. 500 )Although the service fees are burden by the opening bank, the bank is exempt fromresponsibility if other instructions are not executed. (The Sub-Article 18(b) of U.C.P. 500)

2. The right of compensation for a beneficiary of the opening bankThe opening bank should instruct the advising bank and the confirming bank and executeusing relevant applicant's expense and allotment.(The Sub-Article 18(b) of U.C.P. 500) So theexpense paid by the opening bank can be requested to the applicant. (I.C.C. pub 489. caseNo.220). Since the opening bank can request the compensation to the applicant, theexpenses are made by the applicant lastly.

ConclusionThe advising bank and the confirming bank and at the same the negotiating bank mayrequest service fee for confirmation that was never received. And the opening bank mayreceive compensation from the applicant.

19-Bank to Bank Reimbursement Arrangement.

Case 1 Credit is freely negotiating credit and a "S" bank was appointed as a negotiating bankpossible to request reimburse. Due to late manufacturing of products, the shipping was madeafter the valid expiration date of the credit shipping term. The related shipping documentsare prepared and sent to Y bank for L/G NEGO. The shipping document was sent to theopening bank and request payment to S bank which is reimburse bank. The payment wasremitted immediately but the opening bank notified payment rejection due to discrepancyand a request was made to return reimbursement.

Case study1. Document inspection of reimbursing bankAccording to the U.C.P., the opening bank is not to request consistent certificates to thenegotiating bank and reimbursing bank. (The Sub-Article 19(b) of U.C.P. 500)

2. Responsibility on discrepancy documents of reimbursing bankThe reimbursing bank is responsible to reimburse payment to the credit to the opening bankaccording to the Authorization to Reimburse. And the reimburse bank should review andmake payment if the details of reimbursement request of Authorization to Reimburse is



consistent to the credit when there is a request from the negotiating bank or the payingbank. Since the shipping document and the credit is not presented to the reimbursing bank,the discrepancy possibility in document can not be reviewed. In concert with, the I.C.C.instituted and proclaimed Bank to Bank Reimbursement according to the U.C.P states,"The reimbursing bank has no responsibility even if failed to notice the discrepancy indicationin the reimbursement request and may disregard such regulation" (The Sub-Article 11(e) ofU.R.R. 525)

CautionA negotiating bank shouldn't regard the payment as a payment that was made as final justbe a reimbursing bank made a payment, and if the opening bank notified of a paymentrejection within the seven banking days, it is reasonable to return the reimbursement. Alongwith this, the Sub-Article 14(d-iii) states "the negotiating bank should returned thereimbursement upon opening bank's payment rejection notification".

Case 1 On the special terms of the recourse credit, it states that all the bank expenses arisen fromabroad is a beneficiary's burden. But the reimbursing bank paid after 20 days of paymentrequest declaring debtor's dishonor. The negotiating bank requested interest for delaying tothe opening bank but the bank reject to make payment declaring that it is the beneficiary'sburden.

Case study

1. Reimbursement delay interest paymentEven if the recourse credit states that "All bank charges abroad are on account of beneficiary", it is not reasonable to request delaying interest to the beneficiary that arisen from bank tobank. Because the problem occurred during business affairs between the banks and it is not aproblem with documents. Therefore, the beneficiary is free of burden.

2. compensation for debtor about delay compensationThere is a concern if a opening bank compensate reimbursing bank of the reimburse delayinterest and request it to a debtor. According to the Article 18 of U.C.P., a opening bank is onrisk and expense of a applicant for the services rendered by other banks, and on the contractagreement, it states that the indemnity for day is due upon a bank's request as long as theproblem is not the bank's mistake. Therefore, the bank may not request payment to debtorwhen a reimbursing bank is at the fault but otherwise, request can be made to the debtor.

20-Ambiguity as to the Issuers of Documents.

On the credit term, the original B/L), a commercial invoice, a packing list, a inspectioncertificate and a certificate of origin is requested and, one copy of original B/L and the copiesof other documents were sent to a debtor and others are to be sent to the opening bank. Butwhen all other documents were marked as copy and signed but only the inspection certificatewas copied and sent. So a bank is insisting that the copy mark on the original documents cannot be regarded as a original copy.

Case study1. Original and copy documentsOriginal document in credits are a documents marked 'original' and signed. As long as itmarks "original' it doesn't matter whether it is printed or prepared by a computer. There canbe many methods for signing and they can be hand written signature, fax signature, naturalsignature, stamp signature, symbol signature and electronic signature. Only carbon signatureis not acceptable. Signing on a paper and making copies of it by using a carbon paper can notbe acknowledged as a original signature. (I.C.C. 470/444 470/452 opinion(1984-96) p28R109).

2. Documents that can not be regarded as a copy documentsThe problem is, if all the documents that are not original could be regarded as a copydocument. Another problem is, if it is acceptable to regard a simple photo copy of originaldocument can be a copy of orignal document. For this, I.C.C. states that since a copy means

a simple copy of a photo copy, it should regarded as a copied document. (I.C.C. pub 459 caseNo.68).

Conclusion In this case, since the inspection certificate was a copy of original document, it should beconsidered as a original copy.

21-Unspecified Issuers or Contents of Documents



In the credit term, it required 1 copy of inspection certificate that was issued by a creditapplicant. So the applicant company "A" dispatched the chief executive to inspect the goodsand issued a inspection certificate with his signature and present it with other documents to aopening bank but a rejection notification came stating a discrepancy with signature.

Case study1. Unspecified issuers in other documentsBased on the U.C.P., the other documents are, "documents other than shipping documents,insurance documents and a commercial invoice, and for these documents, there should beindication stating the issuer, wording on documents and the standards of the recordingcontents. (Article 21 of U.C.P)If there is no regulation recorded for the documents, a bank should accept the documents asis and such other documents must not be discontent to the commercial invoices in thecontents and other documents that were presented to a bank.

2. Issuers and the representative of issuersReferring to the I.C.C., the inspection certificate must have the applicants signature not adirector of the applicant's company therfore, the document can be reviews as discrepancyone. (I.C.C. pub 489 case No.226).22-Issuance Date of Documents v. Credit Date

In the credit term, the shipping date is September 22nd and the validation period is October2nd. The beneficiary shipped the goods, presented related documents for credits but theissuance date for a commercial invoice was dated October 22nd. The confirming bankassumed this was a simple miss typing and presented to the opening bank after fixing thedate but the opening bank notified rejection of the payment declaring discrepancy in thedocuments issuance date.

Case study1. Issuance of documents before opening a creditU.C.P. states that "Any documents issued before a credit opening can be fixed if presentedwithin the date regulated in the credit term as per U.C.P.(The Article 22 of U.C.P 500)As the regulation states, fixing documents is possible even if documents were issued beforeopening of a credit.

2. Issuance of documents after expiration of validity periodYou are not suppose to fix documents that were presented after expiration of validity period.But there is no reference to in the U.C.P, for the documents issued after expiration butpresented within the expiration of validity period.

ConclusionFor this particular case, when related documents were sent on September 28th and only thecommercial invoice was issued on October 22nd, it should be regarded as a simple misstyping per international practice. (I.C.C. pub 489 case No.231).

23-Marine/Ocean Bill of Lading

Case 1 The credit is requiring original ocean B/L but when reviewing presented shipping documents,it was issued by company "A" of "B" country without agency's title but just a agency ofcompany "A" of "B" country and a signature. So there was a payment rejection because anagency's title of intended vessel was omitted.

Case study1. Signing method of original B/LAs per U.C.P., a original B/L is acceptable if it has shipper's title and named agent that act asa shipping agency. However, if a named agent of a shipper is signing in proxy, the indicationmust be of the shipper's title that the named agent is in proxy for. (The Sub-Article 23(a-i) ofU.C.P 500).

ConclusionThe fifth amended U.C.P., it states that a accurate singing method is when a proxy isprocessing shipping or documents, the proxy must indicate agency's title and the title of thedocuments or the shipper at the same time. So the payment rejection for this case isreasonable.

Case 2



The debtor's company X received a credit from country A for import goods and the credit wasrequiring original B/L, 3/3 original clean on board ocean bill of Lading. Upon reviewingreceived documents, it was receivable bill of lading, stating on board notation on the originalB/L, and the signature was discontent to the issuer of the original B/L. So the payment wasrejected due to the signature discrepancy of on board notation and the issuers.

Case study1. On board notation of Clean On Board Ocean B/LAs per Clean On Board Ocean B/L, it requires to indicate that the products are on board ornoted in the intended vessel. Among Clean On Board Ocean B/L, there are shipped or onboard B/L and receivable B/L. The shipped or on board B/L is a orignal B/L issue after thegoods are loaded into the intended vessel, and the receivable B/L is a orignal B/L that will beissued when a vessel is decided after intended vessel receives goods. Therefore, with areceivable B/L, it requires on board notation separately for a bank to accept. On boardnotation means, indicating a shipping name and the date for on board and it will be effectiveif a shipper or the proxy sign it.

2. Original B/L that requires On board notationOriginal B/L that requires On board notation is receivable B/L, and there are a original B/Lissued by a carrier agency, Combined Transport B/L. And related to the intended vessel,either intended vessel or a orignal B/L with similar condition that loaded as intended vessel, itmust have On board indication.

3. Signature of On board notationSigning On board notation can be former or informally done and it doesn't have to be thesame person's signature as a person who signed for original B/L. The signature for On boardcan be done by a carrier, the master of a ship, owner of the ship or the proxy. (I.C.C. pub489 case No.243).Therefore, this particular receivable B/L case has no relevant reason to reject payment forthe signature discrepancy between On board notation and original B/L.

Case 3 Per Clean On Board Ocean B/L the port of loading is designated as A port and taking incharge is B region. Arrival is to be C port, and the final destination of the products are Dregion. Per the credit terms, the port of loading is A port, discharging port is C port but sincethere is additional taking in charge region and the final destination, the payment was rejectedfor the discrepancy.

Case study1.Port of loading and discharging port within Clean On Board Ocean B/LPer the fifth amended U.C.P., the port of loading and discharging port must be indicatedexactly as what is on Clean On Board Ocean B/L. Therefore, if there is only 1) port of loadingand other taking in charge region indication, if the original B/L indicates discharging andother final destination and 2) the original B/L indicated only intended port of loading anddischarging port can be rejected by a bank. But if discharging port is consistent to the creditterms and only the port of loading is different from the port indicated in the credit it can befixed as long as it indicates the name of intended vessel that is loaded with products as itregulated Onboard indication credit.

(The Sub-Article 23(a-jj) of U.C.P 500).

2. Original B/L without discharging port indicationThe Clean On Board Ocean B/L requires discharging port to be indicated for fact. So if aorignal B/L indicates just any u.s. port or fail to indicate discharging port, it can rejected foracceptance. (I.C.C. pub 489 case No.240) And the orignal B/L indicating only the finaldestination but not indication of discharging port is also subject to rejection.

ConclusionFor this particular case, the Clean On Board Ocean B/L can be acceptable because the port ofloading and discharging port is consistent to the credit terms and only taking in charge andthe final destination was additionally recorded. (The Sub-Article 23(a-iii) of U.C.P 500)

Case 4 On the terms of a credit it states "transshipment not allowed", but the goods were shipped bycontainer, it was transshipment to other vessel from H port, received separate B/L andpresented the two B/L but the payment was rejected.

Case study1. Transshipment in Clean On Board Ocean B/L



Per U.C.P., the Transshipment is referred as within a marine transportation process from aport of loading designed to a discharging port as per the credit term, loading/unloading, re-shipped from intended vessel to another vessel. And as long as Transshipment is notprohibited in a credit, a indication of Transshipment on a credit is acceptable. Except, itlimites that the whole marine transportation has to be with unity and identical orignal B/L.(The Sub-Article 23(vi-e) of U.C.P 500) But again, if a credit states prohibit in Transshipment,it can not be accepted.

2. Container shipment and TransshipmentIf a shipment is transporting by a container vessel, Transshipment is possible even if thecredit prohibits Transshipment. That is, even if the original B/L reads "It will be Transship" or"Reserving the right to Transship" it is acceptable. But in this case, the marine transportationhas to be done with one identical original B/L.If there is more than one original B/L or if it is not identical one it may not be acceptableeven thought a shipment was done by a container vessel. The limitation is not only with thecontainer vessel but also applicable with trailer/LASH vessels too.

ConclusionTransshipment can not be acceptable even if the goods were shipped using container vesselbecause there is more than one original B/L according to the vessel companies.24-Non-negotiable Seaway bill

The credit requires a Clean On Board Ocean B/L, document presenting period is within 10days of shipping and the payment term is 120day after sight. Since a seller presented aSeaway bill instead of a Clean On Board Ocean B/L, the debtor rejected the payment.

Case study 1. The meaning of Seaway billFor Seaway bill, products can be delivery to a consignee if the person's authenticity isconfirmed since it is liner waybill by signature not a marketable securities so if it is atraditional Clean On Board Ocean B/L, it is convenient to save extra expense due to deliverydelay or demurrage.

2. Accepting condition for marine transportationWhen L/C requires invoice for marine transportations the accepting condition is same as

general ocean orignal B/L. Except, invoice for marine transportations can be used with multitransport, if a invoice for marine transportations is necessary from port to porttransportations, the delivery from port of loading to a discharging port must be done by usingmarine transportation as indicated in the credit. But it is acceptable to use othertransportations method before the shipment or after discharging. And the regulation for themarine transportations is based on the U.C.P. amended by CMI (Committee MaritimeInternational).

3. Transaction possible with marine transportationsIt can be used between affiliates of the head offices, between seaborne trade such as thedeep-sea fishing vessels and all other sales contractors that are in reliable relationship. Incase with a credit opening bank, they assigned the actual consignee as a opening bank toopen a credit, than an applicant is not allowed to clear products at custom and requires arelease order from a bank to receive goods.

4. Presenting a invoice for marine transportations instead of a Clean On Board Ocean B/LSince a Clean On Board Ocean B/L is marketable securities and a invoice for marinetransportations is a simple receipt for products, unless a credit requires for it, a invoice formarine transportations can not be replacement for a Clean On Board Ocean B/L.

25-Charter party Bill of Lading

A credit is requesting a Clean On Board Ocean B/L but the presented original B/L is showingthe issuance per contract by charter party, and the issuers is a master of a ship without acarrier indication. And on B/L, it indicated discharging port and other final destination. B/Lalso specially indicated that it prohibits Transshipment so the payment is rejected.

Case study1. Acceptability of contract by charter party original B/LThe contract by charter party original B/L refers to a orignal B/L that was borrowed from aship owner according to a contract by charter party of intended vessel of container. If a bankis requesting for a Clean On Board Ocean B/L, as long as it has no record that allows the



contract by charter party original B/L, the bank may reject the process if a contract bycharter party original B/L was presented. (The Sub-Article 25(b-vi) of U.C.P 500)

2. The difference of Clean On Board Ocean B/L and contract by charter party original B/LFirst, a shipping documents issued by a carrier owner or a proxy is acceptable.Second, a carrier's title is not a necessity indication.Third, a different location for taking in charge and discharging port and final destination fromthe port of loading is not acceptable.Fourth, intended vessel and intended loading port indications are not acceptable.Fifth, Transship related clause are not required. This is because, a case with a contract bycharter party, there is usually no vessel using transportations from port of loading to adischarging port, and if there is a clause prohibiting Transshipment, this is never acceptablein any case.

ConclusionThis case, when a Clean On Board Ocean B/L is requested, presenting a contract by charterparty original B/L may not be acceptable. But the payment rejection is not acceptablebecause there is no carrier indication on the contract by charter party original B/L. And ifthere is a different final destination from a contract by charter party original B/L anddischarging port it can be the cause for payment rejection as per the character of contract bycharter party original B/L.

26-Multimodal Transport Document

The credit term were requesting a Clean On Board Ocean B/L from A region to Z portand that prohibits Transship. But on the actual presented documents, the place oftaking in charge for the B/L is A port and the port of loading is B port. So the debtornotified of the payment rejection declaring the discrepancy of shipping port of loadingand the port of loading in B/L and that the Transship was executed.

Case study1. Multimodal transport documentsMultimodal transport documents is issued at the point when the shipment has beentook in charge by the combined transport operator. This contradicts to the issuance of aClean On Board Ocean B/L when it is loaded in the intented vessel. Therefore, the

multimodal transport documents are the receivable B/L in principle. It means the goodshave been took charge of for shipping documents issuance therefore, it is not necessaryto indicate the actual shipment. But if a credit is requesting a original B/L after theshipment is done, the actual shipment must be indicated.

2. For the discrepancy in loading port and taking in charge and discrepancy indischarging port and final destination with multimodal transport, it is relevant toindicate other taking in charge region from an actual port of loading of L/C or thedischarging port differently from L/C. And it is also relevant to indicate the port ofloading and discharging port as "scheduled". (The Sub-Article 26(iii-a,b) of U.C.P. 500)Multimodal transport is not a port to port transportations but a transportations from acertain point of content to other certain point of content which is "works to works ordoor to door" method so a port of loading or discharging port indication may now showin a credit term. As of a result, the taking in charge and the final destination should beconsistent to the credit term but the port of loading and discharging port can beappointed to other port in the areas.

3.Transshipment with Multimodal transportWith multimodal transport, Transship process is possible even with the prohibitionclauses stating " Transship is possible, Transship could be processed" and should acceptthe multimodal transport documents accordingly. But the whole transportations sectionhave to be based on an identical multimodal transport documents.

ConclusionFor this case, since the place taking in charge region A is inland city, if a shipping

document from A to B is requested, it should be regarded as multimodal transportdocuments. So if the place taking in charge is A region and if the actual port of loadingis port B, and if the place that started is A which is consistent to the credit, there shouldbe no problem.



27-Air Transport Document

The Air way bill is to be presented and the air cargo receipt is suppose to be acceptableas per the credit terms. But the actual documents presented was a house airway billissued by air transport broker and on the name of issuers, the broker representing thecarrier has signed it. On the credit terms, it prohibits Transship but in the house airwaybill, it states that the Transship is possible. The debtor notified of the payment rejectionbecause of the house airway bill presenting and that it breaches the contract byallowing Transship.

Case study 1.Character of air way billWarsaw Convention for International air transport states that the "Air way bill hasprobability to a contract, trust and transportations terms as long as it has a proof of acontrary', therefore, it doesn't necessary mean the precondition of products loading andit is only a receipt since it is not a marketable securities. As of a result, it doesn'trequire security possession to exercise your right and since it is liner waybill, it is issuedin consignee's signature method but can not be made out to the order..

2. House Airway bill's suggestion when requested to present Air cargo ReceiptThe house airway bill issued by a broker who doesn't have a proxy relationship with the

carrier can not be accepted. But it is acceptable since the House Airway bill was issuedwith the broker's signature as a representative proxy for the carrier and the carrier'stitle is recorded. (I.C.C pub 459 case No.79-80)

3. Prohibiting Transshipment with air way billEven though Transship is prohibited with air way bill, if indicates that Transship can beprocessed or may process on AWB, it can be accepted as per U.C.P. (The Sub-Article 27( vii-c) of U.C.P 500)

ConclusionFor this case, the payment rejection for Transshipment is not relevant because thehouse Airway bill was issued by a broker as a proxy of the carrier.

28-Road, Rail Or Inland waterway transport Documents

The rail transport document was required for the credit. Upon receiving the documents,it allowed Transship from country A. But the debtor's company rejected the paymentdeclaring there is no on board indication in the rail transport documents and that it wasTransshipped. The seller company insisted that since it is rail transport, on boardindication is not necessary and that it allowed Transshipment, which created dispute.

Case study1. The character of rail transport receiptAs per U.C.P., '‘Products are received for shipping, or courier and that such intentionmust be indicated and there should be a indication of receipt for the shipper'ssignature, authentication and receipt stamp'. Accordingly, the rail transport receipt is

just a receipt in principle, not the shipping documents that proves of products onboard.

2. On board indication with rail transport receiptAccording to the interpretation of U.C.P. "on board" indication is referring to only theloading for the marine vessel. (The Sub-Article 23(a-jj) and Sub-Article 45(a) of U.C.P500)The interpretation of the I.C.C also depicts that for the land transport or air transport,the meaning of on board shouldn't be over extended not more than taking in charge or

dispatching products. (I.C.C pub 459 case No.102).

3. Transshipment with rail transport receiptFor the rail transport, even the credit term prohibits Transship method, if all thetransport section is one transportation method and one transportation document isissued, "Transship is probable" or " Transship is doable" should be accepted. (The Sub-



Article 28(d) of U.C.P 500)

Conclusion For this case, it is irrelevant action by a the debtor if rejecting the payment because ofon board indication is not indicated and that Transship is done.

29-Courier and post receipt

On the credit, it allowed courier receipt or post receipt. So a inquiry was made to a couriercompany called DHL for a delivery including the company's courier receipt and all the relateddocuments to the credit opening bank. But the courier delivering company did not sent thedocuments to the opening bank but delivered them to the debtor's company directly. Thedebtor dishonor after cleared the products and now the seller can not receive the payment.

Case study 1. The character of a courier receiptThe courier receipt is also a receipt of products. So if there is a stamp, authentification andsignature attached when receiving products, it is possible to accept. (The Sub-Article 29(b) ofU.C.P 500) For these courier receipt, the receiving date is the shipping or dispatching day.

2. Documents mis-delivery by a courier companyThe delivery made to the debtor's company instead of opening bank is clearly a mistakemade by the courier company therefore, the courier company has to make compensation. Butthe courier company insisted of their responsibility only for the document loss, and insistedthey will only be responsible for the document production fee and delivery expense not for allthe products which eventually developed dispute.

3. The lawsuit party of a courier companyThere is a concern if agency of the courier company in A country can be the lawsuit party.The courier company in country A is usually a agency for the head office located in theoverseas. Accordingly, there is a claim that the lawsuit has to be against the head officeinstead of an agency. For this, there is a legal controversy to be anticipated for the result.

30-Transport Document issued by Freight Forwarders

The credit is requesting to present multimodal transport documents, but a shippingdocuments issued by International fright forwarder which is validated by FIAT ispresented. But on it, there is only a signature by the International fright forwarder andno courier or indication for the proxy. As of a result, the payment rejection notificationwas made due to presentation of the shipping documents issued by a freight forwarder.

Case study1.The meaning of a freight forwarderFreight forwarder exist between the owner of a goods and shipper to mediate shipping.So the freight forwarder can exercise as a shipper or as a freight forwarder.

2. Shipping documents issued by Freight forwarderThe shipping documents issued by a freight forwarder is acceptable only when issued asa shipper or as a shipper in proxy but not acceptable if issued as a freight forwarderitself only. And since the shipping documents issued by a freight forwarder is receivedB/L, it must have On board indication if not, the documents are not to be acceptable.

3. Shipping documents issued by a International freight forwarderWhen presenting FIATA multimodal shipping documents, first, the International freightforwarder should issue the documents as a shipper or as a proxy and it should haveshipper's title. Second, it should have On board indication. Since FIATA B/L is receivedB/L it should always have On board indication or proof that the shipment was made infirm wording and indicate shipping date as well as the intended vessel. Third, it shouldrequisite as a multimodal shipping documents.

ConclusionFor this particular FIATA B/L, the documents didn't have indication as a combinedtransport operator and was not issued as a proxy for combined transport operator but



issued as a pure international fright forwarder, therefore, it can not be accepted.

31-"On deck", "shipper's Load and count", name of consignor

The contents of credit states, that it should be carried out by multimodal transport ofthe intended vessel. Upon receiving a shipping document, there was a clause "Mayloaded on deck" and "the unknown clause" for quantity and also, the shipper and the

beneficiary's name was inconsistent. So the payment refusal notification was made.

Case study1. On deck for the container shippingAccording to the U.C.P., article indicating for the two shipping method in original B/L"Either may be carried on Deck or will be carried" are to be refused. But the shippingdocuments are acceptable if it states in a provision which reads "The goods may becarried on deck". (The Sub-Article 31(I) of U.C.P 500)

2. Unknown clause in original B/LThe unknown clauses within the credit, which is a document that doesn't haveprohibition wording in the credit should accept clauses such as "shipper's load andcontain"or "said by shipper to contain". (The Sub-Article 31(ii)of U.C.P 500). This clausemeans, a shipper loaded products and confirmed so that the recorded contents byforwarder and the shipper is recognized as is.

3. The title of shipper and the beneficiaryIn case if products that are in transport is to be sold to the third party, the persontaking over the products but not a shipper may issue a original B/L as a beneficiary,and sometimes, a freight forwarder can issue a master B/L. At this time, the actualshipper and the beneficiary can be inconsistent, and such shipping documents shouldbe accepted. (The Sub-Article 31(iii) of U.C.P 500)

Conclusion Payment rejection for this case is reasonable because this is a multimodal transport

based on the container transportation and it has inconsistent shipper's name,beneficiary's name and unknown clause such as on deck carried.

32-Clean Transport Documents

The credit opened by company Y requires clean on board ocean bill of Lading. But thepresented original B/L states "packaging damaged and contents exposed". Accordingly,payment was denied because such documents can not be regarded as Clean transportshipping documents.

Case study1. The meaning of Clean transport documentsThe clean transport Document is a shipping documents that has no indication for anydefective condition on the products or on the packages as well.

2. The meaning of Clean transport documents on boardThe clean on board transport document is referred to a shipping document that fulfilledcondition stipulated in the credit terms. (The Article 23 ~ 30 of U.C.P.)(The Sub-Article32(c) of U.C.P 500)For the Clean transport documents, if there is inconsistency with the credit terms, abank may refuse to pay but for the clean on board transport document, a bank has norelevant reason to refuse payment if the contents are not inconsistent to the otherdocuments.

3. The examples indication for products and packaging defects(1) contents leaking(2) packaging broken/ hole/ torn/ damaged(3) insufficient packaging



(4) packing contaminated : The examples which can not be regarded as a packingcontamination(1) second-hand packaging materials used(2) old packaging materials used(3) Reconditioned packaging materials are not to be regarded as a defect per I.C.C.

ConclusionFor this case, the indication "packaging damaged and contents exposed" can beregarded as a foul shipping documents as per the Article 32 of UCP.

33-Freight payable / prepaid Transport Documents

A credit established by company Y is CIF term and requires Marine B/L. But theshipping document presented by a seller company is CIF and- FO term and the shippingfee is to be collect. Accordingly, the opening bank which is D bank refused to makepayment because the term was CIF but presented term was CIF and FO term and thatthere is no advance payment indication for shipping fee.

Case study1. Prepaid shipping documentsFor freight prepaid or collect, it is usually written in the freight column of a orignal B/Las prepaid or collect. For this case, it precisely indicated term as CIF term but if freightis indicated as collect, it is definitely breaching credit terms.

2. CIF term and CIF - FO(Free Out) termThe CIF term includes freight and insurance fee which a purchaser issue shippingdocuments that prepaid freight and insurance up to the arrival port. At this time, thefreight is fee including insurance expense and freight up to the arriving port. The CIF -FO term is to determine who takes burden of discharging fee when the shipment arrivesbetween the buyer and the shipper which has nothing to do with the seller. The FO(FreeOut) term is related to stevedoring charges that arise as surcharges. Such unloadingcost is to pay after the products are actually unloaded so the fee can be paid by buyer

and request payment to the seller later. There are heavy lift sursage, port rates andoptional destination fee for these surcharges.

3. Expense responsibility per shipping terms and conditionPer I.C.C, with a original B/L it only stipulates freight fee according to the terms ofcredit, therefore, a negotiating bank should accept documents regardless of detailprovisons of the original B/L and validity. (I.C.C put 459 case No. 119).

ConclusionFor this case, CIF.FO condition in the shipping documents even though the credit termis CIF is relevant, however, wth CIF term, payment collect indication is discrepancywhen the freight is prepaid method.

34-insurance Documents

As per the credit opened by the company Y, it required 2 copies of insurance certificate,insurance amount is 110% of the CIF amount, and prepare a order certificate in blankendorsement method to the debtor. But the presented insurance certificate was 2 copesof declaration issued by a underwriters. And the insurance amount was 120% of theCIF amount and not blank endorsement was made. So the company Y sent notice ofpayment protest declaring that a decoration was submitted instead of a insurancepolicy, the insurance amount doesn't conform with the credit term and that no bankendorsement was made.

Case study1. Acceptable insurance documentsInsurance policy, Insurance certificate or a declaration under an open cover as ainsurance documents can be accepted as a insurance documents but a simple cover



note is not acceptable. (The Sub-Article 32(a,b,c) of U.C.P 500)

2. Discrepancy of Insurance collateral ratioActual submitted insurance document indicates 120$ of the CIF amount. For this, theI.C.C. states that if the credit requires 110% of the CIF amount, it is discrepancy to thecredit terms whether it is 115% or 120% of the collateral ratio therefore, it can not beaccepted. (I.C.C pub 459 case No.129).

4. Blank endorsement for insurance documents

If the credit required insurance certificate in blank, the order should be followed eventhough issuing insurance certificate in bearer is traditional custom, it should be rejectedas it is discrepancy to the credit terms. (I.C.C pub 459 case No.128).

Conclusion For this case, the declaration has no problem, but the 120% of insurance amount andnot issuing a bank endorsement is clearly breaching the credit terms.

36-All Risks Insurance cover

The credit opened by company H has CIF term, requires 110% insurance amount, 2 copies of

insurance certificate stating All Risks Insurance cover. But in the actual submitted insurancedocuments was 100% collateral of CIF amount and a condition with 5% excess. Andaccording to the letter of the insurance certificate, it indicated All Risk but exempt whenstrike and during a war. The company H sent notification of payment refusal because theinsurance certificate is inconsistent to the credit terms.

Case study1. Indicating memorandum clause with insurance certificatesAccording to the U.C.P., unless there is a restriction, the insurance documents preconditionedfranchise or excess must be accepted. (The Article 35 of U.C.P 500)

2. Franchise and ExcessFranchise is (i.e.: 5% Franchise), for the damages under fixed ratio, the insurer is exemptfrom a risk but if exceed the ratio, the insurer is to collateral even the memorandum parts.Excess (i.e.5% Excess) is, when there is a damage exceeding fixed ratio, the insurer isdeducting the memorandum parts and collateral for the exceed parts only. Banks have toaccept process even the insurance certificates indicates such memorandum clause.

3. All risk insurance cover in credit termsIn the Cargo insurance provision, a insurance company is exempt from a risk arisen from awar or a strike even if it is All Risk memorandum clause terms. Accordingly, to collateral thiskind of risk, there should be additional insurance purchased. Then if All risk is the credit term,there is a concern if a bank should accept All risk according to the Institute of LondonUnderwriters. (The Article 36 of U.C.P 500)

37-Commercial Invoices

Case 1A company U received credit related documents. a beneficiary documents including acommercial invoice and packing list were made to the credit applicant, bill of exchangeto the opening bank and the drawee for the bill of exchange was the opening bank. Sothe S bank which is the opening bank notified payment refusal declaring the drawee forthe bill of exchange and the applicant on the commercial invoice is not consistent.

Case study1. The definition of a commercial invoiceThe applicant of a commercial invoice must be the credit beneficiary and the party forthe commercial invoice must be the credit applicant.

2. Drawee for a bill of exchangeThere is no provision declaring a drawee for a bill of exchange must be the creditapplicant. And a drawee for a bill of exchange shouldn't be a credit applicant. Thedrawee in this case is usually a opening bank but sometimes it can be a paying bank or



reimbursing bank.

3. A drafter and the party in a commercial invoiceA commercial invoice must be issued by a appointed beneficiary of a credit and to aapplicant. (The Sub-Article 37(a) of U.C.P 500) The only exception is if a credit istransferred case than the 1st beneficiary should be the drafter of a invoice but if the2nd beneficiary drafts a invoice, this should be accepted too as per the provision. Itseems the inconsistency is rare case because even though a credit is transferred, the1st beneficiary has the right to substitute to substitute with the beneficiary's own

name.

ConclusionFor this case, it seems irrational to declare as document discrepancy because the partyfor the commercial invoice is indicated as the applicant and the drawee of a bill ofexchange is the opening bank, not the applicant.

Case 2 In the credit opened by company H, the packing list reads "Garment" and for the detaildescription it reads "Garment details are offer No.242". But in the actual presentedcommercial invoice, it indicates "Garment" and all the weight units per products. Andone part of the packing list was including a inconsistent product to the offer No. 242packing list. So the company H refused payment declaring inconsistent packing list.

Case study 1. Product list in a commercial invoiceA packing list in a commercial invoice should strictly consistent to the credit terms andif each wording is different, the consistency must be proofed according to the specificstandard banking practice. Other documents rather than a commercial invoice mayhave a general term that is not inconsistent to a packing list of a credit. (The Sub-Article 37(c) of U.C.P 500)

2. Specific details of packing lists can be refer to a offer sheetIf there is a instruction stipulating in case if there are too many products and quantitiesto indicate in a credit, the specific details are to be followed by a offer sheet or a pro

forma invoice, there is a concern if a bank should compare all the products listed in aoffer sheet and the list from a pro forma invoice in detail. For this, I.C.C has followingopinion. If goods as per pro forma invoice No.242, such wording should be regarded asone of a detail list. If it reads, the products list as per pro forma invoice but notattaching it, than a bank has no responsibility to review the details on a pro formainvoice when reviewing for documents. Per I.C.C pub 489 case 266, a bank mayconfirm only the indication written on a commercial invoice whether it has the samewording as above. There is another concern whether a bank should review a pro formainvoice if it was attached at the time of credit opening. For this, I.C.C. expressed that abank should inhibit such a opening of credit since a credit attached with a pro formainvoice is unclear credit. And per I.C.C pub 489 case 267, a beneficiary must change allthe conditions to be consistent when receiving a credit attached with a pro formainvoice if there is any inconsistency.

ConclusionPayment rejection is not acceptable in this case because of inconsistency in the packinglist of a commercial invoice and offer sheet. because, the offer details are not the partof a credit terms. But if a commercial invoice has a wording declaring that it follows acredit term as offering details, than it is inconsistent.

38-Other documents

The payment condition is a sight bill as per a credit term, requiring a air cargo shippinginvoice and the consignee is H bank which is a opening bank. It also requires one original

certificate of weight and three copies. Upon receiving the documents related to the credit, theopening bank found out there is a one original cargo shipping invoice and three copies withall the weight indication but there wasn't a separate certificate of weight so the bank rejectpayment declaring non-presented certificate of weight.

Case study1. Certificate of weight



A certificate of weight may be issued by a seller or the weight can be confirmed by otherspecial organizations. So a certificate of weight is not a essential requirement for a credit.

2. Presenting a certificate of weightAccording to the U.C.P., when products are using marine transporting, unless a certificate ofweight is not separately requested, it can be received if there is a weight indication on ashipping invoice or a stamp showing weight indication. (The Article 38 of U.C.P. 500).With a marine transportation, a certificate of weight is required to presented in a separatedocument but for other methods of transportations, the certificate of weight can be substitutewith a weight indication on a shipping document.

39-Allowance in Credit Amount, Quantity and Unit price

On the special conditions of a credit it reads that it bans a partial shipment, units forproducts were by piece and 10% more or less on credit amount and quantity allowed.The amount of credit is US$1,000,000, quantity was 5,000piece but upon inspectingreceived documents, it was 5,500pcs on the commercial invoice and the packing list,and the amount was US$1,100,000. So the company S rejected the payment but sincethe credit condition reads 10% More of Less clause, a payment was strongly requested.The company S insisted that even with 10% More or Less clause, amount should not beexceed and the clause is not applicable to the individual items which eventuallydeveloped into a dispute.

Case study1. The meaning of More or Less clause with a creditAccording to the Sub-Article 39(b) of U.C.P.,unless there is a clause declaring "thequantity of specified cargo within the credit must not be more or less", 5% more or lessis acceptable. But it regulates the issuing amount for the bill of exchange should notexceed more than the credit amount. To apply this provisions, the following conditionsare necessary. (1) There should be no clause prohibiting more or less L/C.(2) The amount should not exceed more than the L/C amount.(3) No quantity indication allowed as packing units with individual items.(4) There should be no special clause for More or Less.This is a special condition in credit applicable to the case that has no More or Lessclause, and if there is permission article for 10% more or less, this special condition isto be applied.

2. Special article permitting 10% more or lessIf there is a 10% more or less permission article with a credit, this special article isapplied before everything, but the Sub-Article 39 (b) of U.P.C. is not applicable.

3. Prohibiting More or less with packing units with individual itemsIn order for More or Less article to be applied, the quantity indication should not be inpacking units or as individual items. (The Sub-Article 39 (b) of U.C.P.)For these kinds of packing units and individual items, the I.C.C. has following opinion.Packing units are referring to the packing methods with "cases", "boxes", "drum" andindividual items is referring to "piece". The quantities that are not applicable with Moreor Less article are "case, box, drum and piece" but "kg" or "metric ton" indication is

applicable. (I.C.C. pub 459. case No.138).

CautionMore or Less clause is applicable with bulk cargo therefore, applying the standard withpiece, case, box and drum items is violation to the credit terms.

40-Partial shipments / Drawings

A credit received by company A appointed port of loading as a port in B country andtransshipment were prohibited. Based on the credit, the company A completed the productsand shipped the first set of goods to D port and since the intended vessel is to arrive in Fport, the rest was shipped to F port. Therefore, two sets of orignal B/L with a different port ofloading and issuing date were NEGO and sent to a opening bank but the opening sentnotification of payment refusal for partial shipment.

Case studyThe definition of partial shipments



According to the fifth amended UCP 500, in case with the same vessel and the same route,shipped on different date and from different region is not regarded as a partial shipment. Atthis time, it applies the same even if the original B/L was issued in several sets.

Conclusion In this case, the intended vessel are the same, goods were shipped from the same routewhich is D port and stopped by at F port for shipping than the approximate arrival time wouldbe the same, therefore, according to the Sub-Article 40(b) of UCP, this is not regarded as apartial shipment.

41-Installment Shipments / Drawings

The credit received by A company is instructing 4 installment shipments. The A companyshipped the goods normally in first and second time, delay the third shipment and shippedthe fourth shipment on time. But the opening bank rejected the payment for the productsshipped by third and fourth installment shipments. So the negotiating bank protesteddeclaring the fourth shipment was made on time and in normal base.

Case study1. The definition of Installment shipmentsUnlike the partial shipments, the Installment shipments allow shipments to divide productsbut according to the dates and the quantities stated in a credit terms.2. Validity of Installment shipmentsAccording to the U.C.P., with Installment shipment, if the partial shipment was not madewithin the allowed time period, the validity for the partial shipment will be deprived unlessthere is no specific standard.42-Expiry and Place for Presentation of Documents

Case 1The X bank of A country received a credit from a opening bank located in Hong Kong. In thecredit term it reads "This credit is valid for negotiation in country A and is available at ouraccouters against beneficiary's sight draft on applicant". This is a freely negotiable credit thatcan be NEGO at any bank in the country A. This is a unclear statement whether it is payablecredit by a opening bank so a inquiry is made to I.C.C. for an answer.

Case studyThe I.C.C's opinion on this is that it is a negotiation credit and a sight credit. But thestatement is not clear to decide where to apply the credit and there needs additionalinstruction about a opening bank. Therefore, a advising bank may request additionalinformation to the opening bank to clarify this incomplete and unclear credit conditionaccording to the Article 12 of U.C.P., and the opening bank must supply necessaryinformation immediately upon request. (I.C.C pub 459. case No.29)

Case 2 A debtor opened a credit through H bank and notified the opening to a company G. Thevalidity period for this credit was July 20th but there was no indication for documentpresentation date. The company G shipped the goods based on the credit, and negotiatedthrough a bank and on the cover of the negotiation it reads that the negotiation was made on

July 23rd, and on the credit documents, it was presented indicating that the shippingdocuments were presented within the validity period of the credit. The opening bank declaresthat even though the documents were presented within the validity period it is discrepancy ifthe negotiation occurred after the validity period so the payment was rejected for thereason.

Conclusion According to the Article 42 of U.C.P., the available period in L/C is the final day for thepayment, take over and negotiating documents to be presented. Accordingly, if a negotiatingbank received documents within the available period of L/C the bank requires some time toreview but even if the available period was over, it is not reasonable cause for paymentrejection.

43-Limitation on the expiry date

The credit requires Clean On Board Ocean B/L and the shipping date as July 10th and available period as July20th. The shipping documents were to be presented within 10 days from its issue date. The company A receivedreceivable B/L from a Y vessel company but since the entry of intended vessel was delayed, the products wereloaded on July 5th, received On board in the orignal B/L, NEGO through a local D bank and presented thedocuments to the opening bank. But the opening bank rejected the payment for the document delay and the



negotiating bank protested that the document delay is not a relevant cause for the payment rejection.

Case study1. Shipping document presenting periodThe documents are to be presented within the time limit if the clause is stipulated in the credit terms, if not, thedocuments should be presented within 21 days from the shipping date. (The Article 43 of U.C.P. 500) And thevalid period should not be expired.

2. The staring point of reckoning in document presentingAccording to the fifth amended U.C.P., it stipulates that "All the credits that requires a shipping document should

regulate document presenting period which consist with the orignal credit". (The Sub-Article 43(a) of U.C.P.500)Accordingly, even of a credit stipulates "from the date a shipping document is issued", the actual documentpresenting period is the starting point of reckoning.

44-Extension of Expiry Date

The available period of the credit of May 5th and the indicated shipping date was May 4th. The company Ktried to NEGO by receiving original B/L and ship on May 3rd, but May 3rd is Saturday and it was latealready. May 4th is Sunday and may 5th is bank off day so NEGO was made on May 5th inevitably. Thedocument was presented to a opening bank indicating the Article 44 of U.C.P regulation about the extendedavailable period but the bank rejected to meet payment for the expire date.

Case study1. Extension of Expiry date in a creditAccording to the 17 of U.C.P., the available case to extend available period as to unavoidable cause is whena bank is closed for business transaction and the extension is possible until the very next available bankingday. (The Sub-Article 44(a) of U.C.P)

2. Extension not allowable with a creditAvailable period may be extended but not with shipping date. So a shipping date can not be changed unlessthe condition with a credit is changed.

Caution When available period with credit is extend due to a bank close, not because of a unavoidable cause, suchwording must be indicated presented when negotiating documents."The documents was presented within the time limits extended in accordance with the Sub-Article 44(a) of the uniform customs and practice for Documentary credit 1993 Revision I.C.C pub No.500"For this case, the opening bank rejecting to make payment seems irrelevant.

46-General Expressions as to Dates for Shipment

The credit received by the company A reads shipping date as on or about 5 and 10. Thedocument presenting date is May 15th, and the available period is until May 30th. Thecompany shipped the goods on May 15th and documents are presented to a negotiating bankon may 15th but it was Saturday which is a day when banks close business earlier than otherdays. So the paper was again presented on May 16th but the bank rejected payment

declaring the document presenting period is expired.

Case study1. Indicating shipping dateAccording to the U.C.P., there are many ways to indicate shipping date but prohibits anyunclear expression. Specially words such as prompt, immediately, as soon as possible are tobe avoid. (The Sub-Article 46(b) of U.C.P 500).

2. The definition of On or aboutOn or about is the date appointed, specifying 5 days before and after totaling 11 days. So itmeans until May 15th.

3. Document presenting periodA document presenting time to a bank is the bank's business closing point of time. So a bankhas no duty to accept a document presented on or before the business hour.

ConclusionThe shipping period is not over but the late presentation due to a bank's business closingtime on Saturday can be the reason for payment rejection.



47-Date Terminology for Periods of Shipment

The company A received a credit but it was a overseas acceptance credit with 60days fromB/L date condition. So the company shipped the goods on October 25th and on the same daythe company processed negotiation through a C bank and present documents to the openingbank. The overseas acceptance bank notified the expiration date as December 23rd. Thecompany A claimed that the maturity date for bill is not based on the U.C.P., but based onthe local Bills of Exchange and Promissory Notes Act which doesn't calculate the opening dayand so that the December 24 is reasonable.

Case study1. Terminologies about shipping periodAccording to the U.C.P.,all the terminologies using "to, until, till, from" in all the shippingrelated period is including the opening date and a word "after" is excluding the opening date.(The Sub-Article 47(a,b) of U.C.P 500).So these indications are not sufficient enough to clarify whether to apply the terms toavailable period, shipping period, document presenting period and bill maturity date. TheI.C.C.'s interpretation on this clause is, that it clearly states the clause is only applicable tothe shipping period. (I,C.C pub 459 case No.149).But for the bill maturity date, regardless of UCP, it expresses that if the credit states maturitydate as [payment to be made 30days from B/L date], and if the issue date for original B/L isJuly 1st, the payment should be made on July 30th not on July 31st based on the commonsense. (I,C.C pub 459 case No.150~151).

I.C.C interprets that a word "from" should be understood as including the opening date and aword 'after" should be understood as excluding the opening date.

2. Provision about local Bills of Exchange and Promissory Notes ActAccording to the local Bills of Exchange and Promissory Notes Act, when deciding thematurity date for bill per day, the opening day is to be non-deductible. So the UCP andlocal Bills of Exchange and Promissory Notes Act contradicts, the local Bills of Exchange andPromissory Notes Act should be apply in priority. Although it states "from B/L date" theopening day should be excluded.

3. The definition of B/L dateThere is a controversy regarding definition for B/L date. "The date of issuance of B/L" isreferring to the issuing date, and "the date of shipment" is referring to a shipping date. Butthe "B/L date" is unclear. But according to the U.C.P., it states that "All the credits requiring ashipping document should stipulate a certain period to present documents after the shippingis made. (The Sub-Article 43(a) of U.C.P 500). Relating to this provisons, it would bereasonable to interpreted the meaning of "B/L date" as the shipping date.48-Transferable Credit

Seller's company A transferred a transferable credit in the amount of US$300,000 to A company andanother US$300,000 to a C company. Thereafter, a debtor requested changes in shipping date and the1st & 2nd beneficiaries accepted the request but the C company rejected the request. For this case,there is a dispute regarding whether the conditional changes are validity.

Case study1. Transferable credit's condition changesTo make a transferable credit conditionally changable, the 1st & 2nd beneficiaries must agree to thecondition changes. If the first beneficiary rejects to agree, the changes are not possible from thebeginning.

2.I.C.C.'s opinion on the condition changes with Transferred L/CAccording to the Sub-Article 48(c) of U.C.P., "If a credit is transferred to the 2nd grantee that is morethan 2 person, the condition changes to a credit disagreed by the 2nd beneficiary won't become null.The credit continues without changes to the 2nd beneficiary who disagreed the condition changes. TheI.C.C interprets the same.

Conclusion

The shipping date is changed between the 1st beneficiary A company and the 2nd beneficiary ,and Ccontinues with the orignal credit shipping date without changing.

Case 2 Company X received a credit and transferred it to a D company. But the D company returned the creditto the A company because the company couldn't comply with the product quantities so the A companytransferred this to the C company. In this case, would the assignment act allowable in terms with the



U.C.P.

Case study1. Assigning creditsCredit assignments is possible when a credit indicates transferable wording and transferring is onlypossible through a designed bank only. And unless indicated in the credit terms, assignment is onlyavaliable for one time. (The Sub-Article 48(g) of U.C.P.)

2. Credit assignment returnAccording to the U.C.P., "Even if a request of the 2nd beneficiary, credit can not be assigned to the

other 3rd beneficiary. For the purpose of the provision, re-assigning to the 1st beneficiary is notregarded as a prohibited assignment. (The Sub-Article 48(g) of U.C.P 500) Therefore, allowing that re-assigning the credit to the C company by the 2nd beneficiary which is D company, if the assignmentwas returned to the 1st beneficiary which is A, and the 1st beneficiary assigns it to the C company isnot a problem. (I.C.C pub 489 case No.288).

49-Assignment of proceeds

For the payment transferring method with a credit, the company X and the company Y issueda letter of attorney which allows local D bank, a negotiating nominated bank to make

payment to the Y company and specified accounts receivable of Y company. Thereafter, the Dbank received documents related to credit negotiation, and remitted to the Y company'saccount only the difference after paying trade fiance of the X company. Than Y companyrequested remittance in the total negotiated amount since the company transferred the wholepayment. But the rejection continued so the company Y institute a law suit against the bankD for additional payment for the total transferred amount and the delay interest thatfollowed.

Case study1. Payment transferring in a credit transactionAccording to the U.C.P., a beneficiary may assignment of proceeds to other parties with noobjection to the transferable possibility of credit. And such transferring is not definingcondition exercise right to the credit transaction. (The Article 49 of U.C.P 500) Accordingly,the assignment of proceeds with credit transaction is transferring only the right to paymentrequest to the other party while a beneficiary reserving the rights and duty of the creditterms.

2. Assignment of credit and assignment of proceedThe difference between assignment of credit and assignment of proceed is, for assignment ofcredit, unlike the grantee who has to exercise both the credit terms and requesting payment,for the assignment of proceed, the person who has to exercise the credit terms is abeneficiary and the person request payment is the grantee.

ConclusionWhen a negotiating bank is negotiating such a credit, the bank should remit all the payment

to the grantee and it is reasonable to pay the difference of payment and the interest fordelay.