Mr. Hanfried Poensgen,

ICC Deutschland

hpn@icc-deutschland.de

Document 470/TA.567

24 March 2004

Dear Mr. Poensgen,

Thank you for your query regarding UCP 500. Please find below the opinion of the officers of the Banking Commission.

QUOTE

We have been confronted with the following problem in respect of which we would highly appreciate a Banking Commission opinion.

Bank D in Singapore (the ”Confirming Bank”) confirmed 5 documentary credits issued by Bank W in Seoul (”Issuing Bank”), all of which were issued on behalf of the same applicant in favour of the same beneficiary, for the same goods, i.e. petroleum products and contained similar terms and conditions including the following:

• Full set of 3/3 original bill of lading made out or endorsed to the order of the Issuing Bank marked freight payable as per charter party; • Charter party bill of lading and undated Charter party Contract thereon is acceptable; • Field 44B indicated ”Any port(s) in South Korea” as the port of discharge; • The credits do not require the credit number to be indicated on the bill of lading.

The B/Ls presented, in each case, were a full set of original ”Tanker Bill of Lading” containing the clause ”PURSUANT AND SUBJECT TO ALL TERMS AND CONDITIONS, LIBERTIES AND EXCEPTIONS AS PER VOYAGE CHARTER PARTY INDICATED HEREUNDER” and being marked ”FREIGHT PAYABLE AS PER CHARTER PARTY”. Each B/L indicated ”ANY PORT(S) IN SOUTH KOREA” as the discharging port. All B/Ls were endorsed to the order of the Issuing Bank.

…/… The Confirming Bank negotiated the documents under each of the credits after finding them to be in compliance with the terms and conditions of the credits. All the documents were remitted to the Issuing Bank as per instructions in the credits.

The Issuing Bank refused the documents presented under each of the credits citing the following discrepancies with respect to all credits

• L/C number is not indicated on BL; • Different consignee; • Date and place of charter party, charterer and carrier are not indicated on BL; • Tanker B/L is presented; and in addition thereto the following discrepancies in individual L/Cs:

L/C 1:
Actual discharging port is not indicated on B/L;
B/L does not contain the indication that it is subject to a charter party.
L/C 2 – L/C 5:
Documents are inconsistent with each other.

Despite arguments from the Confirming Bank that none of the purported discrepancies are valid, within the context of UCP 500 and ISBP, the Issuing Bank has continued to refuse to take up the documents and to effect payment under their credits.

Our arguments may be summarised as follows:

Ad a):
In the absence of any express credit condition requiring that any B/L indicates the credit number, neither the UCP 500 nor banking practice requires any indication to such effect.

Ad b):
Each B/L showed the aforementioned indications that they are subject to a charter party and all credits allowed for charter party B/Ls, so that pursuant to number 1 supra any B/L was required to be issued to the order of the Issuing Bank or to the order of another consignee who then had to endorse the respective B/L to the Issuing Bank: In fact all B/Ls had been endorsed in favour of the Issuing Bank. This is compliant with the LC terms, paragraph 107 ISBP refers.

…/…
Ad c):
Each of the B/Ls showed the aforementioned indications that they are subject to a charter party and each of the credits allowed for charter party bills of lading, but did not contain any requirement for the date and place of the charter party, the charterer and the carrier to be indicated on the B/L, so that the B/Ls were compliant, since Article 25 UCP 500 and banking practice does not require such additional indications.

Ad d):
Each of the B/Ls was headed ”Tanker Bill of Lading” which was not forbidden by the terms and conditions of each of the credits and was fully in line with the goods concerned. Article 25 UCP 500 allows for any document ”however named” which complies with the terms and conditions thereof, so that this heading is not inconsistent with a charter party B/L nor with a marine B/L.

Ad L/C 1, e):
Each of the credits required shipment to ”any port(s) in South Korea” and each of the B/Ls indicated as port of discharge ”any port(s) in South Korea”. Thus these B/Ls were in full compliance with the terms and conditions of the credits, since B/Ls may show the geographical area of ports stipulated in the credits as the ”port of discharge” (see paragraph 106 ISBP).

Ad L/C 1, f):
The aforementioned clauses on each of the B/Ls ”pursuant and subject to all terms and conditions, liberties and exceptions, as per voyage charter party indicated hereunder” as well as ”freight payable as per charter party” are clear and unambiguous indications that the B/Ls are subject to a charter party; paragraphs 100 and 101 ISBP refers.

Ad L/C 2, e) – L/C 5, e):
Any refusal under any credits reasoning that ”documents are inconsistent with each other”, is not stating any discrepancy in accordance with sub-Article 14(d)(ii) UCP 500 unless further details are given like e.g. the relevant documents and the purported variations, discrepancy or even contradiction observed therein. Therefore any refusal based on ”inconsistency” precludes the Issuing Bank from claiming that the documents are not in compliance with the terms and conditions of the credits (sub-Article 14(e) UCP500).

…/…
This leads us to the question:

Is the Issuing Bank, on the basis of the terms and conditions of the LC as stated above and the UCP 500, justified in insisting in the aforementioned purported discrepancies?

ANALYSIS & CONCLUSION

In responding to this query, it is best to address each of the discrepancies observed by the issuing bank and provide comment.

1. L/C Number is not indicated on BL

Unless the credit specifically requires the insertion of a LC number on any document, including a bill of lading, the absence of such LC number is not grounds for refusal.

*It should be pointed out that the request for insertion of LC numbers is usually at the instigation of the issuing bank to facilitate the collation of documents when one or more go astray. The ICC has commented in the past that a refusal based on the absence of a LC number on a document, where requested in the LC, is not grounds for refusal.

2. Different Consignee

The credit requested that bills of lading be issued to the order of the issuing bank or endorsed to their order. The fact that the bill of lading may show, on its face, a different order party is not considered a different consignee if the bill of lading is duly endorsed by that party to the issuing bank. On this basis, there is no discrepancy.

3. Date and Place of Charter Party, Charterer and Carrier are not indicated on BL

The credit stated that undated Charter Party Contract thereon is acceptable, therefore the discrepancy relating to date of the Charter Party is not valid. The fact that the Charter Party bill of lading may have specific field(s) for the insertion of place of Charter Party and Charterer and these are not completed, are not grounds for refusal.

…/… Sub-Article 25 (a) (iii) states “does or does not indicate the name of the carrier”. Therefore, unless the credit specifically requested this information which it seems it did not, there is no discrepancy.

4. Tanker B/L is presented

The credit allowed for presentation of a Charter Party bill of lading. A Tanker bill of lading is a form of Charter Party bill of lading and from the content of the enquiry contained various references, on its face, to a Charter Party. Sub-Article 25(a)(i) refers to the acceptability of a document “however named” that otherwise complies with the content of Article 25. The document meets the requirement of Article 25 and is not discrepant.

5. Actual discharging port is not indicated on B/L

ICC Opinion R. 281 has previously addressed this issue. Where a Charter Party bill of lading is presented, it is acceptable that the port of discharge field state either an actual port (which is within the range or geographic region that is stated in the credit) or the same data that appears in the credit, i.e. in this case “Any Port(s) in South Korea”. There is no discrepancy.

6. B/L does not contain the indication that it is subject to a Charter Party

As mentioned in point 4. above, the bill of lading that has been presented makes various references to Charter Party. Sub-Article 25(a)(i) states “contains any indication that it is subject to a charter party”. The statements that appear on the face of the bill of lading are sufficient to indicate that the bill of lading is subject to a charter party. There is no discrepancy.

7. Documents are inconsistent with each other.

This is not a correct or acceptable statement of a discrepancy. To say that “documents are inconsistent with each other” gives no clue as to the identity of the inconsistency. Sub-Article 14(d)(ii) states that the notice of refusal must state all discrepancies in respect of which the bank refuses documents. The refusal from the bank, in respect of this point, is not in line with the requirements of UCP and, in particular, Article 14 and therefore is not valid.

Based upon the review of the discrepancies observed and the text of the enquiry, we can find no basis for the bank to refuse documents for any of the reasons stated in their refusal notices.

…/… The opinion(s) rendered on this query reflect the opinion of the ICC Banking Commission’s officers. They do not necessarily reflect the opinion of the ICC Banking Commission until the Banking Commission renders its approval or disapproval of these opinion(s) at the next scheduled meeting.

The reply given is not to be construed as being other than solely for the benefit of guidance and there should be no legal imputation associated with the reply offered.

If this query relates to a matter currently under consideration by the courts, the ICC Banking Commission will refrain from considering it for adoption as an opinion.

Neither the ICC nor any of its employees, nor any member of the Banking Commission, including the Chairman, Vice-Chairmen or Technical Adviser shall be liable to any person for any loss or damage arising out of any act or omission in connection with the rendered opinion(s).

Yours sincerely,

Ron Katz Policy Manager Banking Commission