60 Case Study Ucp600 - Unprotected [PDF]

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CASE STUDY - UCP 600, ICC 2007 1. A credit subject to UCP 600 has the following terms: +One original and two copies forwarder's cargo receipt, consigned to applicant, notify ABC Inc. with freight collect. Please contact XYZ Forwarder Inc, 100 Avenue Road, Toronto, Ontario L4S 2L1 Canada. Mr. So Good Tel: 905 888 8888 Fax 905 888 9999 to arrange delivery of goods. All loading charges are for the account of beneficiary. The issuing bank refuses to pay due to following discrepancy in the forwarder's cargo receipt (FCR): The FCR does not show “All loading charges are for the account of beneficiary”. But in the beneficiary's signed certificate required by the credit, it has covered such condition, namely: We hereby certify that: 1. 2. 3. 4.

This shipment does not contain any wood packing material. No child labour is involved in the manufacture of the goods. The beneficiary holds the applicant harmless against copyright infringement, if any. All loading charges are for the account of beneficiary.

Questions: Q1

Is the issuing bank correct in its refusal?

2. A credit subject to UCP 600, allowing partial shipments, has the following terms: “+One original and two copies beneficiary's signed statement to warrant that: 1. The goods are free of copyright infringement. 2. No child labour is involved in the manufacturing. 3. No wood packing materials are used. 10,000 pcs. remote control helicopters, red, with batteries PO No. 12345 for East Coast USA. 8,000 pcs. remote control sport cars, blue, with batteries PO No. 12346 for West coast USA.” The commercial invoice indicates shipment of 10,000 pcs. helicopters to East Coast only. The issuing bank refuses the beneficiary's signed statement with following reason:

“The beneficiary's signed statement, covering 8,000 pcs. remote control sport cars for West Coast, as well as 10,000 pcs. helicopters for East Coast, is not consistent with the goods covered by the commercial invoice.” Questions: Q1

Is the issuing bank correct in its refusal?

3. A credit subject to UCP 600 calling for 10,000 MT of cement does not allow partial shipments or drawings. Two sets of stipulated documents are presented. One set containing Bill of Lading (BL) 1 is presented in the morning of 1 May 2010 and another set containing BL 2 is presented in the afternoon of 1 May 2010, using a different covering letter or schedule. BL 1 of voyage No. 888 shows carriage by MV OMG covering 6,000 MT of cement to be discharged at New York. BL 2 showing carriage by the same vessel MV OMG of same voyage No. 888 covering 4,000 MT of cement is to be discharged at New York. The issuing bank refuses the two presentations stating: “Partial shipment is made and this is not allowed in the credit.” The beneficiary argues that according to article 31 (b) of UCP 600, the two shipments carried by the same vessel, on the same voyage and to the same destination are not partial shipments. Hence there is no discrepancy. Questions: Q1

Who is correct?

4. Letter of credit A subject to UCP 600 states: +1 original and 2 copies of beneficiary's certificate certifying that 1 set of copies of shipping documents has been sent to the applicant within 2 days from date of shipment. Letter of credit B subject to UCP 600 with other identical terms and conditions states: +1 original and 2 copies of beneficiary's certificate certifying that 1 set of copies of shipping documents has been sent to the applicant within 2 days after date of shipment. The shipment date for the presentation is 3 May 2011. 1 original and 2 copies of a signed beneficiary's certificate are presented, certifying that 1 set of copies of shipping documents has been sent to the applicant on date of shipment. It follows that its issuance or signature date is also 3 May 2011.

Is this beneficiary's certificate compliant under both letter of credit A and B? 5. The LC is subject to UCP 600 available for payment by the nominated bank that is also the transferring bank. The LC states: "Documents must be presented within 21 days from date of BL but within expiry of the Credit". Shipment must be made not later than 31 August 2007. The LC expiry date is?1 September 2007. (Note: This is in line with湶nternational banking practice as most issuing banks make the expiry date 21 days after last shipment date.?However some LCs give only 10 days for expiry after last shipment date.?In my LC escort retainer service, I often ask my clients to check and make sure they do have full 21 days after last date of shipment in order to enjoy the full benefits on period of presentation under UCP 600, particularly when the LC has to be transferred to another supplier for shipment arrangement.) The LC has been transferred to two second beneficiaries in two other countries. The BL presented is a pre-printed "Received for shipment"脷L烀ith an on board notation stamp dated 1 August 2007. The issuing date of脷L is 5 August 2007 After receipt of documents from second beneficiaries, first presentation to the nominated bank by first beneficiary is on 12 August 2007.?The discrepant documents have to be sent back to the second beneficiaries to cure and this takes a lot of time to complete the curing cycle as the second beneficiaries are not domiciled in the same country of the first beneficiary. Date of last presentation to nominated bank after curing discrepancies is?3 August?007. The presentation is rejected by issuing bank based on UCP 600 article 14 (c) as the BL is presented滟ore than 21 days after shipment date [which is the on board notation date according to UCP 600 article 20 (a) (ii)]. Is the issuing bank correct it is refusal?

6. Issuing Date of Cargo Insurance Certificate A Marine Cargo Insurance Certificate (the Certificate) was presented against an LC subject to UCP 600. The Certificate states on its face the following:

Open Cover Policy No. OCP-12345678 issued on 1 January 2011. Marine Cargo Insurance Certificate No. MCIC-87654321 issued on 3 April 2011 The related bill of lading shows a shipped on board date of 1 April 2011. The issuing bank refused payment due to the issuing date of the Marine Cargo Insurance Certificate is later than the shipped on board date, based on the provisions of UCP 600 subarticle 28 (e). The issuing bank also added that the cargo insurance converge is not yet effective at the time of shipment on board. Is the issuing bank correct in refusing payment of the presentation? 7. Tolerance in LC amount and shipped quantity A confirmed letter of credit subject to UCP 600 states: In Field 39A: + or - 5% In filed 43P: Partial shipments and drawings allowed In field 45A: 100,000 MT steel round bars BS 1234 per PO No. 5678. 1st shipment: Around 50,000 MT 2nd shipment: Around 30,000 MT 3rd shipment: Around 20,000 MT The confirming bank refuses to pay based on following discrepancies: 1. “Around” is not a word defined in UCP 600. Hence the tolerance limit in quantity should be governed by the tolerance limit in the credit, namely + or - 5%. 2. The issuing bank should bear the consequences of unclear or misleading wordings as well as ambiguity in the credit. 3. Hence the quantity in the 1st shipment, 55,000 MT exceeds the tolerance limit of + or 5% in the credit. Question: Is the confirming bank right in its refusal? 8. A credit subject to UCP 600 expired on 7 February 2010, which is a Sunday. In the morning of 7 February 2010, although the nominated paying bank in China was closed to the public due to Sunday, yet the bankers in the letter of credit department of this bank had to come back to work internally in order to clear the heavy workload before the Chinese New Year holidays starting from on 14 February 2010. On this day, there was a small fire at 12.00 pm due to short circuit and the bank had to close after 12.00 pm. The bank re-opened on Monday 8 February 2010. In the morning of this day

the bank knew from the headline of the New York Times that the issuing bank in USA had finance troubles. The beneficiary made a presentation on 8 February 2010 and was refused by the nominated paying bank stating: “We had a force majeure incident due to fire on Sunday 7 February 2010. According to UCP 600 article 36 provisions, the expiry date and the last date for presentation for this credit would not be extended to the next business day due to force majeure reasons. As a result, the provisions of article 29 (a) is not applicable due to this force majeure incident. Your presentation is now returned without payment. We regret for this unfortunate incident which is out of our control.” Q1

Is the nominated paying bank right in its refusal notice?

9. A credit subject to UCP 600 has the following clause in field 78: “INFO TO PRESENTING BK: +ON RECEIPT OF DOCUMENTS CONFORMING TO THE TERMS OF THIS DOCUMENTARY CREDIT AT OUR COUNTER, WE UNDERTAKE TO REIMBURSE YOU IN THE CURRENCY OF THIS CREDIT IN ACCORDANCE WITH YOUR PAYMENT INSTRUCTION ON THE DUE DATE OF THE DRAFT/DOCUMENTS AFTER DEDUCTING ALL RELATIVE REIMBURSING FEE AND CABLE CHARGES INCURRED. WE SHALL ADVISE YOU THE MATURITY DATE.” The documents were compliant but were lost in transit from the presenting bank that did not take up the nomination. The issuing bank sent a refusal notice saying that based on the first two lines of the above clause, payment is only conditional to good receipt of documents at the counter of the issuing bank and that this clause overrides UCP 600 article 7 regarding issuing bank's payment obligations under the credit. Q1

Is the issuing bank right in its refusal notice?

10. A credit subject to UCP 600 has the following clause stated in the bill of lading. “NO DIRECT OVERSIDE DISCHARGE OR DIRECT DELIVERY.” The goods are wood pulp packed in bales transported from Canada to Kunsan, South Korea by a break bulk vessel. The issuing bank refuses payment because this clause is discrepant as it infringes the right of the consignee on discharge. Q1

Is the issuing bank right in its refusal?

11. A credit subject to UCP 600 has the following terms:

+One original and two copies beneficiary's signed statement if shipment is free of wood packing materials, the following must be stated on actual shipper's letterhead, I (state name) hereby certify and declare that the merchandise shipped does not contain any wood packing materials, mentioning this credit number, PO No. and container No. The beneficiary's signed statement is signed as: BRASIL EXPORT INC. Beneficiary's Signed Statement LC No. MAICON/424 PO No. LUCIO/1333 Container No. KAKA2010702 We hereby certify and declare that the merchandise shipped does not contain any wood packing materials. For and on behalf of Brasil Export Inc.

Fabiano Robinho Authorized Signature

The issuing bank refuses the beneficiary's signed statement with following reason: “The beneficiary's signed statement states “We hereby certify...” instead of “I, Fabiano Robinho, hereby certify...” as specified in the credit. Questions: Q1

Is the issuing bank correct in its refusal?

12. In a credit subject to UCP 600, asking for drafts, the words in the signature box for the drawer is all written in hand writing as follows:

For and on behalf of ABC Company Limited Michael Jimson Authorized Signature

The issuing bank refuses to pay due to following discrepancies in the drafts: Hand written company name is not acceptable to avoid frauds. For and on behalf of ABC Company Limited,

Michael Jimson ............................ Authorized Signature According to trade practice, words in red as shown above should appear in the form of a company stamp. Questions: Q1

Is the issuing bank correct in its refusal?

13. A credit subject to UCP 600 has the following terms: +One original and two copies forwarder's cargo receipt, consigned to applicant, notify ABC Inc. with freight collect. Please contact XYZ Forwarder Inc, 100 Avenue Road, Toronto, Ontario L4S 2L1 Canada. Mr. So Good Tel: 905 888 8888 Fax 905 888 9999 to arrange delivery of goods. All loading charges are for the account of beneficiary. The issuing bank refuses to pay due to following discrepancy in the forwarder's cargo receipt (FCR): The FCR does not show “All loading charges are for the account of beneficiary”. But in the beneficiary's signed certificate required by the credit, it has covered such condition, namely: We hereby certify that: 1. 2. 3. 4.

This shipment does not contain any wood packing material. No child labour is involved in the manufacture of the goods. The beneficiary holds the applicant harmless against copyright infringement, if any. All loading charges are for the account of beneficiary.

Questions: Q1

Is the issuing bank correct in its refusal?

14. Is an “UPS air waybill” a courier receipt or an air waybill under UCP 600?

In a credit subject to UCP 600, an “UPS air waybill” is presented, showing air carriage of Apache remote control toy helicopters of CIP value USD200,000 packed in 42 strong cartons of size 4 x 5 x 6 ft. The issuing bank dishonours because in the “UPS air waybill”, the carrier is not identified as required under UCP 600 article 23. The negotiating bank disagrees and says that the “UPS air waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit. Q1

Is an “UPS air waybill” a transport document under UCP 600?

Q2 Under which article, article 23 or 25 in UCP 600 should this document be examined? 15. Is a SME Courier Forwarder Inc. “certificate of courier receipt”, a courier receipt, an air waybill or a forwarder's certificate of receipt under UCP 600? In a credit subject to UCP 600, a “certificate of courier receipt” issued by SME Courier Forwarder Inc. is presented showing air delivery of oil drilling head assembly of CIP value USD880,000 stowed in 4 pallets. The issuing bank dishonours because the document is a courier receipt that has only shown a date of receipt of the goods without “evidencing receipt of goods for transport” as required in article 25 (a) of UCP 600. The confirming bank dishonours because the document is an air waybill and the carrier is not identified as required by article 23 (a) (i) of UCP 600. The negotiating bank disagrees and says that this “certificate of courier receipt” is a forwarder's certificate of receipt (FCR) issued by SME Courier Forwarder Inc. as a forwarder. Hence article 14 (f) should be used to examine this document. As a result there is no discrepancy since there is no requirement in the credit for “evidencing receipt of goods for transport” in the credit or under UCP 600 article 14 (f). Q1 Q2

Is this “certificate of courier receipt” a transport document under UCP 600? Under which article, article 23, 25 or 14 (f) in UCP 600, should this document be examined?

16. If examination of documents by a nominated bank constitutes "acting on its nomination" under UCP 600 article 14 (b)? The beneficiary presented documents to a nominated bank N under a credit subject to UCP 600 available for deferred payment 60 days after date of bill of lading. Negotiation is restricted to nominated bank N. As bank N is the beneficiary's banker, the beneficiary requested bank N to examine the documents for compliance. Bank N found the documents compliant and forwarded them to the issuing bank in USA. Ten banking days after receipt of presentation by the issuing bank, there

was no notice of refusal received. Two week before the payment maturity date, the issuing bank applied for Chapter 11 protection due to lack of liquidity. On payment maturity date, the beneficiary demanded payment by Bank N based on following reasons: 1. Bank N is the nominated bank, having examined the documents and found them compliant. 2. Bank N never showed any intention to refuse the nomination before the payment maturity date. Is bank N obligated to pay the beneficiary? 17. A credit subject to UCP 600 providing sight payment states in field 42D “Drawee: ABC Bank, with full address” There is no requirement to present any drafts or bills of exchange in field 42C. Hence no draft is presented. The issuing bank refuses to pay because the information in field 42D is not reflected in the documents. Is the issuing bank correct in its refusal? 18 Beneficiary's Certification in Commercial Invoice A credit subject to UCP 600, amongst other documents, asks for one original commercial invoice certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F. The commercial invoice presented has no such certification but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit. Should missing the certification in commercial invoice be a valid discrepancy under the circumstance? 19. Beneficiary's Certificate A credit subject to UCP 600, amongst other documents, asks for one original beneficiary's certificate certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F. The beneficiary's certificate is not presented but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.

Should missing the beneficiary's certificate be waived under the circumstance? 20. A credit subject to UCP 600 asks for full set of 3 original sea waybills consigned to the order of the issuing bank, evidencing shipment from Hong Kong to New York, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancies: 1. One original sea waybill instead of full set of 3 originals is presented. 2. The sea waybill is consigned to issuing bank but not to order of issuing bank. Are the two discrepancies valid? 21 A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancy: 

Three sets of original bills of lading are presented whereas the credit only asks for one set.

Can the beneficiary present three sets of original bills of lading when the credit only asks for one set? 22. A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The credit prohibits partial shipments. Three sets of original bills of lading loaded on the same vessel under the same voyage number, discharging at Dubai are presented. The issuing bank dishonours due to following discrepancy: 

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

Is this discrepancy valid? 23 A credit subject to UCP 600 asks for full set of 3 original charter party bills of lading evidencing shipment of freshly cut logs, consigned to the order of the shipper, evidencing shipment from any Asian port to any European port, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancies: 1. Three sets of original charter party bills of lading are presented whereas the credit only asks for one set.

2. The 3 sets of original charter party bills of lading show a range of ports of loading (one set showing Kota Kinabalu, one set showing Sandakan, and one set showing Tawau). This is not allowed in UCP 600 article 22 (a) (iii) which only allows a range of ports of discharge.

Can the beneficiary present three sets of original charter party bills of lading when the Q1 credit only asks for full (one) set? Q2 Are the 3 sets of original charter party bills of lading discrepant? 24. A bill of lading presented under a credit subject to UCP 600 has the following preprinted clause: “The shipper acknowledges that the carrier is authorized to carry the Goods identified in the Bill of Lading on the deck of any vessel and in taking remittance of this Bill of lading, the Merchant (including the Shipper, the Consignee and the Holder of the Bill of Lading, as the case may be) confirms his express acceptance of all the terms and conditions of this...”. The bill of lading is however silent on “on deck shipment”. The issuing bank dishonours because the bill of lading bearing such pre-printed clause about on deck shipment is not acceptable according to UCP 600 article 26 (a). Is the issuing bank right in its decision? 25 A credit subject to UCP 600 calls for one set of 3 original charter party bills of lading (CPBL). The issuing bank dishonours due to following discrepancy: “The set of 3 original CPBL presented is signed by an agent A for the carrier C. It does not comply with UCP 600 Article 22 (a) (i)”. Is the issuing bank correct in its refusal decision? 26. A credit subject to UCP 600 asks for an original inspection certificate issued by competent surveyors within 3 days before loading on board. The issuing bank refuses the presentation based on following discrepancy: “Inspection certificate issued by only one surveyor (single number) whereas the credit asks for checking by competent surveyors (plural number). Is this discrepancy valid? 27. A credit subject to UCP 600 states in field 41D that it is available with ABC Bank in Dubai by negotiation but in field 31D, it does not state the place of expiry. Which is the place of expiry under the circumstance?

28. A credit subject to UCP 600 requires goods of Japanese origin. It does not ask for any certificate of origin. The invoice shows that the goods are made in South Korea. The issuing bank dishonours due to following discrepancy: “Invoice shows that the goods are of South Korean origin whereas the credit asks for goods of Japanese origin”. The beneficiary disagrees, saying that Japanese origin is a NDC (non-documentary condition) since the credit does not ask for any document to reflect this. According to UCP 600 article 14 (h), country of Japanese origin can be ignored. As a result of this, the bank need not check for the origin of the goods. Hence there should be no discrepancy. Who is correct? 29. The issuing bank in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary represented the rejected documents to the confirming bank in Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating: “Because the law is overriding the UCP, we cannot pay you due to the injunction even though the documents are compliant.” Can the confirming bank refuse payment based on the injunction? 30. The issuing bank, head office of Bank ABC in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary re-presented the rejected documents to the confirming bank, a branch of Bank ABC in South Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating: “Our head office Bank ABC is bound by the injunction in India. As a South Korean branch of Bank ABC, we are also bound by the injunction and hence cannot pay you even though the documents are compliant.” Can the confirming bank refuse payment under the circumstance? 31. A bill of lading presented under a credit subject to UCP 600 is signed as follows: “By authority of Master, Captain ABC: (Manual signature) XYZ Shipping Company Ltd. as agent” The issuing bank rejects this bill of lading because the agent has not stated whether it is signing for the master or for the carrier.

Is this discrepancy valid? 32. A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid. A FCR is signed by a chop as follows: “For and on behalf of: (Manual signature) XYZ Freight Forwarding Company Ltd.” The issuing bank rejects this FCR as XYZ Freight Forwarding Company Ltd. does not indicate whether it signs as a carrier or as an agent of the carrier or as an agent of the master. Is this discrepancy valid? 33. A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid. A FCR is signed by a chop as follows: “For and on behalf of: (Manual signature) XYZ Godown Company Ltd.” The issuing bank rejects this FCR as XYZ Godown Company Ltd. is only a godown or warehouse and cannot sign as an issuer of the FCR that should be signed by a forwarder only. Is this discrepancy valid? 34. A credit subject to UCP 600 issued for steel round bars trade asks for one original and two copies of certificate of origin, evidencing goods are of China origin. The issuing bank refuses the certificate of origin that is issued “To Whom It May Concern” instead of issuing to the buyer, consignee or applicant named in the credit. Is the issuing bank correct in refusing the certificate of origin? 35. A credit subject to UCP 600 asks for one set of original bills of lading, evidencing shipment from Shanghai, China to Abu Dhabi, UAE, notifying forwarder AUH, with freight collect.

The issuing bank refuses the bill of lading bearing the clause “Part load with bill of lading No. JMSBOND007 no separate delivery.” Is the issuing bank correct in refusing the bill of lading? 36. A credit subject to UCP 600 asked for presentation of “One original and 2 copies of certificate of origin evidencing China origin” for sales of 10,000 MT steel goods from Hong Kong to Dubai. A certificate of origin issued by a Chamber of Commerce in China covering 30,000 MT of steel goods was presented, showing shipment from Hong Kong to Dubai. The issuing bank regarded the certificate of origin discrepant because: Q1 It covers 30,000 MT instead of 10,000 MT of steel goods. Q2 The issuing date of the certificate of origin is two months before the credit issuing date. 37. A credit subject to UCP 600 from the purchasing department of a department stores chain in USA, purchasing goods based on FOB Yantian China terms, asked for “One original forwarder's cargo receipt (FCR) consigned to USA port determined by the forwarder marked freight collect”. A FCR was presented, inter alia, marked “consigned to USA port determined by the forwarder, freight collect”. The issuing bank rejected the FCR because no port of discharge was specified based on ICC Banking Commission opinion R368, which states that a bill of lading must specify the port of discharge even if the credit asks for “any Country K port(s)” as the port of discharge. Is ICC opinion R368 applicable to the present case? 38. Master Air Waybill v. House Air Waybill According to ICC Document 470/TA.621, if a credit requires expressly a master air waybill, a house air waybill is also acceptable based on the following reasons: 1. Wordings like "HAWB (house air waybill) No. XXXXX" in an air waybill is acceptable even if the credit expressly requires a "master air waybill" . 2. The intent of this condition (requiring presentation of a master air waybill in a credit) is unclear. 3. Under Article 27 of UCP 500, as far as the air waybill is signed by a "carrier", it is acceptable. UCP 500 does not care whether the carrier is an actual carrier or a contracting carrier. 4. This "master air waybill condition" does not prohibit signature by a freight forwarder. 5. This ICC decision is based on ICC Opinion No. R 221 (where the credit does not expressly require a master air waybill). Do you agree with this ICC decision?

39. Lost of letter of credit advice If a credit advice by local mail is lost, is this advice duly given by the advising bank? A credit advice has been lost in local mail. Q1

Is such an advice considered as sent by the advising bank?

Q2 Is such advice considered as received by the beneficiary? 40. What Is A Banking Day? After a long holiday, a letter of credit document checker Bob went to his office to work overtime on Sunday 6 July 2008 in Hong Kong. His old classmate Jim called his mobile phone to invite him to lunch. When Jim knew that Bob was working in his office, he went to Bob's office to pick him up for lunch at a restaurant just two blocks from Bob's office. He went into Bob's room and handed over Bob one set of documents presented under a local letter of credit subject to UCP 600 where the issuing bank was Bob's bank branch. The presentation consisted of a simple set of stipulated documents. The notice of refusal was sent by fax on Monday 14 July 2008 pointing out 7 valid discrepancies. Jim's boss Don demanded payment from Bob's bank because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600. Bob's office is not open on Saturday and Sunday. Q1

Is Don correct in his demand?

Q2 What should Don have done to claim payment? 41.Bank I invited its VIP customer C to attend a real estate mortgage promotion campaign held on Tuesday 8 July 2008 on board a 100 feet yacht near Lantau Island, Hong Kong, where the Hong Kong Disneyland is located. C met D on the yacht. D was a letter of credit document checker for Bank I. C handed over to D one set of documents presented under a local letter of credit subject to UCP 600 where Bank I was the issuing bank. The presentation consisted of a simple set of stipulated documents. The notice of refusal was sent by fax on Wednesday 16 July 2008 pointing out 5 valid discrepancies. C demanded payment from Bank I because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600. Bank I was open on Tuesday 8 July 2008 but is not open on Saturday and Sunday. Q1

Is C correct in his demand?

Q2 What should C have done to claim payment from Bank I? 42. Presentation to an Overseas Branch of a Bank A credit subject to UCP 600 issued by the head office of an Indian international bank in New Delhi stated in SWIFT MT700 field 31D: “Presentation to us on or before 1 July 2008”. After being aware that there was not enough time to send the stipulated documents by courier to the head office of the issuing bank in New Delhi, the beneficiary presented them to its branch in Hong Kong. When the documents arrived the head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to presentation after expiry. The beneficiary argued that “us” on its face should include all branches of the Indian bank. If the issuing bank did really mean presentation exclusive to the head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings. Q1 Should the issuing bank honour the presentation under such circumstance? 43. Presentation to a Local Branch of a Bank A credit subject to UCP 600 issued by State Bank of India head office in New Delhi stated in SWIFT MT700 field 31D: “Presentation to us on or before 1 July 2008”. Field 41a states: “Available with the State Bank of India by sight payment”. After being aware that there was not enough time to send the stipulated documents by courier to the New Delhi head office of the State Bank of India, the beneficiary in Bangalore presented them to its branch in Bangalore, India. When the documents arrived the New Delhi head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to (i) presentation to the wrong branch and (ii) after expiry. The beneficiary argued that “us” in field 31D and “State Bank of India” in field 41a, on their face, should include all branches of the State Bank of India. If the issuing bank did really mean presentation exclusive to the New Delhi head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings. Q1 Is the argument by the beneficiary valid?

44. Article 14 (l) allows any party, beneficiary included, to issue a transport document. What measures should an issuing bank take to avoid the potential risks? According to this sub-article 14 (l) of UCP 600, any third party may issue a transport document as a carrier, master, owner, charterer, or their agent. A beneficiary may also do so if he prefers. In other words, this sub-article would provide a legitimate platform for creation of fraudulent transport documents. 45. What qualifies "indication" of a charter party bill of lading under article 22 (a) of UCP 600? UCP 600 article 22 (a) states: "A bill of lading, however named, containing an indication that it is subject to a charter party (charter party bill of lading)..." Bankers are frustrated as to the precise interpretation of the word "indication" quoted above. Due to lack of knowledge on charter party operations, bankers do not have an effective means to determine which bill of lading is a charter party bill of lading as most of the bills of lading look like the same on the face page, sharing many identical data contents and boxes. Q1 How would you determine a charter party bill of lading on its face? 46. Does an oral waiver constitute an amendment? In USA the issuing bank dishonoured by naming a valid and incurable discrepancy (executing the first instalment shipment after latest date for shipment as stated in the instalment shipment schedule) in its notice of refusal. After an exchange of long distance telephone calls, the applicant finally agreed to waive this discrepancy in an email to the beneficiary. A copy of the waiver was sent to the issuing bank. An officer of the issuing bank tried to comfort the beneficiary on the phone by serving a diplomatic message: “Please do not worry. There should be no problem with the discrepancy with our bank.” Later, the issuing bank dishonoured despite giving the “verbal waiver” as regarded by the beneficiary and the “wavier in writing” from the applicant. The beneficiary sued the issuing bank and the applicant. Who is going to win the case, the beneficiary, the applicant or the issuing bank? 47. In the Total Energy v. Standard Chartered Bank Hong Kong case, (a) a fax stating discrepancies alone in the morning followed by (b) a phone in the afternoon stating refusal and disposal of documents, would comply with UCP 500 Articles 13 & 14. Is this court decision valid in UCP 600 where "a single notice" is required? According to the judicial decisions of the captioned case provided by the Hon. William Stone J., 1. sending a copy of the discrepancies checklist used by the bank internally, listing all the discrepancies in the morning, followed by

2. a phone call in the afternoon to the same person in the beneficiary's company, advising the bank's decision to refuse documents and asking for disposal of documents would comply with UCP 500 Articles 13 & 14. Q1

Is this court decision valid in UCP 600 where "a single notice" is required under article 16 (c)?

48. Insurance problems in a transferable DC A DC subject to UCP 600 calls for goods of CIF Dubai value of USD1,100,000. Shipment is by sea from Shanghai to Dubai. The first beneficiary in Hong Kong intends to transfer the full DC quantity to a second beneficiary in Shanghai for CIF value of only USD220,000. The issuing bank that provides the financing insists that the insurance policy must cover a minimum CIF value of USD1,100,000 to protect the bank's interests. The first beneficiary hesitates to ask the second beneficiary to do this insurance cover, as the second beneficiary will then know the price that the first beneficiary sells to the applicant in Dubai. The second beneficiary will be very unhappy after knowing the huge profit the first beneficiary makes. What is the best solution to make the first beneficiary and the second beneficiary both happy? 49. CIF insurance problems in a transferable DC What is the best solution in Exercise No. 65 if the first beneficiary is not from Hong Kong but from a small country in Africa, which is in severe short of foreign exchange? As a result, this African country does not allow exports in FOB or CFR terms or imports in CFR or CIF. The only term allowed in exports is CIF and imports in FOB in order to earn more foreign exchange in its international trade. In a nutshell, for both imports and exports, freight and insurance costs must be paid in this African country. The benefit for the African country is that, for exports, the country can earn more foreign currency such as USD and for imports, it can avoid paying in foreign currency, such as USD that it has not enough reserve to meet the foreign exchange obligations. 50.Can an issuing bank negotiate when the nominated negotiating bank refuses to negotiate? In a DC subject to UCP 600 without providing confirmation, available by usance drafts at 60 days after shipped on board date in bill of lading, the beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v) when the nominated negotiating bank refuses to negotiate. The issuing bank refuses to negotiate. Q1

Is the issuing bank correct in its refusal?

Q2 What should the beneficiary do under the circumstance?

52. Can an issuing bank negotiate or discount when the nominated confirming bank refuses to negotiate? In a DC subject to UCP 600, available by negotiation with usance drafts drawn on the confirming bank at 60 days after shipped on board date in bill of lading. The confirming bank refuses to negotiate due to discrepancies. However, the issuing bank finds the presentation compliant. The beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v). The issuing bank refuses to negotiate. Q1 Q2 Q3

Is the issuing bank correct in its refusal? Can the beneficiary ask the issuing bank to discount? What can the beneficiary do under the circumstance in order to receive payment before maturity?

53. Problems with drafts drawn on an applicant in a credit subject to UCP 600 Despite the provision of UCP 600 sub-article 6 (c), a credit subject to UCP 600 is however available by negotiation of usance drafts drawn on the applicant at 60 days after shipment date. The applicant refuses to accept the drafts relying on fabricated discrepancies disagreed by the issuing bank and the beneficiary. The issuing bank however disagrees to honour or negotiate the compliant presentation. Q1

Is the issuing bank obligated to honour or to negotiate under the UCP 600?

If the credit is confirmed, is the confirming bank obligated to honour or to negotiate under Q2 the UCP 600? Q3 What should the beneficiary have done to avoid such risk? 54. Terms like "purchase", "advancing funds", "agreeing to advance funds" and "prepay " are used in UCP 600 articles 2, 7 (c), 8 (c) and 12 (b). What do they really mean?

Q1 Q2 Q3

What are the origin, focus and implication of these terms? What are the actions that these terms refer to under UCP 600? In the market place, do these terms share the same meaning as they are interpreted under UCP 600?

55. Multimodal Transport Document On Board Notation 1

An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Place of receipt: Macau; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Place of Receipt

Vessel Name

Macau

Casino Royale

Port of Loading

Intended Vessel Name

Hong Kong

Chopsticks

Port of Discharge

Place of Final Destination

New York

West Orange, New Jersey

The issuing bank refuses payment due to one discrepancy: “An on board notation is required because Chopsticks is an intended vessel only.” Is this discrepancy valid? 56. Multimodal Transport Document On Board Notation 2 An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Place of receipt: Hong Kong; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Shipped on board dated 1 May 2009

Place of Receipt

Vessel Name

Hong Kong Port

Port of Loading

Vessel Name

Hong Kong Port

Chopsticks

Port of Discharge

Place of Final Destination

New York

West Orange, New Jersey

The issuing bank refuses payment due to one discrepancy: “The on board notation has not shown the vessel name and the port of loading.” Is this discrepancy valid? 57. Multimodal Transport Document On Board Notation 3 An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Port of loading: Hong Kong; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Shipped on board this vessel dated 1 May 2009 Place of Receipt

Vessel Name

Shenzhen, China

Container Haulage Motor Truck No. HK 8228

Port of Loading

Vessel Name

Hong Kong Port

Chopsticks

Port of Discharge

Place of Final Destination

New York

West Orange, New Jersey

The issuing bank refuses payment due to one discrepancy: “The on board notation has not shown the vessel name and the port of loading.” Is this discrepancy valid? 58. Loss of documents in a back-to-back credit situation The documents presented under a baby letter of credit subject to UCP 600 were lost during transit. Nevertheless, Bank IB, the intermediate bank that issued the baby credit, paid the ultimate supplier according to the provisions of UCP 600 article 35. Certified true copies of documents, including the bills of lading, other than drafts and commercial invoices that were replaced with originals, were presented to Bank IA, the issuing bank of the master letter of credit that was also subject to UCP 600. Could Bank IA refuse the otherwise compliant presentation according to UCP 600 17 (a), relying on the following reasons: 1. The two credits, although both subject to UCP 600, are in fact separate payment undertakings. 2. The originals are lost in another presentation (under the baby credit) and not in the same presentation (under the master credit), and 3. Most of the documents (other than drafts and commercial invoices) are not originals? 59. Is an “UPS waybill” a courier receipt or an air waybill under UCP 600? In a credit subject to UCP 600, an “UPS waybill” is presented, showing air carriage of vintage collection series Lamborghini remote control titanium toy cars of CIP value USD20,000 stowed in 20 packages of size 24 x 12 x 10 inches. The issuing bank dishonours because in the “UPS waybill”, the carrier is not identified as required under UCP 600 article 23. The negotiating bank disagrees and says that the “UPS waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit.

Q1

Is an “UPS waybill” a transport document under UCP 600?

Q2 Under which article, article 23 or 25 in UCP 600 should this document be examined? 60. Partial Shipments The DC subject to UCP 600 called for supply of freshly cut logs and prohibited partial shipments. It specified port of loading "Any Malaysian port". Goods were shipped on the same vessel loading at different ports in Malaysia at different time periods under the same voyage number for the same destination. Different sets of bills of lading and related documents (certificates of inspection etc) were presented under the same DC. The issuing bank refused to pay due to following reasons: 1. Bills of lading show more than one port of loading whereas the DC calls for only one port of loading, namely "Any Malaysia Port" and not "Any Malaysian portS". 2. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC. 3. Partial shipments made and this is not allowed in the DC. Is the issuing bank correct in its refusal?