lcviews premium – an example: Non-Documentary Conditions


The lcviews premium pages have taken year to build. There have been different writers – but all pages have been through the same editorial process – for language consistency.

 

Below is an example of one premium page – showing how it is “linked” to different pages – and how other pages links to it.

 

The page in this example is a commentary to ISBP 745 paragraph A26 “Non-Documentary conditions and conflict of data.” This page is written by the great Vijay Kumar:

 

 

Quote

045 ISBP 745 Paragraph A26 (Non-Documentary conditions and conflict of data)

 

Relevant references:

UCP 600 article 5, 14(h), 14(a), 14(d), Uniform Civil Code(USA) –UCC Section 5-108g

ICC Opinion 136 (UCP 400) [Credit should not require sailing date]

ICC Opinion R237(UCP 500) [description of goods on the packing list]

ICC Opinion R 321 (UCP 500) [Certificate of origin requirement under special condition of LC]

ICC Opinion R 326 (UCP 500)  [Demurrage should be account of beneficiary]

ICC Opinion R 388 (UCP 500) [Guarantee requirement under special condition]

ICC Opinion R389  (UCP 500) [Data content on the Certificate of Origin]

ICC Opinion R411 (UCP 500) [ Non-documentary condition to be disregarded]

ICC Opinion R412 (UCP 500) [Instructions appearing on the 47A under MT700]

ICC Opinion R511 (UCP 500) [Condition of payment]

ICC Opinion R631 (UCP 600) [Data in the transport document inconsistent with a condition deemed non-documentary]

ICC Opinion R743 (UCP 600) [Goods must be shipped in export standard packing and clearly marked [with] country of origin and shipping marks in each and every package/carton/bag/container]

ICC Opinion TA799 (URDG 758) (LC requirement: Bank guarantee from international first class bank payable in country X)

 

UCP in court:

Gian Singh & Co Ltd v. Banque de l’Indochine [1974]

Banque de l’Indochine v. J H Rayner(Mincing Lane) Ltd [1983]

Astro Exito Navegacion SA v. Chase Manhattan Bank NA, The Messiniaki Tolmi [1986]

Korea Exchange Bank v. Standard Chartered Bank [2006]

Oliver v. Dubai Bank Kenya Ltd [2007]

Uzinterimpex JSC v. Standard Bank PLC[2008]

United Overseas Bank(Malaysia) Bhd v. Indian Bank (2013) (relying on UCP Article 14(h) for payment).

 

Comments:

This paragraph guides on how to deal with the so-called “non-documentary conditions” i.e. the situation where an LC contains a condition without stipulating the document to indicate compliance with the condition. The paragraph is closely linked to UCP 600 article 14(h), which indicates that such condition will be deemed as not stated and therefore disregarded.

As it will appear from the following there are situations where such “non-documentary conditions” should not be disregarded.

 

Below are 4 “external” definitions of “Non-documentary conditions:”

 

1: T.O. Lee:
Non-documentary conditions are those conditions named in a documentary credit that cannot be checked for compliance solely on the face of the stipulated documents.

 

2: Gary Collyer:
Non-documentary condition can be defined as any instruction or condition that is not clearly attributable to a document to be stipulated in documentary credit.

 

3: Professor James E. Byrne:
A non-documentary condition is a condition whose fulfillment must be ascertained by a factual determination of the occurrence of an event as opposed to giving conclusive effect to a documentary representation of the occurrence of the condition. 

 

4: ISP98 Rule 4.11(b)
Terms or conditions are non-documentary if the standby does not require presentation of document in which they are to be evidenced and if their fulfillment cannot be determined by the issuer from the issuer’s own records or within the issuer’s normal operations.

 

Banks deal only with the documents called for by the LC – and examine a presentation to determine on the basis of the documents alone, whether or not the documents appear on their face to constitute a comply presentation.

 

From the above, it is understood that the beneficiary is not obligated to provide any document(s) in evidence of compliance with any non-documentary conditions.

 

However, if the beneficiary chooses to state the non-documentary conditions in a document called for by the LC, then the data on that document must comply with the conditions in the LC – including the non-documentary condition.

 

Any data in a document required by the LC must not conflict with the conditions stipulated in the LC – including any non-documentary conditions. I.e. the standard for the examination is UCP 600 article 14(d).

 

If the beneficiaries choose to present a document not required by the LC in order to satisfy the non-documentary conditions, such document will be disregarded and may be returned to the presenter (UCP 600 article 14(g)).

 

Examples of Non-documentary conditions:

(Most of the LC contains non-documentary conditions under MT700 Swift field 47A (Additional conditions). However, it may also appear under 46A (Documents required) field.)

 

* Phytosantiary certificate to be sent applicant within 3 workings after shipment.

* Goods are of Indian Origin.

* Goods are packed in Jute bags and marked with shipping marks.

* Goods are shipped in FCL/FCL.

* Goods are shipped under CY/CY basis.

* Labels sewn with textile clothes should evidence instructions for cleaning in the Vietnamese language.

* HS code of the commodity 2805.00.00

* Beneficiary should send the shipment advice by fax mentioning the details of shipment for insurance purpose to applicant and insurance company.

* Beneficiary should sent the copies of all documents to the applicant after shipment.

* Shipment to be sea freight vessel sailing to Mombasa Port via Suez Canal.

* Shipment should be effected through conference liner and also the vessel must not be more than 25 years old.

* Applicant will cover the insurance.

 

From the above examples, it applies that none of them requires a document to satisfy the conditions stated in LC.

 

Precautionary measure:

 

1: Applicant should refrain from including non-documentary conditions in their LC application. If they nevertheless do, such should be “linked” to the documents in order to evidence its compliance. Otherwise, the applicant bears the risk of the ambiguity created (ISBP 745 paragraph 7).

 

2: Issuing bank should discourage from including non-documentary conditions in their LCs.

 

3: Confirming bank should take precaution about the non-documentary conditions during their confirmation to the LC. If they do so, they should approach the beneficiary to initiate an amendment before confirmation of the LC.

 

4: Beneficiary should approach the issuing bank and applicant for clarification.

 

Note: UCP600 Article 14(h) rescinds the ICC Opinion R212 and ICC Position Paper 3.

Unquote 

 

 

From this page there are links to reviews of the relevant ICC Opinions on the issue – for example ICC Opinion TA644rev. Clicking on that one you will find the following review:

 

 

Quote

Title: Non-documentary condition

 

Links:

UCP 600: Article 14(d) and (h)

ISBP 745: A26

Topic: Standard for Examination of Documents

 

Details of the query:

Is a condition that stipulates details of transport and latest shipment date without the LC requires a document indicating compliance with the condition a non-documentary condition?

 

ICCs opinion:

Details as above may be disregarded for the purpose of determining a complying presentation and need not be stated in any other stipulated document that is presented.

 

However, the data in the other stipulated documents will still be subject to review under sub-article 14 (d) to ensure that any data is not conflicting with the data in the LC.

 

 

Full transcript

This review is written by LC Views.

For the full transcript of the Official ICC Opinion please contact ICC Books or DC-Pro.

Reference:

Official Opinion R631 / TA644rev - 2005-2008

Unquote

 

 

Of course one could have started it search for the practice regarding non-documentary conditions in the page that includes a commentary to UCP 600 article 14(h) “Standard for Examination of Documents (Non-documentary condition).” In this page there is the following text:

 

 

Quote

UCP 600 Article 14(h) Standard for Examination of Documents (Non-documentary condition)

 

Article 14(h)

Standard for Examination of Documents (Non-documentary condition)

 

This article bears a warning to the issuing bank that banks are expected to disregard a condition in the LC that is not “documentary.” I.e. a condition in the LC that does not stipulate the document to indicate compliance with the condition.

 

This provision is qualified by ISBP 745 paragraph A26 which indicates that data in any document required by the LC are not to be in conflict with the non-documentary condition.

 

For example if the LC mentions “Goods origin: Spain,” then there is no requirement that this be indicated in any document. However, if for example, the invoice indicates the origin of the goods, then this must not be in conflict with ‘Spain.’

Unquote

 

 

This page of course also links to reviews of both the relevant ICC Opinions (like the one quoted above) AND ISBP 745 paragraph A26.

 

So now you have the practice on non-documentary conditions in on place – all linked together.

 

Take care of each other and the LC!

 

Best regards

Kim

 

 

 

 



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LCViews - lcviews premium – an example: Non-Documentary Conditions