Overturned ICC Opinions
Following the approval of ISBP 745 in Lisbon Gary Collyer stated that it was in force as of 2007 – i.e. when the UCP 600 was in force. This of course is a provocative statement: How can a publication be in force 7 years before it is published? In any case this blog post will illustrate that at least it was a “truth with modifications.”
But first a practical note: This blog post may get a bit “nerdy.” However it contains information that is “need to know.” Therefore I have highlighted in bold the need to know paragraphs – so if you do not bother to read all – read what is in bold.
The background for the blog post is a message that was circulated 11 June to the members of the ICC Banking Commission regarding ISBP 745. The part relevant for this blog post is the following:
National Committees and members of the Banking Commission are requested to note that the agreed text of ISBP 2013 revised Edition (publication No. 745) contains two practices that differ from previously agreed positions that have been published as ICC Opinions. These are Opinions R751 (TA735rev) and R766 (TA709rev). These Opinions appear in the ICC booklet "ICC Banking Commission Opinions 2009-2011", publication No. 732.
For your information, Opinion R751 is superseded by the practices described in paragraphs D1 (c) and E1 (a). For R766, this Opinion is superseded by the practice described in paragraph K10 (c). These two Opinions are to be considered withdrawn with immediate effect.
The purpose of this blog post is to provide more details about these two issues – plus another issue that could well have been mentioned in the same message:
ICC Opinion R751 (TA735rev) versus ISBP 745 paragraph paragraphs D1 (c) and E1 (a)
The issue is the following: Which UCP 600 transport article are to be used for an LC that calls for a bill of lading and shows a multimodal transport route (i.e. more than one mode of transport). The name of the required document should dictate that it is UCP 600 article 20; whereas UCP 600 article 19 is designed for multimodal transports.
The root for the issue is in fact ICC Document No.470/1128rev final (22 April 2010) titled “Recommendations of the Banking Commission in respect of the requirements for an On board Notation.” This document includes the following statement:
Transport documents must be examined under the article that is applicable to the conditions stated in the credit. These conditions include: the type of document that is to be presented and the details given with respect to the shipment of the goods e.g., those shown in fields 44A, E, F or B of the MT700, 710 or 720. Transport documents are not examined under the article applicable to the type of document that has been presented.
In other words: the routing of the goods in very important in determining the applicable UCP 600 transport article. The intention of this clearly is to say that when the LC calls for a multimodal routing, then a multimodal transport document is required. I.e. article 19 would apply.
At the ICC Banking Commission meeting September 2010 ICC Opinion TA.735rev was discussed. The scenario was an LC showing following requirement:
Place of receipt: 44A: South Korea
Port of loading: 44E: Any port in Korea
Port of discharge: 44F: Peru Callao Port
Place of delivery: 44B: Lima
Required transport document: Clean on board ocean B/L
And the question was: Which article of UCP 600 shall be applied in the examination of the B/L, article 19 or article 20?
The Draft ICC Opinion said that it must be article 19. This however initiated a huge discussion, which actually resulted in a vote for either article 19 or article 20. With overwhelming majority article 20 was chosen! I.e. a different result from the Draft Opinion AND the ICC “Recommendations of the Banking Commission in respect of the requirements for an On board Notation” mentioned above.
During the revision of ISBP 681 the issue was addressed again. ISBP draft 4 included the following paragraph:
Where a credit requires the presentation of a transport document other than a multimodal transport document or combined transport document, and it is clear from the routing of the goods stated in the credit that more than one mode of transport is to be utilized, UCP 600 article 19 is to be applied in the examination of that document.
I.e. back to article 19! There were strong comments in favour of both deleting and keeping the paragraph but in final version of ISBP 745 paragraph D1 (c) reads:
When a credit requires the presentation of a transport document other than a multimodal or combined transport document, and it is clear from the routing of the goods stated in the credit that more than one mode of transport is to be utilized, for example, when an inland place of receipt or final destination are indicated, or the port of loading or discharge field is completed but with a place which is in fact an inland place and not a port, UCP 600 article 19 is to be applied in the examination of that document.
In other words when the LC calls for a bill of lading but shows a multimodal transport route – then the presented transport document must be examined according to UCP 600 article 19.
In that respect it should be noted that it is doubtful that this has any significant effect on the result of the examination. For example ISBP 745 paragraph D7 reads:
When a credit requires shipment to commence from a port, i.e., when the first leg of the journey, as required by the credit, is by sea, a multimodal transport document is to indicate a dated on board notation, and in this event paragraph E6 (b-d) will also apply.
For your information ISBP 745 E6 (b-d) is the bill of lading requirements for on board notations.
The ICC document “Recommendations of the Banking Commission in respect of the requirements for an On board Notation” can be downloaded here:
ICC Opinion R766 (TA709rev) versus ISBP 745 paragraph K10 (c)
The background for the question is UCP 600 article 28(e), which reads:
The date of the insurance document must be no later than the date of shipment, unless it appears from the insurance document that the cover is effective from a date not later than the date of shipment.
ICC Opinion TA709rev answers the following question:
We would like to seek an official opinion from the Banking Commission on the acceptability of insurance documents with a date of issuance which is later than the date of shipment, that indicate cover “from warehouse to warehouse” and no further indication of a date as to when the cover is effective.
The conclusion reads:
“An insurance document that is dated later than the date of shipment, but clearly indicates on the document, by addition or note, “coverage effected on a warehouse to warehouse basis” or words of similar effect, is acceptable.”
In other words; an insurance document that indicates that cover is effected on a warehouse-to-warehouse basis is acceptable even if it is dated later than the date of shipment.
During the ISBP revision, the issue was debated, and the ISBP 745 Drafting Group chose to seek advise from the insurance industry.
From this we learned that the inclusion of a transit clause does not necessarily backdate the commencement of cover.
For example, if the goods leave the warehouse on 1 September and are shipped by vessel on 3 September, an insurance policy incorporating Institute Cargo Clauses (A) issued on 4
September will NOT backdate cover to 1 September unless other provisions show that was clearly intended.
For that reason ISBP 745, paragraph K10(c) now reads as follows:
An insurance document that indicates coverage has been effected from “warehouse-to-warehouse” or words of similar effect, and is dated after the date of shipment, does not indicate that coverage was effective from a date not later than the date of shipment.
So as of now an insurance document that is dated later than the date of shipment is NOT acceptable even if it indicates that cover is effected on a warehouse-to-warehouse basis.
Of course if the insurance document indicates a date as to when the cover is effective, and that date is no later than the date of shipment, then the document is acceptable.
ICC Opinion R313 (TA87) versus ISBP 745 paragraph C15
ICC Opinion is fairly old as it dates back to 1998 – and is given under UCP 500.
However, the instalment rule in UCP 600 is similar to the one in UCP 500 – and for that reason the ICC Opinion is still in play. It deals with instalments – and how to define “within given periods.” First a glance at the UCP 600: Article 32 (Instalment Drawings or Shipments) reads:
If a drawing or shipment by instalments within given periods is stipulated in the credit and any instalment is not drawn or shipped within the period allowed for that instalment, the credit ceases to be available for that and any subsequent instalment.
With that article in the back of the head it is of course very important how “a drawing or shipment by instalments within given periods” is defined.
ICC Opinion R313 (TA87) shows (among others) the following scenario:
The LC stipulates a total quantity of shipment of 30,000kgs and mentions the following shipping schedule:
10,000kgs latest on 31 Oct. 1997
10,000kgs latest on 30 Nov. 1997
10,000kgs latest on 31 Dec. 1997
The question is if a series of latest dates is “shipment by instalments within given periods?”
The analysis and conclusion of the ICC Opinions includes the following:
…… While this is not the requested wording that was intended by Article 41, nevertheless, if at least 10,000kgs is not shipped by 31 October the credit would cease to be available for all further shipments. Likewise, if at least 10,000kgs is shipped by 31 October but a total of 20,000kgs is not shipped by 30 November, the credit would cease to be available for any remaining merchandise.
So according to this, a series of latest dates is considered to be shipment by instalments within given periods.
However ISBP 745 effectively changes this: Paragraph C15(b) includes the following:
When a credit indicates a drawing or shipment schedule by only indicating a number of latest dates, and not given periods (as referred to in paragraph C15 (a) (i)) […] this is not an instalment schedule as envisaged by
UCP 600, and article 32 will not apply…
So as of now shipment within given periods is a sequence of dates or timelines that determine a start and end date for each instalment.
For example, a credit requiring shipment of 100 cars in March and 100 cars in April is an example of two periods of time that start on 1 March and 1 April and end on 31 March and 30 April respectively. In this case UCP 600 article 32 applies.
However a series of latest dates (i.e. ONLY end dates) is not shipment by given periods. In this case article 32 does not apply.
More about the bills of landing and multimodal transport document in my book “UCP 600 Transport Documents” (http://www.remburs.com/UCP%20600.htm)
More about warehouse-to-warehouse and the transit clause in my article “The Transit Clause - A journey from fire alarms to insurance technique and practice” published in “LC Monitor September/October 2005 Volume 7, Issue 5” and my book “From Beginning to Beginning – Trade Finance Articles from 2003 to 2011.” (http://www.kimsindberg.com/beginningtobegin.html)
More about UCP 600 article 32 and instalments in my article ”The ambiguities in UCP article 32” (DCInsight – Vol. 8 No. 3 July – September 2012).
Take care of each other and the LC!
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