New ICC Opinions – New Issuing Bank Craziness
The ICC Banking Commission have circulated a new bundle of Draft ICC Opinions to be discussed (and I guess – approved) at the meeting to be held next month in Vienna.
The overall impression I am left with after having read through all of them is that I feel totally provoked! Provoked about the acts of issuing banks. There are 6 new Draft Opinions. One is TA786rev – which was held over from the meeting in Lisbon. One is an open question about the signing of a bill of lading … and then there are 4 (i.e. 67%) that display real cases where the issuing bank clearly has lost its mind! Here is a short summary of these 4 cases. You may guess the answer yourself:
The LC included the following requirement:
“B/L presented in incomplete number of page is not acceptable”
Now – what in earth does that mean?
I guess the nominated bank had the same question, but found the requirement too silly and did not bother think more about it. That was a mistake – because when receiving the documents, the issuing banks refused citing the following discrepancy:
“Bill of lading presented in incomplete number of page”
Kindly enough they explained what they mean:
“Full set charter party bill of lading presented has indicated “Page 01” at the reverse side of the B/L but the front page did not indicate “Page 02” to declare it was the 2nd page of the B/L.”
I bet they did not see that one coming!
Of course both the requirement is crazy … and the refusal is an insult to the LC instrument – to the beneficiary and not least to the nominated bank!
This is the first “bundle” of ICC Opinions that has been given by the 3 newly appointed ICC Technical Advisers – and I admire their answer to this questions. They calmly explain how many bills of lading are issued with only one side numbered.
I am not sure I could have done the same.
This is actually an interesting – and unfortunate case. The LC covers a shipment of coal. During the loading the vessel was arrested – and the goods could not be unloaded.
Consequently a bill of lading both showed “clean on board 18 February 2013” and “vessel under arrest 18 February 2013” was presented.
So what to do? Refuse of course! But on what ground? This one:
“Bill of Lading is not clean. It bears the clause as follows: Vessel under arrest 18 February 2013”
I understand fully that the desire to pay is not huge – but seriously? B/L not clean because the vessel is arrested is really imaginative!
The next one included the following requirement:
“Documents must be presented not later than 10 calendar days after credit issuance date”
Sounds straightforward right? However – when the documents reached the issuing bank, they were REFUSED … followed by this discrepancy:
“Presented later than 21 days after the date of shipment”
Where did that come from? The LC said 10 days after credit ISSUANCE date??? The Issuing bank argued that BOTH the LC requirement AND UCP 600 article 14(c) applies …. Hmmm – a bold and really far out interpretation! How can a bank insert a really unusual requirement that clearly changes a UCP 600 rule – and then refuse based on the rule they have modified themselves.
That is really bad practice!
The next one is probably the one that provoked me the most. There are two issues:
A Standby LC included the following requirement:
In case of the documents show a shipment by vessel, a photocopy of original bill of lading must be presented with the other documents.
The photocopy of bill of lading will be accepted by us as presented except if not complying with the next two conditions:
1. in case of sea transport, the transport document must indicate IMO ship number of carrying vessel.
2. shipment by a shipping co and/or by ship under sanctions US/EU/UN are forbidden
And guess what. The presentation was REFUSED citing the following discrepancy:
“Presentation of B/L used with charter party, not foreseen in the SBLC terms (as per paragraph 115 of ISBP)”
So what they say is that there can be only two reasons for refusing the B/L … and then when the B/L is presented … they choose a third discrepancy!
Really nice! Good style!
This refusal is wrong for so many reasons …
For the same case I want to highlight one of the mentioned requirements in the LC. This one:
“Shipment by a shipping co and/or by ship under sanctions US/EU/UN are forbidden”
ICCs “Guidance Paper on the Use of Sanction Clauses for Trade Related Products (e.g. Letters of Credit, Documentary Collections and Guarantees) subject to ICC Rules” includes the following:
Where sanctions are applicable, banks are compelled to comply with them in accordance with the applicable national law or regulation in the jurisdictions in which they operate. International rules of practice do not address how sanctions should be treated or their consequences under the rules.
ICC Opinion TA.752rev3 includes the following:
Any disputes on the application of the particular sanctions by the confirming bank or its relevant activity should be submitted to the competent court.
These two statements clearly illustrate that the issue of sanctions are separate from (in this case) UCP 600. Adding a sanction text this way – i.e. as a requirement under the LC may have severe consequences. Bear in mind that the fact that a named vessel is on a sanction list does not BY ITSELF mean that an issuing/confirming bank is prohibited from fulfilling its obligation under the LC.
When the sanction text becomes a requirement under the LC, the issuing bank can simply refuse the presentation according to article 16 of the UCP 600, regardless if there are in fact sanctions in force prohibiting the bank to pay under that particular transaction.
For this particular case it is even more troublesome since it is a presentation under a standby LC and shipment has been made long time ago. The vessel may be added to a sanction list long after goods are delivered to the consignee.
Adding such requirement to the LC is simply bad banking practice – and if I were the beneficiary I would never act under such LC….
I must admit that after reading these new ICC Draft Opinions I am in a really bad mood. How are things ever to get better – when issuing banks treat the LC and LC instrument with such total and utterly DISRESPECT!
I normally end my blog posts by saying: “take care of each other and the LC!”
Obviously that is a waste of time. Just like revising UCP and ISBP is obviously a waste of time … because no ICC publication can cope with or cure such total and utterly CRAZYNESS!
Shame on you issuing banks represented in the above mentioned ICC Draft Opinions.
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