ICC Opinion TA786 Revisited


In a previous blog post I discussed Draft ICC Opinion TA786 (“Commercial Weight” the universal LC challenge / http://www.lcviews.com/index.php?page_id68).

 

It is the one where the price calculation is based upon the commercial weight – rather than the net weight.

 

The Draft Opinion was part of the Opinions discussed at the meeting in the ICC Banking Commission in Lisbon earlier this year. After the discussion it was held over for further comment by the national committees. Consequently it was circulated to the national committees asking their comments latest 1 July 2013. After this date it was expected that a “final” version was circulated. This has however not been the case. Instead it is now part of the bundle of Draft Opinions to be discussed this October at the ICC Banking Commission Meeting in Vienna. The (I assume still “Draft” – still to be re-discussed) Opinion has been re-written – but as such the conclusion has not been changed: It is acceptable that the price calculation is based on the commercial weight – where the LC does not indicate the basis for the calculation. What is interesting is a new paragraph in the Analysis – which I need to quote:

 

Quote

The key issue is that this query refers to shipment of fiber. In the fiber industry, commercial weight is an understood term. Whilst it would have been preferable for this to be stated in the credit, it does not detract from the fact that “commercial weight” is an acceptable term for the described goods. There is no conflict with the net and gross weights that appear on other documents.

Unquote

 

What seems to be very troublesome (and I think regardless if you agree or disagree to the conclusion) is that it is a “key issue” that the query refers to fiber.

As such it makes sense to explain the commercial reason for using a different weight than the net weight. When the specific commodity becomes a “key issue” in terms of determining compliance of the commercial invoice, it creates an expectation that the document checker has deep knowledge about all commodities mentioned in LCs, and that compliance of the document may depend on the commodity – and the specific practice related to the industry working with that commodity, regardless if this is reflected in the LC. This of course is not in line with the UCP 600 where it is clearly stated that banks deal with documents and not with goods (article 5).

The conclusion must be based on the provisions of the UCP 600 alone. In this case article 14(d).

 

The part quoted above is fundamentally changing the basis for examining documents according to the UCP 600. I think this is not the intention. My best guess is that the intention is to “balance” the comments received from the national committees. If it had been a “clear” answer from the national committees, surely a final version had been circulated (just as was the case with ICC Opinion TA784). So this is an attempt to say that this is the answer, but it only relates to this specific case with these specific details.

 

So although I acknowledge the need to balance this, I consider it a dangerous path, and I surely hope that this will be changed in the final version. 

 

Take care of each other and the LC - and have a great weekend.

 

Kim

 

 



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