ICC Banking Commission meeting in retrospect – part 3

The art of refusing - and arrest

The LC banks demand a lot from their customers. Making a complying presentation is not easy! There is however one phase of the LC process where there are huge demands on the banks – namely when they are refusing a presentation. Such refusal must be according to UCP 600 article 16 i.e.:

* The refusal must be in the form of a single notice (i.e. one) to the presenter (article 16(c)).

* The notice of refusal must state that the bank is refusing to honour or negotiate (article 16(c) (i)) as the case may be.

* The notice of refusal must state each discrepancy (article 16(c) (ii). (General statements such as ‘various discrepancies’ is not sufficient, Likewise the wording of each discrepancy must be precise. For example a wording like ‘Invoice not as per LC’ is not sufficient, while ‘Description of goods in the invoice does not correspond with goods description in the credit’ is.)

* The notice of refusal must state the disposal of the documents (article 16(c) (iii)), i.e., what the bank is doing with the documents.

There are four options namely the following:

And the consequence of not acting in accordance with the above is severe (article 16(f)):


If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation.


I came to think about this when I read the ICC Opinions that came out of the recent meeting in the ICC Banking Commission. One of them (TA788rev) is a long and troublesome story of a vessel being arrested before all the goods are loaded on board – and it is not possible to unload the goods at the load port.

However the core question is really simple:

The presentation under the LC was refused citing the following discrepancy:

“Bill of Lading is not clean. It bears the clause as follows: Vessel under arrest 18 February 2013”

Is that a valid discrepancy? Somehow it is not hard to conclude that it is not. Whether or not a transport document is clean will depend on a statement on the document regarding the goods or the packaging of the goods. So it is clear that the discrepancy is not correct: the fact that the vessel is under arrest does not render the bill of lading unclean.

The Analysis correctly states that:

“On the basis of the transport document, there is no indication that the goods or their packaging were defective. Accordingly, the transport document was compliant and the presentation must be honoured.”

It however goes on to state that:

“Arrest of a vessel, and any subsequent obligation or liability arising out of such arrest, is a matter of law and outside the remit of UCP 600.”

Of course it is correct that the issue of arrest is “outside” the UCP 600 – however please consider the case a bit. I guess most people would agree that the result of an arrest is that the buyer cannot get hold of the goods.

Now can you think of a similar situation where the fact that the buyer cannot get hold of the goods actually constitutes a discrepancy?

Hmm – I come to think of (as an example) ISBP 745 paragraph G26 which reads:

“A charter party bill of lading is not to expressly state that goods covered by that charter party bill of lading will only be released upon its surrender together with one or more other charter party bills of lading, unless all of the referenced charter party bills of lading form part of the same presentation under the same credit.

For example, “[Cargo XXXX] is covered by B/L No. YYY and ZZZ, and can only be released to a single merchant upon presentation of all charter party bills of lading of that merchant” is considered to be an express statement that one or more other charter party bills of lading, related to the referenced cargo, must be surrendered prior to the goods being released.”

Here is a situation where (in this case) a text on a CPBL to the effect that the buyer cannot get the goods will render the document discrepant.

So – and this is just a thought – if the reason to refuse had been better thought through – thereby better worded, would the result have been different?

For example what it the refusal message had stated:

“Bill of Lading includes the following statement: “Vessel under arrest 18 February 2013,” which means that the applicant in unable to get access to the goods”

Would that have changed things? I think there is a fair chance it would. What do you think?

Also – what has puzzled me is that such bill of lading is issued in the first place. How can such be issued? It beats me. Any good suggestions?

Thanks in advance and remember to take care of each other and the LC.

Best regards


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LCViews - ICC Banking Commission meeting in retrospect – part 3