The final Tbilisi ICC Opinions are out
I am really happy to still be able to write the headline in plural. As has been reported in a previous blog post, the number of ICC Opinions has been declining the last couple of meetings; and the “bundle” for the Tbilisi meeting is an all time low: Only two.
In this blog post, however, I will not go into that issue but rather report on the final analysis and conclusion of the two Opinions:
The meeting were held in Tbilisi, Georgia 15-17 October, and the Draft Opinions discussed were:
470/TA.884rev
470/TA.885rev
Here is a short overview:
470/TA.884rev
The outset for the query is an LC indicating the following wording:
“OUR BANK PROCESS TRANSACTIONS IN ACCORDANCE WITH LOCAL AND INTERNATIONAL LAWS AND REGULATIONS, AND RESERVE THE RIGHT TO COMPLY WITH FOREIGN SANCTIONS AS WELL. CONSEQUENTLY DOCUMENTS ISSUED BY OR SHOWING ANY INVOLVEMENT OF PARTIES SANCTIONED BY ANY COMPETENT AUTHORITY OR CONTAINED ANY INFORMATION THEREON MIGHT NOT BE PROCESSED BY OUR BANK AT OUR SOLE DISCRETION AND WITHOUT ANY LIABILITY ON OUR PART.”
The scenario in the Opinion is a refusal made by the issuing bank using the following explanation:
“NOTE THE DOCUMENTS HAVE BEEN REJECTED AND RETURNED TO YOU BY COURIER BECAUSE OF LOCAL AND INTERNATIONAL LAWS AND REGULATIONS AND INTERNAL POLICY FOR AML/CTF AND FOREIGN SANCTIONS IN ACCORDANCE WITH OUR L/C TERMS.”
During the discussion between the presenter and the issuing bank, the issuing bank indicated that the refusal actually related to internal policy and risk concerns, rather than regulatory. In particular the historical whereabouts of the vessel carrying the goods as well as the applicant itself.
The questions – and view of the ICC were as follows:
1: Can an issuing bank refuse a presentation based on internal policies and/or concerns over its applicant?
No; the issuing bank is obligated to honour a complying presentation. If the issuing bank wishes to apply “internal policies” this must be clearly started in the LC.
2: Is the issuing bank precluded from claiming that a complying presentation has not been made; i.e. must honour?
Yes; since the issuing bank has not acted in accordance with UCP 600 article 16 it is precluded from claiming that the documents do not constitute a complying presentation, hence is obligated to honour.
3: If a refusal is due to legal or regulatory reasons, is the bank required to substantiate its refusal?
There are situations where the issuing bank is obligated under the LC, but prohibited to honour based upon established sanction or law. In such case the issuing bank should clarify accordingly. However, applicable law overrides a bank’s obligations.
470/TA.885rev
Details of the query:
LC information:
44F: Port of Discharge: Mundra Port, India
44B: Place of Final Destination: ICD Moradabad India
Required transport document:
“Full set 3/3 original shipped clean on board ocean shipping company’s bill of lading made to order and blank endorsed or made out to order of [issuing bank] marked ‘freight prepaid’ and notify applicant.”
Delivery terms: CIF Mundra Port, India.
Presentation information:
The bill of lading indicated:
Port of Discharge: Mundra Port, India
Place of Delivery: ICD Moradabad India
The bill of lading also indicated the following clause
“Inland haulage charges from Mundra seaport to ICD Moradabad are to buyer’s account. Empty container to return to ICD TKD on consignee’s risk & account.”
Refusal information:
“Bill of lading states that empty containers to return to ICD TKD on consignees risk and account whereas LC states no such condition.“
Is the discrepancy valid?
Additional question:
What would have been the answer had the LC contained the following condition:
“Documents bearing any reference by stamp or otherwise to cost additional to freight charges are not acceptable”?
ICCs answer:
The delivery terms is CIF Mundra. As a consequence, the freight costs under the LC are those up to Mundra port. Any carriage from Mundra to ICD Moradabad is outside the LC and on the buyer’s account. Therefore the reference to costs additional to freight only applies in the context of the freight costs incurred up to CIF Mundra.
On that basis the discrepancy is not valid.
As for the additional question:
The clause "Empty container to return to ICD TKD on consignee's risk & account” relates to an activity which takes place after delivery to the port to where freight has been paid (Mundra) and is, therefore, outside the LC hence on the buyer’s account.
Consequently, even if the LC contained the condition: “Documents bearing any reference by stamp or otherwise to cost additional to freight charges are not acceptable” there would be no discrepancy, and UCP 600 article 26 (c) does not apply.
Already now the reviews of the 2 new ICC Opinions is in lcviews premium; duly linked to the relevant UCP 600 pages.
I hope this helps you – and ask you to take care of yourselves and the LC.
Kind regards
Kim