ICC Banking Commission Opinions October 2023 – Deep-Dive #2
This is the second of five blog posts where I will deep-dive into the Opinions approved by the ICC Banking Commission on their October 2023 meeting.
This blog post will take a closer look at the second part of ICC Opinion TA931rev.
The query relates to a required carrier/agent certificate. The query looks somewhat complex, but in reality it is not.
The query refers to both the original requirement in the LC – as well as a wording that was in a subsequent requirement.
The presentation contained two originals of the required certificates. However, one of those were in the extra set of documents for the issuing bank's records.
The presentation was refused stating that the certificate was “short of one original”.
One issue that can be discussed is whether or not the requirement for the certificate is in fact two requirements. The Analysis reads “The beneficiary had provided two certificates, one designed to address the original credit certificate statements and the other to address the amendment’s certificate statements …” This would suggest that for the original requirement only one certificate was required – but for the amendments requirement in fact two certificates were required.
Here ISBP 821 paragraph A40 is also relevant in this context. A40 basically says that documents required by an LC are to be presented as separate documents. Therefore, for the requirement in the original LC only one original would be required. However, for the purpose of the amendment’s certificate statements two originals (regardless if identical) are required to be presented.
Of course, in this case there were actually two originals presented – the issuing bank just did not realise it untill they were informed about it.
This leads to the other issue that was discussed at the ICC Banking Commission meeting: Was the amendment approved based on the presentation of two original certificates. This question was not part of the query – and therefore not answered in the Opinion. The basis for the question is UCP 600 article 10(c); in particular this part: “… If the beneficiary fails to give such notification, a presentation that complies with the credit and to any not yet accepted amendment will be deemed to be notification of acceptance by the beneficiary of such amendment….” The main question is if – by presenting two originals the beneficiary have “used” the amendment. Or rather, ICC Opinions R634/TA638rev and R795/TA820rev4 state that a presentation that is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary. Interesting discussion that unfortunately was not answered by the Opinion.
In any case, the view of the ICC Banking Commission was that this was not deemed a valid discrepancy. That is a good call.
Again, the not-so-good-call was to refuse the presentation based on this. It is acknowledged that the bank did not realise that they actually had received two originals – and thought that they had received only one. However, only with one original the should have accepted the document on the basis of the requirement in the original LC!
I am afraid of repeating myself, but making such refusal is a problem. It is a problem because the LC is a payment instrument but also because raising discrepancies has a line of consequences: Banks must spend time in arguing about this (and today time is money). Most likely – payment will be delayed. It may also trigger increased fees e.g., discrepancy fees. It also supports the argument that LCs are costly, time consuming and that it is practically impossible to comply with the terms and conditions of the LC.
This is therefore not taking good care of the LC. It is the opposite and let’s encourage all to discourage raising such discrepancies.
For the sake of good order, this refusal was part of the same presentation as the refusal described in the blog post “ICC Banking Commission Opinions October 2023 – Deep-Dive #1”; so of course only one refusal. Still, both of the discrepancies should never have been raised.
Kind regards
Kim
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