ICC Banking Commission Opinions October 2023 – Deep-Dive #3
This is the third 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 ICC Opinion TA933rev.
The query relates to an LC that requires a presentation period of 21 days after the date of shipment.
For this query the negotiating bank’s cover letter was dated 28 March 2023. As part of the presentation was a bill of lading – and the date of shipment according to the bill of lading was 6 March 2023. If you want to, you can do the math, or I can tell you the result: There are 22 days between the date of the negotiating bank’s covering letter and the date of shipment. And as you know, 22 days is more than 21 days.
And then (you guessed it): Refused!
It should be mentioned that in the cover letter from the negotiating bank, it was stated:
“We hereby certify that all terms and conditions of this credit have been complied with and that we endorsed the drawn amount on the reverse of the credit”.
In the query, reference is made to UCP 600 Article 29 which basically says that if a presentation is made on the first following banking day, the negotiating bank must provide the issuing bank with a statement on its covering schedule that the presentation was made within the time limits extended in accordance with sub-article 29 (a).
On that basis, the question raised is if the issuing bank can consider this as late presentation?
I am sure you can guess the answer, but let’s look a bit at the Analysis. It references two ICC Opinions on the issue; both issued subject to UCP 500.
One is ICC Opinion R373. This ICC Opinion concludes that in a case like the one we discuss here (i.e., the cover letter from the negotiating bank is dated after the latest date of presentation/expiry) it is sufficient with a statement certifying that the terms and conditions have been complied with to evidence a timely presentation.
The other is ICC Opinion R481, that takes ICC Opinion R373 one step further, by adding that even if the cover letter from the negotiating bank does not include a statement certifying that the terms and conditions have been complied with, then the negotiating bank is allowed to subsequently confirm that the documents were presented within the prescribed time limits.
I am sure you can see where this is going: The refusal from the issuing bank is not correct. There even is published practice documenting this. It is appreciated that above ICC Opinions are issued subject to UCP 500. In that respect it is important to note that there were no substantial changes from UCP 500 article 44(a) to UCP 600 article 29(a). In general, UCP 600 article 29 restates and simplifies UCP 500 article 44. *)
Regardless of the above and UCP 600 article 14(b), it is so that “...the issuing bank shall each have a maximum of five banking days following the day of presentation to determine if a presentation is complying”.
This means that even if the beneficiary made the presentation to the negotiating bank on the latest day of presentation/expiry (in this case 27 March 2023), the negotiation bank would not be required to forward the documents (and date the cover letter) on that same day. It would be natural – even logical – that the cover letter is dated a couple of days after the latest day of presentation/expiry, i.e., allowing due time to examine the documents and determine if they constitute a complying presentation….
So, once again we are left with a spurious discrepancy, that should never have been raised in the first place. To repeat my previous blog post:
“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.”
Kind regards
Kim
*) Professor James E. Byrne, ”The Comparison of UCP600 & UCP500”, page 221.
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