New ICC Opinions – New Issuing Bank Craziness
The ICC
Banking Commission have circulated a new bundle of Draft ICC Opinions to be
discussed (and I guess – approved) at the meeting to be held next month in Vienna.
The overall
impression I am left with after having read through all of them is that I feel totally
provoked! Provoked about the acts of issuing banks. There are 6 new Draft
Opinions. One is TA786rev – which was held over from the meeting in Lisbon. One
is an open question about the signing of a bill of lading … and then there are
4 (i.e. 67%) that display real cases where the issuing bank clearly has lost
its mind! Here is a short summary of these 4 cases. You may guess the answer
yourself:
TA.787
The LC
included the following requirement:
“B/L
presented in incomplete number of page is not acceptable”
Now – what
in earth does that mean?
I guess the
nominated bank had the same question, but found the requirement too silly and
did not bother think more about it. That was a mistake – because when receiving
the documents, the issuing banks refused citing the following discrepancy:
“Bill of
lading presented in incomplete number of page”
Kindly
enough they explained what they mean:
“Full set
charter party bill of lading presented has indicated “Page 01” at the reverse
side of the B/L but the front page did not indicate “Page 02” to declare it was
the 2nd page of the B/L.”
I bet they
did not see that one coming!
Of course
both the requirement is crazy … and the refusal is an insult to the LC
instrument – to the beneficiary and not least to the nominated bank!
This is the
first “bundle” of ICC Opinions that has been given by the 3 newly appointed ICC
Technical Advisers – and I admire their answer to this questions. They calmly
explain how many bills of lading are issued with only one side numbered.
I am not
sure I could have done the same.
TA788
This is
actually an interesting – and unfortunate case. The LC covers a shipment of
coal. During the loading the vessel was arrested – and the goods could not be
unloaded.
Consequently
a bill of lading both showed “clean on board 18 February 2013” and “vessel
under arrest 18 February 2013” was presented.
So what to
do? Refuse of course! But on what ground? This one:
“Bill of
Lading is not clean. It bears the clause as follows: Vessel under arrest 18
February 2013”
I
understand fully that the desire to pay is not huge – but seriously? B/L not
clean because the vessel is arrested is really imaginative!
TA789
The next
one included the following requirement:
“Documents
must be presented not later than 10 calendar days after credit issuance date”
Sounds straightforward
right? However – when the documents reached the issuing bank, they were REFUSED
… followed by this discrepancy:
“Presented
later than 21 days after the date of shipment”
Where did
that come from? The LC said 10 days after credit ISSUANCE date??? The Issuing
bank argued that BOTH the LC requirement AND UCP 600 article 14(c) applies ….
Hmmm – a bold and really far out interpretation! How can a bank insert a really
unusual requirement that clearly changes a UCP 600 rule – and then refuse based
on the rule they have modified themselves.
That is
really bad practice!
TA790:
The next
one is probably the one that provoked me the most. There are two issues:
Issue 1:
A Standby
LC included the following requirement:
Quote
In case of
the documents show a shipment by vessel, a photocopy of original bill of lading
must be presented with the other documents.
The
photocopy of bill of lading will be accepted by us as presented except if not
complying with the next two conditions:
1. in case
of sea transport, the transport document must indicate IMO ship number of
carrying vessel.
2. shipment
by a shipping co and/or by ship under sanctions US/EU/UN are forbidden
Unquote
And guess
what. The presentation was REFUSED citing the following discrepancy:
“Presentation
of B/L used with charter party, not foreseen in the SBLC terms (as per
paragraph 115 of ISBP)”
So what
they say is that there can be only two reasons for refusing the B/L … and then
when the B/L is presented … they choose a third discrepancy!
Really
nice! Good style!
This
refusal is wrong for so many reasons …
Issue 2:
For the
same case I want to highlight one of the mentioned requirements in the LC. This
one:
“Shipment
by a shipping co and/or by ship under sanctions US/EU/UN are forbidden”
ICCs “Guidance
Paper on the Use of Sanction Clauses for Trade Related Products (e.g. Letters
of Credit, Documentary Collections and Guarantees) subject to ICC Rules”
includes the following:
Where sanctions are applicable, banks are
compelled to comply with them in accordance with the applicable national law or
regulation in the jurisdictions in which they operate. International rules of
practice do not address how sanctions should be treated or their consequences
under the rules.
ICC Opinion
TA.752rev3 includes the following:
Any disputes on the application of the
particular sanctions by the confirming bank or its relevant activity should be
submitted to the competent court.
These two
statements clearly illustrate that the issue of sanctions are separate from (in
this case) UCP 600. Adding a sanction text this way – i.e. as a requirement
under the LC may have severe consequences. Bear in mind that the fact that a
named vessel is on a sanction list does not BY ITSELF mean that an
issuing/confirming bank is prohibited from fulfilling its obligation under the LC.
When the
sanction text becomes a requirement under the LC, the issuing bank can simply
refuse the presentation according to article 16 of the UCP 600, regardless if
there are in fact sanctions in force prohibiting the bank to pay under that particular
transaction.
For this
particular case it is even more troublesome since it is a presentation under a
standby LC and shipment has been made long time ago. The vessel may be added to
a sanction list long after goods are delivered to the consignee.
Adding such
requirement to the LC is simply bad banking practice – and if I were the
beneficiary I would never act under such LC….
I must
admit that after reading these new ICC Draft Opinions I am in a really bad
mood. How are things ever to get better – when issuing banks treat the LC and
LC instrument with such total and utterly DISRESPECT!
I normally end
my blog posts by saying: “take care of each other and the LC!”
Obviously
that is a waste of time. Just like revising UCP and ISBP is obviously a waste
of time … because no ICC publication can cope with or cure such total and
utterly CRAZYNESS!
Shame on
you issuing banks represented in the above mentioned ICC Draft Opinions.
Best
regards
Kim