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Bad / poor practice as reflected in ICC Opinions

11/02/2019

We make no apologies for having frequently referred to the ICC consultation document in respect of a potential revision of UCP 600, in which it was considered not to be appropriate to undertake a revision of UCP 600 but instead to provide a greater understanding of practices.

 

This has been the approach that we have always supported.

 

Evidence of bad practice can be found all over, but it can be interesting to take a look at a few of the examples that have appeared in ICC Opinions.

 

TA795rev

-       When a bank deducts a discrepancy fee on the basis of a ‘discrepancy fee clause' in a credit, it is good banking practice to inform the presenter of any discrepancies that were found in the documents, either in the advice of payment or in a separate communication. In the event it fails to do so, this does not preclude it from providing such information subsequently.

 

TA808rev

-       The instrument as described in the query does not comply with the definition of a credit as stated in UCP 600 article 2 and banks should refrain from issuing such instruments subject to UCP (i.e. reimbursement condition where the issuing bank will reimburse only after receiving funds from the applicant). This is considered to be bad banking practice. A bank handling such a credit as a nominated or transferring bank should inform the beneficiary and second beneficiary in respect of such a clause.

 

TA812rev

-       The inclusion of this clause in a credit indicates a modification of UCP 600 and must be considered as an integral part of the terms and conditions of the credit (i.e. permission to draw under a credit by way of a provisional invoice with a subsequent final invoice indicating whether the balance is due to the beneficiary or the applicant). Absence of a clause clarifying the impact of such modification on UCP 600 is bad banking practice.

 

TA830rev

-       The manner in which Bank B handled the collection and communicated with Bank A cannot be considered to be good banking practice (i.e. not sending any information concerning status of the presentation). Whether their procedure violates the principle of good faith would be considered outside URC. ?

 

TA878rev

-       By allowing the applicant to apparently control the settlement process, the issuing bank has acted contrary to international standard banking practice and, by issuing the credit in such a format, has disregarded the irrevocable and independent nature of the credit.

 

TA879rev2

-       The query indicates that there was a technical flaw in the credit, which is seen as bad practice, in that it was available with the nominated bank by payment and yet, at the same time, indicated that the issuing bank would remit proceeds upon receipt of credit conforming documents.

 

 

 

 

 

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