Five queries were received for discussion at the ICC Banking Commission meeting which was held virtually in October 2020. TA.905 was withdrawn. All have been approved.
TA.903rev - presentation of an AWB on two separate sheets
Under a documentary credit subject to UCP 600, the beneficiary presented an air waybill (AWB) on two separate pages, both printed single-sided. The 2nd page contained the terms and conditions.
In the view of the issuing bank, this constituted a discrepancy because the AWB (considered by them to be the 1stpage) did not show the terms and conditions of carriage. Although the AWB (1st page) included a reference to an addendum via addition of the wording ‘subject to the conditions of contract on the addendum hereof', the issuing bank stated that there was no identifier to connect the two pages.
The analysis noted that reference to an addendum cannot be ignored. It was additionally stated that whilst an ‘addendum' is not specifically cited in ISBP 745, addendums are routine documents which clearly fall under the definition of ‘another source' as detailed in UCP 600 sub-article 23 (a) (vi).
Bearing in mind that the AWB (1st page) made reference to another source which was, in this case, an addendum, the ‘2nd page' is considered to be acceptable. The stated wording on the 1st page, ‘subject to the conditions of contract on the addendum hereof', also provides sufficient evidence of an ‘internal cross reference' as required by ISBP 745 paragraph A24.
It was concluded that no discrepancy existed.
TA.904rev - do previous waivers continue to apply for future presentations under documentary credits?
A large number of documentary credits were issued subject to UCP 600 which, at a later date, resulted in frequent discrepant presentations. In the majority of cases, the applicant accepted the discrepancies and the issuing bank honoured.
In a minority of the cases, with similar discrepancies, the issuing bank refused the documents. It would appear that such refusals were made in accordance with UCP 600 article 16.
In any event, it was the viewpoint of the beneficiary that no discrepancies existed, merely inconsistencies based upon the fact that the credits covered Bonded Warehouse Transactions (BWT). They further argued that, in view of the fact similar discrepancies had been accepted previously by the issuing bank, then this should create a precedent for accepting all such discrepancies in comparable presentations.
As stated in the analysis, presentations under credits must be viewed as separate and independent. As such, there is no basis under UCP 600 for historical precedent to be applied to presentations.
With regard to a further question as to whether or not a bank can consider issues under credits based upon a BWT as inconsistencies rather discrepancies, it was concluded that it cannot be expected that such transaction types would fall under international standard banking practice. In any event, it falls under the responsibility of the beneficiary to ensure that any conflict of data should be reflected as being acceptable under the terms and conditions of the credit.
TA.906rev - lack of clarification regarding acceptance of documents by the issuing bank
Documents were presented under a documentary credit subject to UCP 600 available by deferred payment. Although the issuing bank did not provide any notice of compliance or non-compliance as required by UCP 600, the confirming bank considered the documents to be compliant and expected payment on maturity. Non-provision of any notice precludes the issuing bank from claiming that the documents do not constitute a complying presentation.
Two days prior to maturity, the issuing bank stated that they could not honour, owing to the accounts of the applicant being frozen due to a ‘justice decision'.
The ICC has consistently indicated that whilst banks cannot ignore court injunctions, they should seek to have such injunctions lifted. Under the circumstances of this query, the ‘justice decision' was considered to be the equivalent of a court injunction.
However, it was unclear if the ‘justice decision' only prevented the issuing bank from debiting the applicants account, not from honouring under the credit.
As such, it was concluded that the issuing bank must honour if this was the case.
TA.907rev - recovery of funds from a counter guarantor
A guarantor received complying presentations under a number of guarantees subject to URDG 758. As a result, it made equivalent demands under the reciprocal counter-guarantees.
The counter-guarantor treated the guarantor's demands as compliant and indicated that payment would be made. However, on the same day, it sent a further message that payment would be delayed until a few days later owing to the operating area indicating that payment would be made the next day and then, by a further message, delayed until 2 working days later. However, later that day a further message was sent stating that no payment would be made due to ‘payment restriction from authorities.' This contravenes URDG 758 sub-article 20 (b), which states that when a demand is determined to be complying, then it must be paid.
Furthermore, the content of the ‘payment restriction' was entirely unclear, and there was no evidence that it prevented the counter-guarantor from paying under the counter-guarantees, or whether it solely related to debiting the account of the applicant.
It was concluded that provided the ‘payment restriction' did not prevent the counter-guarantor from paying complying demands under the counter-guarantees, then it is obligated to pay.
If payment is prevented then, as established by precedent in previous ICC Opinions, the counter-guarantor should seek lifting of the ‘payment restriction'.
TA.908rev - terms and conditions of an insurance document
An issuing bank refused to honour a presentation under a credit subject to UCP 600, due to its opinion that the presented insurance policy was not compliant.
Such refusal was based upon the premise that the insurance policy included a clause that restricted any subsequent claims, thereby contravening UCP 600 sub-article 28 (e) which reflects that insurance cover must be effective from a date no later than the date of shipment.
It was concluded that it was evidently clear that the insurance policy was effective from the date of shipment, and that the added clause had no detrimental impact upon cover.
Accordingly, the refusal of the issuing bank was invalid.