As we have mentioned previously, whilst majority support was communicated in favour of the content of the draft Opinion, an alternate minority viewpoint was also expressed.
As such, ICC National Committees were asked to provide a final decision on proposed next steps.
To recap, a credit was issued providing for shipment of a cooking range and its spare parts for an amount of XXX (the credit amount). The presented documents included an invoice which displayed three rows under the header ‘Commodity':
The issuing bank refused the presentation stating that ‘free of charge' goods were not allowed by the credit. The nominated bank considered, as the credit did not stipulate a price for the spare parts, that ‘free of charge' spare parts were acceptable under the credit.
It was queried as to whether the discrepancy was valid, and whether an invoice stating goods free of charge was acceptable.
The options given to National Committees were to revert to the initiator recommending withdrawal of the query with a view to inclusion of the issue within a future revision of ISBP, or to accept the majority viewpoint that no discrepancy existed.
This process has now been completed, with the result that the query has been withdrawn.
Bearing this in mind, we are now at liberty to reveal our own strong personal views on this subject and, in the interests of transparency, provide details below.
It had been stated by some respondents that the intended meaning of ISBP 745 paragraph C12 (b) was essentially the same as that of ISBP 645 paragraph 68 (b) and ISBP 681 paragraph 64 (b) and that the language that was added was just to state that it is a discrepancy if goods not called for in the credit are shipped even if the goods are of the same type as goods that are called for in the credit In their view, the intent was to state that it is a discrepancy any time goods not called for in the credit are shipped - the phrase "even when...stated to be free of charge" was actually incidental
This emphatically does not reflect our understanding and does not mirror the intended meaning. Having both been involved in the ISBP 745 drafting group, one as Chair, we wish to point out that no phrase is incidental - all wording is purposeful and included for a reason.
During the drafting process of ISBP 745, and thereafter, our view was, and has been ever since, that no free of charge goods are allowed.
It should be emphasised that ISBP 745 differed from the previous versions of ISBP. Previous versions referred to "merchandise not called for in the credit even if stated to be free of charge" - it was very narrow in approach.
As approved by ICC National Committees, a significant change was introduced with ISBP 745 Paragraph C12 (b).
Paraphrasing ISBP 745 Paragraph C12 (b), the text distinctly and incontestably states that: "An invoice is not to include additional quantities of goods as required by the credit which are stated to be free of charge."
The existence of an extra (3rd) row in the goods description of the invoice, despite covering goods as required by the credit, can only reflect that this row is in respect of "additional quantities of goods".
The 3rd row of the goods description in the invoice clearly highlights that these particular spare parts have been provided "free of charge"
As a result, the invoice does include additional quantities of goods as required by the credit which are stated to be free of charge.
A further concern arises in the amount of "Free of Charge" goods - should certain quantities of free of charge goods be ringing alarm bells? Would this be a "red flag"?
Issues such as avoidance of customs duties, customs fraud, undervaluation, and
false invoices need to be considered. In other words, where is the line drawn on the quantity of acceptable free of charge goods?
It is our view, and always has been, that unless allowed by the credit, free of charge goods are not acceptable.