1126rev November 2009 Consolidated Final Opinions

Subject: Document 470/TA.698rev (UCP 600)
Dear Sirs,
Ines Obradovic
ICC Croatia Secretariat
Rooseveltov trg 2
10000 Zagreb
Croatia
3 December 2009
We refer to our letter dated 10 August 2009 in respect of your query regarding
UCP 600.Please find below the opinion of the Banking Commission.
QUOTE
Bank A issued an L/C via SWIFT MT700 and advised it through Bank B in the
beneficiary’s country with the instruction that it “May Add” confirmation. L/C was
available with Bank B by deferred payment.
The day after issuing the L/C, Bank A sent a SWIFT MT799 message to Bank B
stating “Pls read correctly item 2 and 3 under documents required in filed 46A: ……..
” and “Pls add also item 4 under docs required: …….. ”. The requirements for items
2 and 3 were restated in full. Bank B acknowledged, by SWIFT MT730, receipt of this
MT799 message with the following notice: “We have contacted beneficiary about
confirmation and we'll revert a.s.a.p.” Subsequently, Bank B has not advised Bank A
about the fate of confirmation.
Fifteen days later, Bank A sent another amendment by SWIFT MT707
extending the shipment date and expiry date of the L/C. Bank B also acknowledged
receipt of this message by MT730.
When forwarding documents to Bank A, in utilisation of the L/C, Bank B noted
on its cover letter that the documents comply with the credit terms and that they will
pay the beneficiary at maturity. Documents were presented to Bank B within L/C
validity.
By a review of the documents, Bank A found discrepancies – additional
document as required by the MT799 was missing, transport document was not
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marked as required in the MT799, taking over protocol showed delivery term FCA
instead of EXW named place as it was required in original MT700.
Bank A sent an advice of refusal by SWIFT MT734 referring to sub-article 16 (c)
(iii) (b) of UCP 600, stating discrepancies which all except one related to the
amendment sent by MT 799.
After L/C expiration, Bank A contacted Bank B to forward documents required
by MT799 in order for applicant to resolve customs formalities and clearing of the
goods. Bank B forwarded one of the required documents one month later.
After receipt of documents, and having not received a waiver from the
applicant in a reasonable time, Bank A returned the documents to Bank B.
Bank B contested, for the first time, Bank A’s advice of refusal which was sent
two months earlier, on the grounds that Bank`s A MT799 cannot be considered as an
amendment and that it was not accepted by the beneficiary. Therefore, in Bank B’s
opinion the presented documents should have been examined against the terms and
conditions stated in the MT700 and the amendment sent by MT707, and that they
should be considered as a compliant presentation against which Bank A should pay.
NATIONAL COMMITTEE ANALYSIS
1. Could the MT799 be construed to be an amendment message?
Sub-article 11 (a) of UCP 600 states “An authenticated teletransmission of a
credit or amendment will be deemed to be the operative credit or amendment, and
any subsequent mail confirmation shall be disregarded.”
2. Could Bank B, being the nominated bank under the L/C, and asked by Bank A to
add its confirmation, be considered a confirming bank as it failed to advise Bank
A that it was not prepared to add its confirmation as required by sub-article 8 (d)
of UCP 600? Bank B, on its covering letter accompanying the documents, states
that it will pay beneficiary at maturity date thus expressing its undertaking
towards the beneficiary.
Sub-article 8 (d) of UCP 600 states “If a bank is authorized or requested by the
issuing bank to confirm a credit but is not prepared to do so, it must inform the
issuing bank without delay and may advise the credit without confirmation.”
3. Was Bank B, at the moment of forwarding documents to Bank A, obliged to
advise Bank A of the amendments which have been rejected by the beneficiary?
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Also, in accordance with which terms and conditions it has performed the
examination of documents, especially having in mind that there were more than
one amendment under the L/C?
Sub-article 10 (c) of UCP 600 states ''The terms and conditions of the original
credit (or a credit incorporating previously accepted amendments) will remain in
force for the beneficiary until the beneficiary communicates its acceptance of the
amendment to the bank that advised such amendment, The beneficiary should
give notification of acceptance or rejection of an amendment. If the beneficiary fails
to give such notification, a presentation that complies with the credit and to any not
yet accepted amendment will be deemed to be notification of acceptance by the
beneficiary of such amendment. As of that moment the credit will be amended.''
Sub-article 10 (d) of UCP 600 states ''A bank that advises an amendment
should inform the bank from which it received the amendment of any notification of
acceptance or rejection.''
NATIONAL COMMITTEE CONCLUSION
An MT799 is an authenticated teletransmission and as such it is to be
considered as an operative instrument. Therefore, Bank B must act upon receipt of
the amendment sent by MT799 and advise it to the beneficiary.
Bank B, being a nominated bank and asked by Bank A to add its confirmation
to the L/C, may be considered as confirming bank as it has advised Bank A that it had
contacted beneficiary for confirmation (and thus expressed its willingness to do so, if
the beneficiary asked for it) and has never advised Bank A of its refusal to add
confirmation. Moreover, it has advised Bank A on its covering letter, accompanying
the documents, that it will pay the beneficiary at maturity i.e. that it has undertaken
an obligation towards the beneficiary.
As confirming bank, Bank B was obliged to advise Bank A from which it has
received amendments which amendments have not been accepted by the beneficiary
and also amendments, if any, to which it has not extended its confirmation (subarticle
10 (b) of UCP 600) thus providing information both to the issuing bank and to
the beneficiary as to what terms and conditions will be relevant for checking of
documents in order to ascertain whether the presentation is compliant or not.
Although a confirming and issuing bank must, on the grounds of the documents
alone, conclude whether documents represent a complying presentation, the
confirming bank being in direct contact with the beneficiary and also being
responsible for checking of documents should advise the issuing bank what are the
valid terms and conditions for checking i.e., which amendments have not been
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accepted by the beneficiary, just to be sure that they are on the same page when
checking of documents is performed.
Following the aforesaid, Bank A’s refusal of documents was justified since
Bank B has not acted in accordance with generally accepted rules and practices for
handling of L/Cs, as stated in UCP 600 and, last but not least, all discrepancies stated
by Bank A were not all related to the amendment sent by MT799.
ANALYSIS & CONCLUSION
1. The conclusion of the national committee is supported subject to the following.
Sub-article 7 (b) states “[A]n issuing bank is irrevocably bound to honour as of
the time it issues the credit.” The wording of the MT799 provided the new
wording for documents 2 and 3 plus details of a document not appearing in the
MT700. Based on the wording of the message, it would indicate an amendment to
the original LC terms, that was subject to the consent of the beneficiary and was
to have been advised to the beneficiary in accordance with sub-article 9 (b).
Bank A is obliged to honour a presentation of documents that complies with the
terms and conditions of the original credit; the original credit and MT799; the
original credit, MT799 and MT707; or the original credit, MT707 but not the
MT799. See point 3, regarding acceptance or rejection of the amendments.
Where bank systems permit, they should use the correct SWIFT message type for
the transaction and not the MT799.
2. The conclusion of the national committee is not supported.
The instruction to Bank B, in relation to confirmation, was “May Add”. Such an
instruction allows Bank B to add their confirmation upon a request from the
beneficiary. Such a request need not be forthcoming at the time of advising the
credit and may occur at any time. Sub-article 8 (d) would only be applicable if
Bank B were not willing to consider any request to add confirmation. If they were
awaiting a request from the beneficiary, there is no need for them to advise the
issuing bank of this fact. The credit would have been advised on an unconfirmed
basis pending receipt of a request for confirmation from the beneficiary.
Whether or not Bank B entered into an express communication with the
beneficiary, in accordance with sub-article 12 (a), is of no concern to Bank A and
does not affect the confirmation status of the credit.
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3. The conclusion of the national committee is not supported.
Bank B was under no obligation to inform Bank A of the amendments that had
been accepted or rejected by the beneficiary. In these situations it would be Bank
A that would need to make their own determination from the documents
presented, in accordance with sub-article 10 (c), absent any specific indication of
acceptance or rejection from the beneficiary and/or Bank B. It is unclear as to
whether Bank B received a notification of acceptance or rejection of the
amendments from the beneficiary. Only if they had, would they be required to
send a notification in accordance with sub-article 10 (d).
The opinion(s) rendered on this query reflect the opinion of the ICC
Banking Commission based on the facts under “QUOTE” above.
The reply given is not to be construed as being other than solely for the
benefit of guidance and there should be no legal imputation associated with
the reply offered.
If this query relates to a matter currently under consideration by the
courts, the ICC Banking Commission will refrain from considering it for
adoption as an opinion.
Neither the ICC nor any of its employees, nor any member of the
Banking Commission, including the Chairman, Vice-Chairmen or Technical
Adviser shall be liable to any person for any loss or damage arising out of any
act or omission in connection with the rendered opinion(s).
Yours sincerely,
Thierry Senechal
Policy Manager
Banking Commission
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