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Certified Documentary Credit Specialist Paper

Some of our Exercises are tricky ones and you have to read them carefully and think twice before you finish your answers. For best learning results (if you don’t know the answer at all) or for testing purposes (if you believe that you should know what the correct answer is), please do not click the Model Answer button placed below each question so soon. After you have provided your answer, which you think should be correct, do think twice before you click for the Model Answer. Otherwise you will exclaim: “Oh shiX! I should have given a different answer if I had read the question correctly and had given the issues a little more thoughts”.

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The Good News If you fail in providing good answers for the Exercises, don’t worry! You would still be able to pass the CDCS exam, because our Exercises may be more difficult than those in the CDCS. The examiners of CDCS only wish to check your knowledge on UCP 600, ISP98 and the other ICC Rules. They do not wish to give you a hard time like we do, to push you to the limit, so that you may get a distinction! Our Advices In the CDCS examination, due to fear, anxiety and heavy pressure, you could only perform up to 66% (2/3) of your normal capacity.

That means you would not be able to think so coolly and intelligently for the best answers. And exercises like this would prepare you well in advance for the most difficult part (case studies) of the CDCS examination that would ultimately lead you to a pass, if not an enviable distinction. Here you go. And good luck! Note:  | Question 11 was edited on 19 Jun 2009. | 1. A documentary credit subject to UCP 500 bears a title “Irrevocable Documentary Credit” has a special condition as follows: “This documentary credit will become inoperative upon receipt of a cable to this effect from the issuing bank after issuance. After receipt of such a cable advice, the beneficiary made a presentation nevertheless. The issuing bank sent a refusal notice by SWIFT pointing out a discrepancy as follows: “Documents presented after expiry of the documentary credit render the presentation discrepant. ” Is the issuing bank correct in its refusal? What would be the situation if the same credit is subject to UCP 600? 2. Is the following refusal notice acceptable for a DC subject to UCP 600? “We refuse the documents and have found the following three discrepancies in the presented documents: 1.

The port of discharge in the B/L is not the same as that stated in the DC. 2. Presentation after expiry. 3. Corrections in the certificate of origin are not authenticated by the issuer. ” 3. What is an “unconfirmed letter of credit” under UCP 600? 4. Is it possible that a confirmed letter of credit subject to UCP 600 becomes an unconfirmed letter of credit without the consent of the beneficiary? 5. Is the following refusal notice acceptable for a DC subject to UCP 600? “We have found the following three discrepancies in the presented documents: 4.

The port of discharge in the B/L is not the same as that stated in the DC. 5. Presentation after expiry. 6. Corrections in the certificate of origin are not authenticated by the issuer. Meanwhile we are holding the documents at your disposal and risk. ” 6. An applicant informed the issuing bank that the goods were rubbish and asked the issuing bank to freeze payment under a DC subject to UCP 500/600 due to trade frauds although the documents presented were all compliant. Should the issuing bank follow the instructions from the applicant? 7. Is this refusal notice acceptable for a DC subject to UCP 600? We refuse to pay you due to the following three discrepancies: 7. The commercial invoice does not meet the terms and conditions of the DC. 8. Third party B/L presented. 9. Unclean B/L presented. Meanwhile we are holding the documents at your disposal and risk. ” 8. A DC subject to UCP 500 issued by Bank I was confirmed by Bank C expiring on 1 September 2002. There was no restriction on the presentation. The beneficiary presented the documents to Bank I on 29 August 2002. Is this the best practice? What are the risks? If the DC were subject to UCP 600, would your answer be the same? 9.

A presenting bank had the following messages in its covering letter/schedule dated 24 July 2007 presented against a DC subject to UCP 600. “We have found the following discrepancies in the documents: 10. The port of discharge in the B/L is not the same as that stated in the DC. 11. Presentation after expiry. 12. Corrections in the certificate of origin are not authenticated by the issuer. The documents are now presented for collection. Please approach the applicant for a waiver and give us your authority to negotiate by SWIFT message. ” The issuing bank sent its refusal notice as follows: After consulting the applicant, we determine to refuse the documents due to the three discrepancies with the underlying reasons as stipulated in your covering letter/schedule dated 24 July 2007. Meanwhile, we are holding the documents at your disposal and risk. ” 10. A nominated paying bank sent three refusal notices on the same day under a DC subject to UCP 600. The first notice was sent by fax listing all the discrepancies with reasons; the second notice made by telephone advising payment dishonour and the third notice sent by telex advising that documents were returned to the presenter by local courier.

Is this acceptable? Please state your reasons. 11. UCP 600 article 3 states that: “Branches of a bank in different countries are considered to be separate banks. ” UCP 500 Article 2 states that: “For the purpose of these Articles, branches of a bank in different countries are considered another bank. ” Charles del Busto explained in ICC Publication No. 511 “UCP 500 and 400 Compared” that the underlying reason is because branches of the bank in different countries may be subject to different jurisdictions.

What is legal for the head office of a bank may not be also legal in its branches in different countries. Hong Kong was a British territory before 1 July 1997. After 1 July 1997, Hong Kong became part of the People’s Republic of China (PRC) but it practises “One Country Two Systems” whereby the applicable law in Hong Kong is the Basic Law (Common Law) whereas that of PRC is Civil Law. On 24 July 2007, a documentary credit subject to UCP 600 issued by Bank ABC Beijing Head Office was advised by its branch in Hong Kong.

There were disputes on the discrepancies between the Beneficiary and the Bank ABC Head Office. The Beneficiary’s law firm served a strong letter to Bank ABC Hong Kong Branch showing its intent to sue it in Hong Kong unless payment was made within 14 days. Bank ABC Hong Kong Branch replied as follows: “Due to different jurisdictions between Hong Kong and PRC, we are in fact a different bank according to the provisions of UCP 500 Article 2 (equivalent to UCP 600 article 3), based on the interpretation of Charles del Busto in ICC

Publication No. 511 “UCP 500 and 400 Compared”. Hence as an advising bank we have no payment obligations. Your client, as a beneficiary, should sue our Head Office in Beijing instead. ” Is the defence of Bank ABC Hong Kong Branch correct? 12. The applicant showed to the beneficiary a written undertaking from the issuing bank for its agreement to issue a letter of credit subject to UCP 600. However, due to change in financial position of the applicant, the issuing bank later decided not to do so.

The beneficiary wrote to the issuing bank to force its commitment in writing. Is the beneficiary successful? Please give your reasons. 13. Under which condition that a confirmed letter of credit subject to UCP 600 may become unconfirmed without the consent of the beneficiary? 14. In determination of the compliance of a refusal notice with the UCP 600, should the stipulations of UCP 600 articles 14 and 16 be read separately for (a) document examination for compliance, (b) determination of refusal or acceptance and (c) sending of the refusal notice respectively? 5. One set of Drafts drawn on the drawee bank presented under a documentary credit subject to UCP 600 expiring on 30 August 2007 was accepted on 30 July 2007 for 30 days deferred payment but was unpaid on maturity 30 August 2007. According to UCP 600 article 7 (a) (iv) the beneficiary made a new set of “replacement” Drafts drawing on the issuing bank on 3 September 2007. The issuing bank refused to pay the Drafts because they were drawn and presented after expiry of the DC.

Is the issuing bank correct in its decision? Please state your reasons. 16. An issuing bank sent its refusal notice on the 5th banking day after receipt of the documents presented under UCP 600. In fact a simple set of documents was presented for sales of kitchenware, consisting of a total of 12 pages of documents. Is this refusal notice sent within reasonable time? 17. An issuing bank sent its refusal notice to a presentation under UCP 600 to a presenting bank overseas by courier. Is this acceptable? 18.

Under UCP 600, can a beneficiary, through a presenting bank, have the right to present documents against a confirmed letter of credit directly to the issuing bank? 19. A standby letter of credit subject to UCP 600 was issued to back up an “open account” transaction where payment was made only 30 days after the “shipped on board” date. The standby required presentation of Drafts in duplicate, one Default Statement signed by the Beneficiary, one copy of Commercial Invoice and one copy of “shipped on board” B/L.

It also specified that no presentation could be made until after default in payment. The Issuing Bank sent its Refusal Notice as follows: “We refuse to pay due to the following discrepancy in the B/L: The copy of B/L was presented more than 21 days after shipment, which is against the stipulation in UCP 600 article 14 (c). ” Is the Issuing Bank correct in its refusal decision? 20. For a DC subject to UCP 600, what should the presenting bank advise the beneficiary who asks for direct presentation to the issuing bank, thereby by-passing the confirming bank? 21.

A standby LC issued by Bank I was confirmed by Bank C expiring on 1 September 2002. There was no restriction on the presentation. The beneficiary presented the documents to Bank I on 29 August 2002 but was wrongly dishonoured on 2 September 2002 relying on invalid discrepancies, such as the commercial invoice was not marked “original” whereas the standby LC did not ask for such marking. The documents were returned to the beneficiary that received them on 5 September 2002. The beneficiary presented the same documents without any alteration to the confirming bank on 6 September 2002.

The refusal notice from the confirming bank stated: “We refuse to pay due to presentation made after expiry of the standby LC. Meantime we are holding the documents at your disposal and risk. ” Is the confirming bank right in its refusal under ISP98? 22. Case Study A beneficiary put in its purchase agreement a special condition: “Payment by a confirmed letter of credit” and a “confirmed letter of credit” subject to UCP 600 was advised by the advising bank, which was also the nominated paying bank for at sight payment with reimbursements subject to URR 525 by an independent reimbursing bank.

When the issuing bank in country A was ordered by the local government to freeze payment due to foreign exchange control, the beneficiary presented the compliant documents (later certified by the ICC DOCDEX Decision) to the nominated paying bank in country B, but no payment was made. What are the reasons? 23. A beneficiary made a compliant presentation under a documentary credit subject to UCP 600. The applicant showed to the issuing bank that the same beneficiary had made fraudulent presentation under another documentary credit issued by another bank and instructed the issuing bank not to pay the beneficiary.

The issuing bank did not follow the instruction and paid the beneficiary. The applicant refused to reimburse the issuing bank. Is the applicant right in doing so? Please give your reasons. 24. Is the nominated paying bank in question 10 subject to the sanction under UCP 600 Article 16 (f)? 25. A DC subject to UCP 600 has the following stipulation: “Purchase Contract No. 123456 dated 24 July 2007 attached herewith forms an integral part of this documentary credit. ” Is this stipulation acceptable and what are the risks? 26. Case Study

A documentary credit subject to UCP 600 called for “Full set of 3/3 clean on board original marine/ocean bills of lading evidencing shipment from Houston to Shanghai made out to order and blank endorsed, marked freight prepaid, notifying applicant”. The presented bill of lading, bearing a title of “Mermaid Shipping Company S. A. , Geneva”, was manually signed with a signature chop reading “Carrier – Mermaid Shipping Company S. A. , Geneva”. The “Place and Date of Issue” box contained a statement: “New Orleans – Mermaid Shipping Company (USA) Inc. , 17 July 2007 12:12:22 pm”. Is this bill of lading acceptable?

Please state your reasons. 27. Case Study Upon request by the applicant, the issuing bank finally waived the previously advised valid discrepancy for the first instalment shipment made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three instalment shipments. However, the issuing bank did not clarify whether or not the DC was still valid for subsequent instalment shipments. After a period of time, the beneficiary presented compliant documents for the second instalment shipment made according to the shipping schedule stated in the DC.

The issuing bank denied payment according to UCP 600 article 32. The beneficiary sued the issuing bank for payment dishonour and negligence. I. The expert’s report from the beneficiary states that the confusion is created by the issuing bank that should have clarified in its waiver notice whether or not the DC is still valid for the second and the third instalment shipments. So the issuing bank should bear the serious consequences for its negligence and should effect payment of the second instalment shipment, since the documents are all compliant.

II. The expert’s report from the issuing bank states that: a. There is no stipulation in the UCP 600 that requires the issuing bank to state its intention/decision on the validity of the balanced instalment shipments after waiving the discrepancy in the first instalment shipment. b. Discrepancy and waiver are two separate issues. The wavier cannot change the nature of a discrepancy. A discrepancy always remains a discrepancy, whether being waived or not. c. The discrepancy will trigger the following two consequences: 1.

To dishonour payment according to UCP 600 articles 7, 14 & 16, and 2. To make the DC no more available for all future instalment shipments according to UCP 600 article 32. d. So the wavier only waives the first consequence regarding payment but the second consequence affecting balanced instalment shipments remains unwaived. e. As a result, the issuing bank has no payment obligation for the second and the third instalment shipments. If you were the Judge, what would you adjudicate? Please state the reasons of your judicial decisions. 28.

An Insurance Policy Not Indicating Number of Originals Issued A DC subject to UCP 600 calls for full set of insurance policy but is silent on the number of originals issued. The issuing bank refuses to pay due to the insurance policy presented does not indicate number of originals issued. Is the issuing bank correct in naming this as a discrepancy? 29. Port of Loading Different from DC The DC subject to UCP 600 requires port of discharge to be “Alexandria (Free Zone)” whereas in the “port of discharge” box in the bill of lading, it states only “Alexandria”.

However, the same bill of lading also has information “CFR Alexandria Port Free Zone” appearing in other area. Is the bill of lading discrepant? 30. Signature in a Bill of Lading Not In the Signature Box In a bill of lading presented under a DC subject to UCP 600, the signature box is empty. However, in other area of the same bill of lading, there is a signature of the master with the name and capacity of the master given. Is this bill of lading compliant? 31. An insurance policy is issued on 10 August 2007 and the DC specifies the latest shipment date as 15 August 2007.

The loaded on bard date in the bill of lading is 9 August 2007. Is the insurance policy discrepant under UCP 600? 32. Partial Shipments The DC subject to UCP 600 called for supply of freshly cut logs and prohibited partial shipments. It specified port of loading “Any Malaysian port”. Goods were shipped on the same vessel loading at different ports in Malaysia at different time periods under the same voyage number for the same destination. Different sets of bills of lading and related documents (certificates of inspection etc) were presented under the same DC. The issuing bank refused to pay due to following reasons: I.

Bills of lading show more than one port of loading whereas the DC calls for only one port of loading, namely “Any Malaysia Port” and not “Any Malaysian portS”. II. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC. III. Partial shipments made and this is not allowed in the DC. Is the issuing bank correct in its refusal? 26. Consignee Different from DC Requirement The DC subject to UCP 600 required the Consignee of a negotiable bill of lading made to the order of Party A but the negotiable bill of lading presented was consigned to the order of Party B.

However, there was an endorsement from Party B to the order of Party A on the face of the bill of lading. The issuing bank dishonoured due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy? 27. Reasons for changing the name of consignee as specified in the DC Please state your reasons why the bill of lading is not made out straight to the order of Party A as specified in the DC under the above case “Consignee Different from DC Requirement”? 28. Reimbursement instructions

A DC subject to UCP 600 specified a reimbursement instruction that reads: “Upon receipt of full set of documents in conformity with the letter of credit terms and conditions, we will effect payment as per your instructions”. Compliant presentation was made to the nominated negotiating bank that had given value to the beneficiary and claimed for reimbursements. The documents were however lost in transit by the courier company. The issuing bank refused reimbursement because reimbursement would only be effective “upon receipt of documents” as specified in the reimbursement instruction quoted above.

Is the issuing bank correct in its refusal decision? 29. DC Number missing A DC subject to UCP 600 specified that the DC number must be quoted in all documents presented. The commercial invoice did not quote the DC No. and the issuing bank refused payment. Is the issuing bank correct in its refusal? 30. Documents not consistent In a DC subject to UCP 600, the issuing bank gave a refusal notice that read: “We refuse payment due to following discrepancies: The commercial invoice and the bill of lading are not consistent with each other. Meanwhile we hold documents at your risk and disposal”.

Is this refusal notice valid? 31. Documents not consistent In a DC subject to UCP 500, the issuing bank gave a refusal notice that read: “We refuse payment due to following discrepancies: The commercial invoice and the bill of lading are not consistent with each other. Meanwhile we hold documents at your risk and disposal”. Is this refusal notice valid? 32. Interpretation of CIF An LC subject to UCP 600 was issued on 1 August 2007 stating the total value of the goods as “USD 200,000 CIF Hong Kong” and a commercial invoice stating “USD 200,000 CIF Hong Kong Incoterms 2000” was presented.

The Issuing Bank considered this as a discrepancy. The reasons are: I. “CIF” does not exist only in Incoterms. It is also found in other trade terms, such as the USA Trade Definitions, the Warsaw Trade Terms and the like. The Applicant may not mean Incoterms. II. Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms 2000. Is the Issuing Bank correct in its determination of this discrepancy? Please state your reasons. 26. Port of Loading & Port of Discharge

A DC issued in Hong Kong and confirmed by a bank in Taiwan subject to UCP 600 requires a port-to-port bill of lading showing: Port of Loading: | Come by Chance, Canada | Port of Discharge:   | Any port in China | A port-to-port bill of lading is presented showing: Port of Loading: | Come by Chance, Canada | Port of Discharge:   | Kaohsiung | The Confirming Bank in Taiwan rejected the bill of lading stating: III. “Come by chance in Canada” means “Any port at which the goods happen to be discharged in Canada”. Come by Chance is not the name of a port.

The Port of Loading should show the name of a port in Canada, such as Toronto, as required by UCP 600 sub-article 20 (a) (iii). IV. Republic of China (Taiwan) is an independent country and not part of “China” according to President Chen Shui-bien (?? ¤o«o) and the Democratic Progressive Party (? A? D¶i? BAO). Accordingly “China” should mean “People’s Republic of China”. V. Hence “Any port in China” should mean any port in People’s Republic of China, such as Shanghai and not any port in Republic of China (Taiwan), such as Kaohsiung. Is the Confirming Bank right in its rejection?

And why? 27. Transport documents issued by freight forwarder not acceptable The L/C subject to UCP 600 states “Transport documents issued by freight forwarder not acceptable” and a port-to-port bill of lading signed by freight forwarder as a carrier is presented. Is the bill of lading acceptable? 28. Freight Forwarder’s Bill of Lading Acceptable The DC subject to UCP 500/600 states “Freight Forwarder’s Bill of Lading not acceptable” and the bill of lading presented is issued by a freight forwarder in the capacity of a carrier. Is the bill of lading acceptable? 9. Negotiation by A Confirming Bank An acceptance L/C subject to UCP 600 was confirmed by a confirming bank with drafts drawn on the confirming bank at 180 days after shipment date. The issuing bank, upon request by the applicant, who accepted the request from the beneficiary, later amended the L/C to be available for negotiation by the confirming bank. The confirming bank then requested the issuing bank to amend the L/C for drafts to be drawn on the issuing bank. Q1     Is this a violation of international standard banking practice where the drafts should e drawn on the confirming bank after confirmation was added? Q2     What is the intent of the confirming bank for making such a request? Q3     What is the risk for the issuing bank after accepting such a request? 30. Bill of Lading Consigned to Order of Issuing Bank A DC subject to UCP 600 required presentation of copy of a set of original bills of lading consigned to order of Issuing Bank in country A with full set of originals sent directly to the Applicant, quoting DC No. on bills of lading.

The Issuing Bank refused payment due to valid discrepancies by giving valid notice of refusal. Meanwhile a third party sent for D/A collection under URC 522 full sets of same original bills of lading to another Branch of Issuing Bank in country B (now acting as Remitting Bank) to endorse to another Collecting Bank to facilitate delivery after acceptance of drafts. The Beneficiary claimed payment from the Issuing Bank due to its endorsement on the original bills of lading, resulting the goods being delivered by the Applicant. Should the Issuing Bank be liable for this claim? 1. Extension of Confirmation After An Amendment A DC, subject to UCP 600, available for 30-day deferred payment of USD200,000, covering furniture items of Reconnaissance design shipped from Hong Kong to Jeddah, Saudi Arabia was confirmed by the Advising & Nominated Bank. An amendment added USD100,000 for framed oil paintings with pornographic themes. The Confirming Bank advised the amendment without adding confirmation to USD100,000 because pornographic works would be confiscated by the Saudi Arabian import authorities due to religious reasons.

The Beneficiary argued that (a) DC deals with documents not with goods (b) A bank should not speculate the intention of the parties in international trade and (c) since both the Issuing Bank and the Applicant agreed to the amendment, they were the parties to take this risk, not the Confirming Bank that could claim reimbursement from the Issuing Bank regardless as whether the goods were confiscated or not, according to UCP 600 articles 7 (c) and 12 (b). Questions: I. Does the Confirming Bank have a right to do so under UCP 600?

II. Would your answer be the same if it were DC transfer other than confirmation? 26. Restricted Endorsement on Bills of Lading The DC subject to UCP 600 required presentation of one set of original bills of lading endorsed to the order of the applicant whilst the set of original bills of lading presented was endorsed in blank. Is this acceptable? 27. Open Endorsement on Bills of Lading The DC subject to UCP 600 required presentation of one set of original bills of lading made out to order and endorsed in blank.

A set of original bills of lading was presented made out to order of the beneficiary endorsed to the order of the applicant. Is this acceptable? 28. Freight Receipt A DC subject to UCP 600 required presentation of a freight receipt without specifying its issuer and data content. A freight receipt issued by the beneficiary was presented, certifying that the freight was received by the carrier. Is it acceptable? 29. Is an issuing bank obligated to transfer if the nominated transferring bank refuses to transfer?

A credit subject to UCP 600 provides transfer restricted to a nominated paying bank T that does not agree to transfer. The beneficiary asks for transfer by the issuing bank I, regarding that since bank I chooses to provide transfer by a nominated bank T and that bank does not wish to transfer, then bank I should have the obligation to transfer. Otherwise why bank I provides transfer in the first place if it does not wish to do the transfer? Also a principle should carry out the task refused by its nominated agent. Is the first beneficiary right in its statements? 30.

Can an issuing bank refuse presentation of complying documents from a second beneficiary through a transferring bank? A credit subject to UCP 600 is totally transferred to a second beneficiary S. The first beneficiary F fails to substitute the invoice and drafts upon demand. The transferring bank T presents the complying documents from the second beneficiary S to the issuing bank I for honour. The issuing bank I refuses to honour based on the following reasons: I. The presentation is not from the first beneficiary F. II. The unit price in the invoice is smaller than that stated in the credit.

III. The total value (in both the drafts and invoice) is less than that stated in the credit, creating under drawing. Note:  | Questions 74 and 75 were added on 3 Jun 2009. Question 63 and answers to questions 54, 55, and 57 were edited on 19 Jun 2009. | 51. Change credit currency from USD to CAD in a transfer In a credit subject to UCP 600, the first beneficiary requests the transferring bank to change the currency from USD to CAD in its transfer to the second beneficiary. Q1 | Should the transferring bank accept such request? |

Q2 | If the transferring bank nevertheless accepts the request, what measures should the transferring bank take? | 52. UCP 600 uses terms like “banks”, “banking days” and “international standard banking practice”. Would this imply that UCP 600 couldn’t be applicable to credits issued by non-banks? To answer this question we have to go back to the original intent of the UCP 600 Drafting Group. 53. Is “advance or agree to advance funds” in the definition of “negotiation” in UCP 600 article 2 same as “giving of value” or “undertaking an obligation to make payment” in ICC Position Papers No. 2?

Negotiation is one of the most misled terms in UCP operations because the meaning of negotiation may be different from one region to another, such as North America, Europe, Middle East and Asia. Hence it is almost impossible to create a perfect definition for “negotiation” in UCP. As a result, the definition of “negotiation” in article 2 of UCP 600 is not perfect and is still subject to disputes during the drafting stage as well as after approval by the ICC National Committees. For example, some bankers start asking ICC Banking Commission to provide the definition of “purchase” used in article 2 of UCP 600.

The more new words are introduced, the more clarification will be requested. 54. A credit subject to UCP 600 is fully transferred to a second beneficiary without any reduction in unit price and total value. The issuing bank has been notified for the details of this transfer by the transferring bank. Meanwhile the first beneficiary has also received outside the credit operations an agreed amount from the second beneficiary as its reasonable share of profits in the underlying transaction. In this arrangement, it is obvious that there is no need for substitution of documents by the first beneficiary.

Then can the second beneficiary bypass the transferring bank and make direct presentation to the issuing bank? 55. Master Air Waybill v. House Air Waybill According to ICC Document 470/TA. 621, if a credit requires expressly a master air waybill, a house air waybill is also acceptable based on the following reasons: i. Wordings like “HAWB (house air waybill) No. XXXXX” in an air waybill is acceptable even if the credit expressly requires a “master air waybill” . ii. The intent of this condition (requiring presentation of a master air waybill in a credit) is unclear. ii. Under Article 27 of UCP 500, as far as the air waybill is signed by a “carrier”, it is acceptable. UCP 500 does not care whether the carrier is an actual carrier or a contracting carrier. iv. This “master air waybill condition” does not prohibit signature by a freight forwarder. v. This ICC decision is based on ICC Opinion No. R 221 (where the credit does not expressly require a master air waybill). Do you agree with this ICC decision? 56. Lost of letter of credit advice If a credit advice by local mail is lost, is this advice duly given by the advising bank?

A credit advice has been lost in local mail. Q1 | Is such an advice considered as sent by the advising bank? | Q2 | Is such advice considered as received by the beneficiary? | 57. What Is A Banking Day? After a long holiday, a letter of credit document checker Bob went to his office to work overtime on Sunday 6 July 2008 in Hong Kong. His old classmate Jim called his mobile phone to invite him to lunch. When Jim knew that Bob was working in his office, he went to Bob’s office to pick him up for lunch at a restaurant just two blocks from Bob’s office.

He went into Bob’s room and handed over Bob one set of documents presented under a local letter of credit subject to UCP 600 where the issuing bank was Bob’s bank branch. The presentation consisted of a simple set of stipulated documents. The notice of refusal was sent by fax on Monday 14 July 2008 pointing out 7 valid discrepancies. Jim’s boss Don demanded payment from Bob’s bank because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600.

Bob’s office is not open on Saturday and Sunday. Q1 | Is Don correct in his demand? | Q2 | What should Don have done to claim payment? | 58. Bank I invited its VIP customer C to attend a real estate mortgage promotion campaign held on Tuesday 8 July 2008 on board a 100 feet yacht near Lantau Island, Hong Kong, where the Hong Kong Disneyland is located. C met D on the yacht. D was a letter of credit document checker for Bank I. C handed over to D one set of documents presented under a local letter of credit subject to UCP 600 where Bank I was the issuing bank.

The presentation consisted of a simple set of stipulated documents. The notice of refusal was sent by fax on Wednesday 16 July 2008 pointing out 5 valid discrepancies. C demanded payment from Bank I because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under article 16 (f) of UCP 600. Bank I was open on Tuesday 8 July 2008 but is not open on Saturday and Sunday. Q1 | Is C correct in his demand? | Q2 | What should C have done to claim payment from Bank I? | 59. Presentation to an Overseas Branch of a Bank

A credit subject to UCP 600 issued by the head office of an Indian international bank in New Delhi stated in SWIFT MT700 field 31D: “Presentation to us on or before 1 July 2008”. After being aware that there was not enough time to send the stipulated documents by courier to the head office of the issuing bank in New Delhi, the beneficiary presented them to its branch in Hong Kong. When the documents arrived the head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to presentation after expiry. The beneficiary argued that “us” on its face should include all branches of the Indian bank.

If the issuing bank did really mean presentation exclusive to the head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings. Q1 | Should the issuing bank honour the presentation under such circumstance? | 60. Presentation to a Local Branch of a Bank A credit subject to UCP 600 issued by State Bank of India head office in New Delhi stated in SWIFT MT700 field 31D: “Presentation to us on or before 1 July 2008”. Field 41a states: “Available with the State Bank of India by sight payment”.

After being aware that there was not enough time to send the stipulated documents by courier to the New Delhi head office of the State Bank of India, the beneficiary in Bangalore presented them to its branch in Bangalore, India. When the documents arrived the New Delhi head office, the expiry date was over and a notice of refusal was sent to the beneficiary due to (i) presentation to the wrong branch and (ii) after expiry. The beneficiary argued that “us” in field 31D and “State Bank of India” in field 41a, on their face, should include all branches of the State Bank of India.

If the issuing bank did really mean presentation exclusive to the New Delhi head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings. Q1 | Is the argument by the beneficiary valid? | 61. Article 14 (l) allows any party, beneficiary included, to issue a transport document. What measures should an issuing bank take to avoid the potential risks? According to this sub-article 14 (l) of UCP 600, any third party may issue a transport document as a carrier, master, owner, charterer, or their agent.

A beneficiary may also do so if he prefers. In other words, this sub-article would provide a legitimate platform for creation of fraudulent transport documents. 62. What qualifies “indication” of a charter party bill of lading under article 22 (a) of UCP 600? UCP 600 article 22 (a) states: “A bill of lading, however named, containing an indication that it is subject to a charter party (charter party bill of lading)… ” Bankers are frustrated as to the precise interpretation of the word “indication” quoted above.

Due to lack of knowledge on charter party operations, bankers do not have an effective means to determine which bill of lading is a charter party bill of lading as most of the bills of lading look like the same on the face page, sharing many identical data contents and boxes. Q1 | How would you determine a charter party bill of lading on its face? | 63. Does an oral waiver constitute an amendment? In USA the issuing bank dishonoured by naming a valid and incurable discrepancy (executing the first instalment shipment after latest date for shipment as stated in the instalment shipment schedule) in its notice of refusal.

After an exchange of long distance telephone calls, the applicant finally agreed to waive this discrepancy in an email to the beneficiary. A copy of the waiver was sent to the issuing bank. An officer of the issuing bank tried to comfort the beneficiary on the phone by serving a diplomatic message: “Please do not worry. There should be no problem with the discrepancy with our bank. ” Later, the issuing bank dishonoured despite giving the “verbal waiver” as regarded by the beneficiary and the “wavier in writing” from the applicant.

The beneficiary sued the issuing bank and the applicant. Who is going to win the case, the beneficiary, the applicant or the issuing bank? 64. In the Total Energy v. Standard Chartered Bank Hong Kong case, (a) a fax stating discrepancies alone in the morning followed by (b) a phone in the afternoon stating refusal and disposal of documents, would comply with UCP 500 Articles 13 & 14. Is this court decision valid in UCP 600 where “a single notice” is required? According to the judicial decisions of the captioned case provided by the Hon. William Stone J. , i. ending a copy of the discrepancies checklist used by the bank internally, listing all the discrepancies in the morning, followed by ii. a phone call in the afternoon to the same person in the beneficiary’s company, advising the bank’s decision to refuse documents and asking for disposal of documents would comply with UCP 500 Articles 13 & 14. Q1 | Is this court decision valid in UCP 600 where “a single notice” is required under article 16 (c)? | 51. Insurance problems in a transferable DC A DC subject to UCP 600 calls for goods of CIF Dubai value of USD1,100,000.

Shipment is by sea from Shanghai to Dubai. The first beneficiary in Hong Kong intends to transfer the full DC quantity to a second beneficiary in Shanghai for CIF value of only USD220,000. The issuing bank that provides the financing insists that the insurance policy must cover a minimum CIF value of USD1,100,000 to protect the bank’s interests. The first beneficiary hesitates to ask the second beneficiary to do this insurance cover, as the second beneficiary will then know the price that the first beneficiary sells to the applicant in Dubai.

The second beneficiary will be very unhappy after knowing the huge profit the first beneficiary makes. What is the best solution to make the first beneficiary and the second beneficiary both happy? 52. CIF insurance problems in a transferable DC What is the best solution in Exercise No. 65 if the first beneficiary is not from Hong Kong but from a small country in Africa, which is in severe short of foreign exchange? As a result, this African country does not allow exports in FOB or CFR terms or imports in CFR or CIF.

The only term allowed in exports is CIF and imports in FOB in order to earn more foreign exchange in its international trade. In a nutshell, for both imports and exports, freight and insurance costs must be paid in this African country. The benefit for the African country is that, for exports, the country can earn more foreign currency such as USD and for imports, it can avoid paying in foreign currency, such as USD that it has not enough reserve to meet the foreign exchange obligations. 53. Can an issuing bank negotiate when the nominated negotiating bank refuses to negotiate?

In a DC subject to UCP 600 without providing confirmation, available by usance drafts at 60 days after shipped on board date in bill of lading, the beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v) when the nominated negotiating bank refuses to negotiate. The issuing bank refuses to negotiate. Q1 | Is the issuing bank correct in its refusal? | Q2 | What should the beneficiary do under the circumstance? | 54. Can an issuing bank negotiate or discount when the nominated confirming bank refuses to negotiate?

In a DC subject to UCP 600, available by negotiation with usance drafts drawn on the confirming bank at 60 days after shipped on board date in bill of lading. The confirming bank refuses to negotiate due to discrepancies. However, the issuing bank finds the presentation compliant. The beneficiary demands the issuing bank to negotiate according to the provisions of UCP 600 sub-article 7 (a) (v). The issuing bank refuses to negotiate. Q1 | Is the issuing bank correct in its refusal? | Q2 | Can the beneficiary ask the issuing bank to discount? |

Q3 | What can the beneficiary do under the circumstance in order to receive payment before maturity? | 55. Problems with drafts drawn on an applicant in a credit subject to UCP 600 Despite the provision of UCP 600 sub-article 6 (c), a credit subject to UCP 600 is however available by negotiation of usance drafts drawn on the applicant at 60 days after shipment date. The applicant refuses to accept the drafts relying on fabricated discrepancies disagreed by the issuing bank and the beneficiary. The issuing bank however disagrees to honour or negotiate the compliant presentation.

Q1 | Is the issuing bank obligated to honour or to negotiate under the UCP 600? | Q2 | If the credit is confirmed, is the confirming bank obligated to honour or to negotiate under the UCP 600? | Q3 | What should the beneficiary have done to avoid such risk? | 56. Terms like “purchase”, “advancing funds”, “agreeing to advance funds” and “prepay ” are used in UCP 600 articles 2, 7 (c), 8 (c) and 12 (b). What do they really mean? Q1 | What are the origin, focus and implication of these terms? | Q2 | What are the actions that these terms refer to under UCP 600? |

Q3 | In the market place, do these terms share the same meaning as they are interpreted under UCP 600? | 57. 58. Multimodal Transport Document On Board Notation 1 An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Place of receipt: Macau; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Place of Receipt| Vessel Name| Macau | Casino Royale | Port of Loading| Intended Vessel Name| Hong Kong | Chopsticks | Port of Discharge| Place of Final Destination| New York | West Orange, New Jersey |

The issuing bank refuses payment due to one discrepancy: “An on board notation is required because Chopsticks is an intended vessel only. ” Is this discrepancy valid? 59. Multimodal Transport Document On Board Notation 2 An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Place of receipt: Hong Kong; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Shipped on board dated 1 May 2009 Place of Receipt| Vessel Name| Hong Kong Port |  | Port of Loading| Vessel Name| Hong Kong Port | Chopsticks |

Port of Discharge| Place of Final Destination| New York | West Orange, New Jersey | The issuing bank refuses payment due to one discrepancy: “The on board notation has not shown the vessel name and the port of loading. ” Is this discrepancy valid? 60. Multimodal Transport Document On Board Notation 3 An L/C subject to UCP 600 specifies: A multimodal transport bill of lading; Port of loading: Hong Kong; Place of final destination: West Orange, New Jersey. The multimodal transport bill of lading shows: Shipped on board this vessel dated 1 May 2009 Place of Receipt| Vessel Name|

Shenzhen, China | Container Haulage Motor Truck No. HK 8228 | Port of Loading| Vessel Name| Hong Kong Port | Chopsticks | Port of Discharge| Place of Final Destination| New York | West Orange, New Jersey | The issuing bank refuses payment due to one discrepancy: “The on board notation has not shown the vessel name and the port of loading. ” Is this discrepancy valid? 61. Loss of documents in a back-to-back credit situation The documents presented under a baby letter of credit subject to UCP 600 were lost during transit. Nevertheless, Bank IB, the intermediate bank that issued the baby redit, paid the ultimate supplier according to the provisions of UCP 600 article 35. Certified true copies of documents, including the bills of lading, other than drafts and commercial invoices that were replaced with originals, were presented to Bank IA, the issuing bank of the master letter of credit that was also subject to UCP 600. Could Bank IA refuse the otherwise compliant presentation according to UCP 600 17 (a), relying on the following reasons: i. The two credits, although both subject to UCP 600, are in fact separate payment undertakings. i. The originals are lost in another presentation (under the baby credit) and not in the same presentation (under the master credit), and iii. Most of the documents (other than drafts and commercial invoices) are not originals? 51. Is an “UPS waybill” a courier receipt or an air waybill under UCP 600? In a credit subject to UCP 600, an “UPS waybill” is presented, showing air carriage of vintage collection series Lamborghini remote control titanium toy cars of CIP value USD20,000 stowed in 20 packages of size 24 x 12 x 10 inches.

The issuing bank dishonours because in the “UPS waybill”, the carrier is not identified as required under UCP 600 article 23. The negotiating bank disagrees and says that the “UPS waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit. Q1 | Is an “UPS waybill” a transport document under UCP 600? | Q2 | Under which article, article 23 or 25 in UCP 600 should this document be examined? | 76. Is an “UPS air waybill” a courier receipt or an air waybill under UCP 600?

In a credit subject to UCP 600, an “UPS air waybill” is presented, showing air carriage of Apache remote control toy helicopters of CIP value USD200,000 packed in 42 strong cartons of size 4 x 5 x 6 ft. The issuing bank dishonours because in the “UPS air waybill”, the carrier is not identified as required under UCP 600 article 23. The negotiating bank disagrees and says that the “UPS air waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit.

Q1 | Is an “UPS air waybill” a transport document under UCP 600? | Q2 | Under which article, article 23 or 25 in UCP 600 should this document be examined? | 77. Is a SME Courier Forwarder Inc. “certificate of courier receipt”, a courier receipt, an air waybill or a forwarder’s certificate of receipt under UCP 600? In a credit subject to UCP 600, a “certificate of courier receipt” issued by SME Courier Forwarder Inc. is presented showing air delivery of oil drilling head assembly of CIP value USD880,000 stowed in 4 pallets.

The issuing bank dishonours because the document is a courier receipt that has only shown a date of receipt of the goods without “evidencing receipt of goods for transport” as required in article 25 (a) of UCP 600. The confirming bank dishonours because the document is an air waybill and the carrier is not identified as required by article 23 (a) (i) of UCP 600. The negotiating bank disagrees and says that this “certificate of courier receipt” is a forwarder’s certificate of receipt (FCR) issued by SME Courier Forwarder Inc. as a forwarder. Hence article 14 (f) should be used to examine this document.

As a result there is no discrepancy since there is no requirement in the credit for “evidencing receipt of goods for transport” in the credit or under UCP 600 article 14 (f). Q1 | Is this “certificate of courier receipt” a transport document under UCP 600? | Q2 | Under which article, article 23, 25 or 14 (f) in UCP 600, should this document be examined? | 78. If examination of documents by a nominated bank constitutes “acting on its nomination” under UCP 600 article 14 (b)? The beneficiary presented documents to a nominated bank N under a credit subject to UCP 600 available for deferred payment 60 days after date of bill of lading.

Negotiation is restricted to nominated bank N. As bank N is the beneficiary’s banker, the beneficiary requested bank N to examine the documents for compliance. Bank N found the documents compliant and forwarded them to the issuing bank in USA. Ten banking days after receipt of presentation by the issuing bank, there was no notice of refusal received. Two week before the payment maturity date, the issuing bank applied for Chapter 11 protection due to lack of liquidity. On payment maturity date, the beneficiary demanded payment by Bank N based on following reasons: a.

Bank N is the nominated bank, having examined the documents and found them compliant. b. Bank N never showed any intention to refuse the nomination before the payment maturity date. Is bank N obligated to pay the beneficiary? 79. A credit subject to UCP 600 providing sight payment states in field 42D “Drawee: ABC Bank, with full address” There is no requirement to present any drafts or bills of exchange in field 42C. Hence no draft is presented. The issuing bank refuses to pay because the information in field 42D is not reflected in the documents. Is the issuing bank correct in its refusal? 0. Beneficiary’s Certification in Commercial Invoice A credit subject to UCP 600, amongst other documents, asks for one original commercial invoice certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder’s cargo receipt issued by forwarder F. The commercial invoice presented has no such certification but the forwarder’s cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.

Should missing the certification in commercial invoice be a valid discrepancy under the circumstance? 81. Beneficiary’s Certificate A credit subject to UCP 600, amongst other documents, asks for one original beneficiary’s certificate certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder’s cargo receipt issued by forwarder F. The beneficiary’s certificate is not presented but the forwarder’s cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.

Should missing the beneficiary’s certificate be waived under the circumstance? 82. A credit subject to UCP 600 asks for full set of 3 original sea waybills consigned to the order of the issuing bank, evidencing shipment from Hong Kong to New York, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancies: a. One original sea waybill instead of full set of 3 originals is presented. b. The sea waybill is consigned to issuing bank but not to order of issuing bank. Are the two discrepancies valid? 76.

A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancy: a. Three sets of original bills of lading are presented whereas the credit only asks for one set. Can the beneficiary present three sets of original bills of lading when the credit only asks for one set? 6. A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The credit prohibits partial shipments. Three sets of original bills of lading loaded on the same vessel under the same voyage number, discharging at Dubai are presented. The issuing bank dishonours due to following discrepancy: . Partial shipments are made as evidenced by presentation of three sets of original bills of lading and the credit prohibits partial shipments. Is this discrepancy valid? 77. A credit subject to UCP 600 asks for full set of 3 original charter party bills of lading evidencing shipment of freshly cut logs, consigned to the order of the shipper, evidencing shipment from any Asian port to any European port, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancies: a.

Three sets of original charter party bills of lading are presented whereas the credit only asks for one set. b. The 3 sets of original charter party bills of lading show a range of ports of loading (one set showing Kota Kinabalu, one set showing Sandakan, and one set showing Tawau). This is not allowed in UCP 600 article 22 (a) (iii) which only allows a range of ports of discharge. Q1 | Can the beneficiary present three sets of original charter party bills of lading when the credit only asks for full (one) set? | Q2 | Are the 3 sets of original charter party bills of lading discrepant? 76. A bill of lading presented under a credit subject to UCP 600 has the following pre-printed clause: “The shipper acknowledges that the carrier is authorized to carry the Goods identified in the Bill of Lading on the deck of any vessel and in taking remittance of this Bill of lading, the Merchant (including the Shipper, the Consignee and the Holder of the Bill of Lading, as the case may be) confirms his express acceptance of all the terms and conditions of this… ”. The bill of lading is however silent on “on deck shipment”.

The issuing bank dishonours because the bill of lading bearing such pre-printed clause about on deck shipment is not acceptable according to UCP 600 article 26 (a). Is the issuing bank right in its decision? 77. A credit subject to UCP 600 calls for one set of 3 original charter party bills of lading (CPBL). The issuing bank dishonours due to following discrepancy: “The set of 3 original CPBL presented is signed by an agent A for the carrier C. It does not comply with UCP 600 Article 22 (a) (i)”. Is the issuing bank correct in its refusal decision? 78.

A credit subject to UCP 600 asks for an original inspection certificate issued by competent surveyors within 3 days before loading on board. The issuing bank refuses the presentation based on following discrepancy: “Inspection certificate issued by only one surveyor (single number) whereas the credit asks for checking by competent surveyors (plural number). Is this discrepancy valid? 79. A credit subject to UCP 600 states in field 41D that it is available with ABC Bank in Dubai by negotiation but in field 31D, it does not state the place of expiry. Which is the place of expiry under the circumstance? 0. A credit subject to UCP 600 requires goods of Japanese origin. It does not ask for any certificate of origin. The invoice shows that the goods are made in South Korea. The issuing bank dishonours due to following discrepancy: “Invoice shows that the goods are of South Korean origin whereas the credit asks for goods of Japanese origin”. The beneficiary disagrees, saying that Japanese origin is a NDC (non-documentary condition) since the credit does not ask for any document to reflect this. According to UCP 600 article 14 (h), country of Japanese origin can be ignored.

As a result of this, the bank need not check for the origin of the goods. Hence there should be no discrepancy. Who is correct? 81. The issuing bank in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary re-presented the rejected documents to the confirming bank in Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating: “Because the law is overriding the UCP, we cannot pay you due to the injunction even though the documents are compliant. Can the confirming bank refuse payment based on the injunction? 82. The issuing bank, head office of Bank ABC in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary re-presented the rejected documents to the confirming bank, a branch of Bank ABC in South Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating: “Our head office Bank ABC is bound by the injunction in India.

As a South Korean branch of Bank ABC, we are also bound by the injunction and hence cannot pay you even though the documents are compliant. ” Can the confirming bank refuse payment under the circumstance? 83. A bill of lading presented under a credit subject to UCP 600 is signed as follows: “By authority of Master, Captain ABC: (Manual signature) XYZ Shipping Company Ltd. as agent” The issuing bank rejects this bill of lading because the agent has not stated whether it is signing for the master or for the carrier. Is this discrepancy valid? 84.

A credit subject to UCP 600 asks for a FCR (Forwarder’s Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid. A FCR is signed by a chop as follows: “For and on behalf of: (Manual signature) XYZ Freight Forwarding Company Ltd. ” The issuing bank rejects this FCR as XYZ Freight Forwarding Company Ltd. does not indicate whether it signs as a carrier or as an agent of the carrier or as an agent of the master. Is this discrepancy valid? 5. A credit subject to UCP 600 asks for a FCR (Forwarder’s Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid. A FCR is signed by a chop as follows: “For and on behalf of: (Manual signature) XYZ Godown Company Ltd. ” The issuing bank rejects this FCR as XYZ Godown Company Ltd. is only a godown or warehouse and cannot sign as an issuer of the FCR that should be signed by a forwarder only. Is this discrepancy valid? 86.

A credit subject to UCP 600 issued for steel round bars trade asks for one original and two copies of certificate of origin, evidencing goods are of China origin. The issuing bank refuses the certificate of origin that is issued “To Whom It May Concern” instead of issuing to the buyer, consignee or applicant named in the credit. Is the issuing bank correct in refusing the certificate of origin? 87. A credit subject to UCP 600 asks for one set of original bills of lading, evidencing shipment from Shanghai, China to Abu Dhabi, UAE, notifying forwarder AUH, with freight collect.

The issuing bank refuses the bill of lading bearing the clause “Part load with bill of lading No. JMSBOND007 no separate delivery. ” Is the issuing bank correct in refusing the bill of lading? 88. A credit subject to UCP 600 asked for presentation of “One original and 2 copies of certificate of origin evidencing China origin” for sales of 10,000 MT steel goods from Hong Kong to Dubai. A certificate of origin issued by a Chamber of Commerce in China covering 30,000 MT of steel goods was presented, showing shipment from Hong Kong to Dubai.

The issuing bank regarded the certificate of origin discrepant because: Q1 | It covers 30,000 MT instead of 10,000 MT of steel goods. | Q2 | The issuing date of the certificate of origin is two months before the credit issuing date. | 89. A credit subject to UCP 600 from the purchasing department of a department stores chain in USA, purchasing goods based on FOB Yantian China terms, asked for “One original forwarder’s cargo receipt (FCR) consigned to USA port determined by the forwarder marked freight collect”.

A FCR was presented, inter alia, marked “consigned to USA port determined by the forwarder, freight collect”. The issuing bank rejected the FCR because no port of discharge was specified based on ICC Banking Commission opinion R368, which states that a bill of lading must specify the port of discharge even if the credit asks for “any Country K port(s)” as the port of discharge. Is ICC opinion R368 applicable to the present case? 90. A credit subject to UCP 600 purchasing commodities goods from any Asian port(s) to any European port(s), asked for one set of charter party ills of lading (CPBL). One set of CPBL was presented, inter alia, marked “Consignee: Any European port(s)” The issuing bank rejected the CPBL because no port or ports of discharge was/were specified in the CPBL. Is the issuing bank correct in its refusal? Note:  | Questions 112 to 114 were added on 28 October 2010. | 101. A credit subject to UCP 600 purchasing commodities goods from any Asian port(s) to any European port(s), asked for one set of charter party bills of lading (CPBL).

The beneficiary asked for an amendment to specify the name of the port(s) of loading based on UCP 600 article 22 (a) (iii) that allows only the port(s) of discharge to name a range or ports or a geographic area. But it does not allow the port(s) of loading to indicate a range of ports or geographical area. Is the beneficiary correct in its objection to range of port(s) of loading stated in the credit? 102. A credit subject to UCP 600 expired on 7 February 2010, which is a Sunday.

In the morning of 7 February 2010, although the nominated paying bank in China was closed to the public due to Sunday, yet the bankers in the letter of credit department of this bank had to come back to work internally in order to clear the heavy workload before the Chinese New Year holidays starting from on 14 February 2010. On this day, there was a small fire at 12. 00 pm due to short circuit and the bank had to close after 12. 00 pm. The bank re-opened on Monday 8 February 2010. In the morning of this day the bank knew from the headline of the New York Times that the issuing bank in USA had finance troubles.

The beneficiary made a presentation on 8 February 2010 and was refused by the nominated paying bank stating: “We had a force majeure incident due to fire on Sunday 7 February 2010. According to UCP 600 article 36 provisions, the expiry date and the last date for presentation for this credit would not be extended to the next business day due to force majeure reasons. As a result, the provisions of article 29 (a) is not applicable due to this force majeure incident. Your presentation is now returned without payment.

We regret for this unfortunate incident which is out of our control. ” Q1     Is the nominated paying bank right in its refusal notice? 103. A credit subject to UCP 600 has the following clause in field 78: “INFO TO PRESENTING BK: +ON RECEIPT OF DOCUMENTS CONFORMING TO THE TERMS OF THIS DOCUMENTARY CREDIT AT OUR COUNTER, WE UNDERTAKE TO REIMBURSE YOU IN THE CURRENCY OF THIS CREDIT IN ACCORDANCE WITH YOUR PAYMENT INSTRUCTION ON THE DUE DATE OF THE DRAFT/DOCUMENTS AFTER DEDUCTING ALL RELATIVE REIMBURSING FEE AND CABLE CHARGES INCURRED. WE SHALL ADVISE YOU THE MATURITY DATE.

The documents were compliant but were lost in transit from the presenting bank that did not take up the nomination. The issuing bank sent a refusal notice saying that based on the first two lines of the above clause, payment is only conditional to good receipt of documents at the counter of the issuing bank and that this clause overrides UCP 600 article 7 regarding issuing bank’s payment obligations under the credit. Q1     Is the issuing bank right in its refusal notice? 104. A credit subject to UCP 600 has the following clause stated in the bill of lading. “NO DIRECT OVERSIDE DISCHARGE OR DIRECT DELIVERY. The goods are wood pulp packed in bales transported from Canada to Kunsan, South Korea by a break bulk vessel. The issuing bank refuses payment because this clause is discrepant as it infringes the right of the consignee on discharge. Q1     Is the issuing bank right in its refusal? 105. In a transferred credit subject to UCP 600, the substituted drafts from the first beneficiary had discrepancies. The transferring bank sent notice to the first beneficiary to correct the discrepancies but the first beneficiary had caused some delay in return of the corrected drafts.

Meanwhile the transferring bank did not wait for the return of the corrected drafts and presented the documents from the second beneficiary (for a smaller drawing amount) to the issuing bank in accordance with article 38 (i). Hence the payment was only adequate to cover payment to the second beneficiary. As a result, the first beneficiary was not paid. The first beneficiary sent a protest to the transferring bank and opined that the second part of article 38 (i) only covers the invoice, not drafts.

As a result, the transferring bank has no right to present the documents from the second beneficiary without waiting for the first beneficiary to correct the discrepancies in the drafts. Q1     Is the first beneficiary right in his protest? 106. A credit subject to UCP 600 has the following terms: +One original and two copies beneficiary’s signed statement if shipment is free of wood packing materials, the following must be stated on actual shipper’s letterhead, I (state name) hereby certify and declare that the merchandise shipped does not contain any wood packing materials, mentioning this credit number, PO No. nd container No. The beneficiary’s signed statement is signed as: BRASIL EXPORT INC. Beneficiary’s Signed Statement LC No. MAICON/424 PO No. LUCIO/1333 Container No. KAKA2010702 We hereby certify and declare that the merchandise shipped does not contain any wood packing materials. For and on behalf of Brasil Export Inc. Fabiano Robinho Authorized Signature The issuing bank refuses the beneficiary’s signed statement with following reason: “The beneficiary’s signed statement states “We hereby certify… instead of “I, Fabiano Robinho, hereby certify… ” as specified in the credit. Questions: Q1     Is the issuing bank correct in its refusal? 107. In a credit subject to UCP 600, the issuing bank refuses to pay due to following discrepancies in a port-to-port bill of lading: * The goods should be consigned to the place of the consignee. The bill of lading shows that the consignee is in New York whereas the port of discharge is Los Angeles. Questions: Q1     Is the issuing bank correct in its refusal? 108.

In a credit subject to UCP 600, the issuing bank refuses to pay due to following discrepancies in a cargo insurance policy: * The credit asks for payment of claims in Sharjah, UAE whereas the stamp in the policy shows that payment of claims is in Sharjah, UAE but the pre-printed words in the policy show that payment of claims is in Dubai, UAE. Questions: Q1     Is the issuing bank correct in its refusal? 109. In a credit subject to UCP 600, asking for drafts, the words in the signature box for the drawer is all written in hand writing as follows: For and on behalf of ABC Company Limited

Michael Jimson Authorized Signature The issuing bank refuses to pay due to following discrepancies in the drafts: Hand written company name is not acceptable to avoid frauds. For and on behalf of ABC Company Limited, Michael Jimson ………………………. Authorized Signature According to trade practice, words in red as shown above should appear in the form of a company stamp. Questions: Q1     Is the issuing bank correct in its refusal? 110. A credit subject to UCP 600 has the following terms: +One original and two copies forwarder’s cargo receipt, consigned to applicant, notify ABC Inc. ith freight collect. Please contact XYZ Forwarder Inc, 100 Avenue Road, Toronto, Ontario L4S 2L1 Canada. Mr. So Good Tel: 905 888 8888 Fax 905 888 9999 to arrange delivery of goods. All loading charges are for the account of beneficiary. The issuing bank refuses to pay due to following discrepancy in the forwarder’s cargo receipt (FCR): The FCR does not show “All loading charges are for the account of beneficiary”. But in the beneficiary’s signed certificate required by the credit, it has covered such condition, namely: We hereby certify that: This shipment does not contain any wood packing material. * No child labour is involved in the manufacture of the goods. * The beneficiary holds the applicant harmless against copyright infringement, if any. * All loading charges are for the account of beneficiary. Questions: Q1     Is the issuing bank correct in its refusal? 101. A credit subject to UCP 600, allowing partial shipments, has the following terms: “+One original and two copies beneficiary’s signed statement to warrant that: *

The goods are free of copyright infringement. No child labour is involved in the manufacturing. * No wood packing materials are used. 10,000 pcs. remote control helicopters, red, with batteries PO No. 12345 for East Coast USA. 8,000 pcs. remote control sport cars, blue, with batteries PO No. 12346 for West coast USA. ” The commercial invoice indicates shipment of 10,000 pcs. helicopters to East Coast only. The issuing bank refuses the beneficiary’s signed statement with following reason: “The beneficiary’s signed statement, covering 8,000 pcs. remote control sport cars for West Coast, as well as 10,000 pcs. elicopters for East Coast, is not consistent with the goods covered by the commercial invoice. ” Questions: Q1     Is the issuing bank correct in its refusal? 102. A credit subject to UCP 600 calling for 2,000 MT of chemicals does not allow partial shipments or drawings. Two bills of lading are presented. Bill of lading 1 of voyage No. 666 shows carriage by MV Good Luck with 1,000 MT of chemicals to be discharged at Singapore and bill of lading 2 of voyage No. 666 showing carriage by the same vessel MV Good Luck with 1,000 MT of chemicals to be discharged at Hong Kong.

The issuing bank refuses the presentation stating: “According to article 31 (b) of UCP 600, shipments to two different destinations are partial shipments that the credit does not allow”. The beneficiary argues that Singapore and Hong Kong are only ports of discharge, not destinations, that are the exact words used in article 31 (b) of UCP 600. Hence there is no discrepancy. Questions: Q1     Who is correct? 103. A credit subject to UCP 600 calling for 10,000 MT of cement does not allow partial shipments or drawings.

Two sets of stipulated documents are presented. One set containing Bill of Lading (BL) 1 is presented in the morning of 1 May 2010 and another set containing BL 2 is presented in the afternoon of 1 May 2010, using a different covering letter or schedule. BL 1 of voyage No. 888 shows carriage by MV OMG covering 6,000 MT of cement to be discharged at New York. BL 2 showing carriage by the same vessel MV OMG of same voyage No. 888 covering 4,000 MT of cement is to be discharged at New York. The issuing bank refuses the two presentations stating: Partial shipment is made and this is not allowed in the credit. ” The beneficiary argues that according to article 31 (b) of UCP 600, the two shipments carried by the same vessel, on the same voyage and to the same destination are not partial shipments.

Hence there is no discrepancy. Questions: Q1     Who is correct? 104. We refer to the previous case study No. 113. Questions: Q1     Would the two presentations be compliant in case study No. 113 if 1. The covering letter or schedule presented in the morning states: Special instructions: This is only the first batch of documents. The second batch of documents will be sent in the afternoon. Please do not start your document checking until the second batch of documents has been received. Thank you for your kind cooperation. ” and 2. The covering letter or schedule presented in the afternoon states: “Special instructions: This is the second batch of documents. Please start your document checking now together with the first batch of documents already sent in the morning. Thank you for your kind cooperation. ”

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