Is the confirming bank right in its refusal under ISP98?

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1 21. A standby LC issued by Bank I was confirmed by Bank C expiring on 1 September There was no restriction on the presentation. The beneficiary presented the documents to Bank I on 29 August 2002 but was wrongly dishonored 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 The beneficiary presented the same documents without any alteration to the confirming bank on 6 September 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: ١

2 "Purchase Contract No 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 :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 installment shipment made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three installment shipments. However, the issuing bank did not clarify whether or not the DC was still valid for subsequent installment shipments. After a period of time, the beneficiary presented compliant documents for the second installment 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 dishonor 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 installment shipments. So the issuing bank should bear the serious consequences for its negligence and should effect payment of the second installment 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 installment shipments after waiving the discrepancy in the first installment shipment. b. Discrepancy and waiver are two separate issues. The wavier cannot change the nature of a discrepancy. A ٢

3 discrepancy always remains a discrepancy, whether being waived or not. c. The discrepancy will trigger the following two consequences: 1. To dishonor payment according to UCP 600 articles 7, 14 & 16, and 2. To make the DC no more available for all future installment shipments according to UCP 600 article 32. d. So the wavier only waives the first consequence regarding payment but the second consequence affecting balanced installment shipments remains unwaived. e. As a result, the issuing bank has no payment obligation for the second and the third installment 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? ٣

4 31. An insurance policy is issued on 10 August 2007 and the DC specifies the latest shipment date as 15 August The loaded on bard date in the bill of lading is 9 August 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: 3. 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". 4. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC. 5. Partial shipments made and this is not allowed in the DC. Is the issuing bank correct in its refusal? 33. 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 dishonored due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy? 34. 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"? 35. Reimbursement instructions ٤

5 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? 36. 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? 37. 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? 38. 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: ٥

6 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? 39. 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: vi. vii. "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. Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms Is the Issuing Bank correct in its determination of this discrepancy? Please state your reasons. 40. 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: a. "Come by chance in Canada" means "Any port at which the goods happen to be discharged in Canada". Come by Chance is ٦

7 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). b. Republic of China (Taiwan) is an independent country and not part of "China" according to President Chen Shui-bien ( 陳水扁 ) and the Democratic Progressive Party ( 民主進步黨 ). Accordingly "China" should mean "People's Republic of China". c. 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? ٧

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