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UCP 500 Articles 2, 7, 9, 10, 11, 12, 13 & 14
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UCP 500 Articles 2, 7, 9, 10, 11, 12, 13 & 14
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28 August 2003
To: Members of the Consulting Group
UCP 500 Revision
ICC Banking Commission
ParisHello Members,
ID 2 & 10 (Articles 2 and 10)
Discount v. negotiation triggered by the Santander case
Triggered by the Santander case, the UCP should differentiate between "negotiation" and "discount". According to the previous published ICC Banking Commission opinions, where buying drafts drawing on the accepting bank is discount and buying drafts drawn on the issuer is negotiation.
This narrow definition leads to another problem. How about buying documents that have no drafts? Is it negotiation or discount?
I think buying documents for a bank that has no payment obligation is negotiation and for a nominated accepting/paying/confirming bank, it is discount (of its own debt) according to Santander case interpretation.
ID 7, 11, 12 & 14 (Articles 7, 11, 12 and 14)
Without delay
"Without delay" cannot be deleted as it allows the beneficiary more time to cure the discrepancies. This would fortify the acceptance of DC as an international payment undertaking.
"Without delay" can be interpreted within a specific range of time, depending on the nature of the advice, from "within the same business day" to "within the same business hour". The decision is to be made by majority agreement amongst ICC National Committees, in the same manner as leading to determination of "7 banking day" reasonable time.
ID 9 (Article 9)
Release of goods by a banker's guarantee
Release of goods by a banker's guarantee makes the delivery irreversible. The beneficiary will exercise its rights to claim against the carrier, which in turn claims against the bank that endorses on the BL. So whether UCP has any such stipulation or not, the beneficiary is going to get the full payment anyway.
From my experience in resolving DC frauds, if the beneficiary were presenting a fake BL, then the beneficiary would not dare to make any claim. However, if the goods are substandard, then the endorsing bank must pay against compliant documents and leave the quality disputes to be resolved between the buyer and the seller. This is not a DC concern.
So my opinion is that whether it is codified or not in the UCP, it does not really matter. Having said that, it is good to have a stipulation in the UCP X00 that once the applicant requests for delivery against shipping guarantee, the applicant must reimburse the endorsing bank even if there were quality disputes as DC deals with documents not with goods. For a fake BL the applicant may apply for interim injunction, which is a legal issue out of the scope of governance of the ICC Banking Commission.
ID 13 (Article 13)
Shipping marks and numbers
According to an old English case Parsons v. New Zealand Shipping Co., in which Romer L. J. adjudicated that shipping marks is not part of the description of goods within the meaning of s. 3 (of COGSA UK). This has to be written in the UCP to end arguments.
However, "shipping marks and numbers" is a must in a packing list to help the warehouse management in floor planning and speedy identification of a specific assortment of goods. For example, shirts may have many assortments, 100% cotton, mix fibres, coloured, long and short sleeves, single or double pocket etc. This can be easily identified by shipping marks and numbers in the packing list.
Hence the UCP should deal with the different significances of shipping marks and numbers in a BL and in a packing list.
ID 14 (Article 14)
To take up
"To take up" should mean "to accept" for consistency in use of terminology in UCP.
Best regards,
T. O. Lee
Toronto
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