TA.927rev (re-submitted)
A credit was issued providing for shipment of a cooking range and its spare parts for an amount of XXX (the credit amount). The presented documents included an invoice which displayed three rows under the header ‘Commodity':
The issuing bank refused the presentation stating that ‘free of charge' goods were not allowed by the credit.
The nominated bank considered, as the credit did not stipulate a price for the spare parts, that ‘free of charge' spare parts were acceptable under the credit.
It is queried as to whether the discrepancy is valid, and whether an invoice stating goods free of charge is acceptable.
Whilst majority support was communicated in favour of the content of the draft Opinion, an alternate minority viewpoint was also expressed.
Accordingly, ICC National Committees will be asked to provide a final decision on next steps within the next few weeks.
TA.930rev
Documents were submitted and accepted by the issuing bank under a credit subject to UCP 600.
Prior to maturity, the issuing bank advised that they could not pay due to trade sanctions.
A number of questions have been raised by the nominated bank including whether or not a sanctions clause is a non-documentary condition; whether the obligation of the issuing bank under a credit is separate from the underlying agreement between the applicant and the issuing bank; whether evidence is required to prove a sanctions issue; whether the payment obligation remains in force until the sanctions issue is approved; whether an offer to pay in a different currency is valid.
The Addendum to the Sanctions Guidance Paper, Introduction 2nd paragraph, states that sanctions clauses are non-documentary conditions for the purposes of the UCP and the URDG and recommends that banks should refrain from issuing trade finance-related instruments that include sanctions clauses that purport to impose restrictions beyond, or conflict with, the applicable statutory or regulatory requirements.
Non-documentary conditions are addressed in UCP 600 sub-article 14 (h) wherein it is stated that if a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it. However, the scope of this sub-article is in respect of determining if the presented documents constitute a complying presentation. The legality or enforceability of sanctions clauses may also involve considerations of mandatory law/regulations which may override the credit and the UCP.
Whether or not an issuing bank is obligated to honour in the event of no evidence
being provided, is a matter outside the scope of the UCP 600.