TA.946
Withdrawn by initiator.
TA.947rev
A documentary credit, subject to UCP 600, was issued by SWIFT MT700 on which field 71D (Charges) was empty.
There was no other condition in the credit as to who would bear the charges.
When providing payment, the issuing bank deducted a fee stating that this was as agreed between the applicant and the beneficiary.
The underlying contract shows that charges in issuing bank's country are for applicant's account and outside issuing bank's country for beneficiary's account.
Questions were raised as to the acceptability of the fee reduction, and the relevance of statements in the underlying contract. Furthermore, it was queried which UCP 600 article(s) were of relevance if there was no condition in the credit as to how charges should be allocated.
The subject of charges levied by issuing banks has been covered by numerous previous ICC Opinions, the most recent of which stated: "The subject of charges levied by issuing banks, in the absence of a specific reference in the credit, has been covered by previous ICC Opinions R 380 and R656. The message in both Opinions is quite clear: if the issuing bank wishes to make a deduction from the proceeds in respect of fees due to the issuing bank, then the credit should clearly indicate the amount or percentage of charges that will be deducted. In this way, the beneficiary and the nominated bank will be aware of the level of deductions that may be made from the proceeds of a presentation."
The applicant, as the party requesting the issuance of the credit, is responsible for covering the issuing bank's charges unless otherwise specified in the credit terms.
Therefore, if the credit does not clearly state which party is responsible for the opening charges, the issuing bank should seek reimbursement from the applicant by default. This follows international standard banking practice, which require the party requesting the service to bear the associated costs.
Regarding any references to the underlying contract, UCP 600 sub-article 4(a) clarifies that "123 Someroad Street
Somewhere Town
Someplace credit by its nature is a separate transaction from the sale or other contract on which it may be based."
Any reference made by the issuing bank to the underlying contract falls outside the scope of the credit's terms and conditions. It is also important to note that the underlying contract is strictly a matter between the applicant and the beneficiary and does not involve the banks handling the credit.
TA.948rev
A documentary credit was issued subject to UCP 600 and, among other documents, required: "1. Beneficiary draft drawn on (issuing bank) at 90 days from invoice date bearing the clause 'drawn under documentary credit no. (LC number, date, name of issuing bank) in 2 copies", and "5. Packing list in 1 original & 2 copies mentioning total quantity of goods as per LC and commercial invoice and also specifying types of total packing of goods".
The issuing bank initially refused the presentation due to four alleged discrepancies but, after an exchange of messages, refused on the basis of two discrepancies: "B/E not endorsed to (name of the issuing bank)" and "Actual packing details not mentioned in packing list".
It was queried as to whether either discrepancy was valid.
Bill of Exchange - the presenting bank correctly informed the issuing bank that there was no explicit requirement in the credit for the draft to be endorsed, and that there is no such requirement in UCP 600, further emphasising that ISBP 821 paragraph B15 merely states: "A draft is to be endorsed, if necessary" (emphasis added).
Packing List - the issuing bank refusal was made on the basis that actual packing details were not mentioned in the packing list. However, the packing list contained a list of the goods that were loaded onto pallets together with the weights and dimensions of each pallet.
Neither discrepancy was considered as valid.