obrien, v - counter-guarantee wording + synthetic...

Vin O’BrienAssociate Director IIBLP

Member Executive Committee ICC Banking CommissionAdvisor on Innovation & Market Intelligence at China Systems

Materials for 25 and 26 October 2018

SYNTHETIC LC CASE

USA

CRIMINAL CASE

“GUILTY VERDICT ”

9

CONSIGNOR:Lesser Cotton Co989 Sweet LandBrisbaneAustralia

CONSIGNEE:to order of

Global Trade Bank SeoulKorea

NOTIFY PARTY:Nahgnup Co . LtdKU -CHUNGC.P.O. BOX 9648Korea

PLACE OF RECEIPTBRISBANE

VESSEL PORT OF LOADINGOCEAN SAILORMELBOURNEPORT OF DISCHARGE PLACE OF DELIVERYPUSAN, KOREASEOUL, KOREA

DESCRIPTION OF GOODS

FROZEND BONELESS CHICKET QUARTERS

27,442

CONSIGNOR:A N Other Export Company USABig City United StatedUSA

CONSIGNEE:Unknown Importer Russia

NOTIFY PARTY:CONSIGNEE

PORT OF LOADING PORT OF DISCHARGENEW YORK PORT ST PETERSPURG

BILL OF LADING

TO BE USED FOR CHARTER PARTIES

No: BL NO 765432

Number of Originals Issued: : 3

VESSEL

OCEAN WARRIOR v101

THIS SINGLE PIECE OF PAPER IS VISIBLY A ’SMUDGY’ PHOTOCOPY

CONSIGNOR:Lesser Cotton Co989 Sweet LandBrisbaneAustralia

CONSIGNEE:to order of

Global Trade Bank SeoulKorea

NOTIFY PARTY:Nahgnup Co . LtdKU -CHUNGC.P.O. BOX 9648Korea

PLACE OF RECEIPTBRISBANE

VESSEL PORT OF LOADINGOCEAN SAILORMELBOURNEPORT OF DISCHARGE PLACE OF DELIVERYPUSAN, KOREASEOUL, KOREA

DESCRIPTION OF GOODS

FROZEND BONELESS CHICKET QUARTERS

27,442

CONSIGNOR:A N Other Export Company USABig City United StatedUSA

CONSIGNEE:Unknown Importer Russia

NOTIFY PARTY:CONSIGNEE

PORT OF LOADING PORT OF DISCHARGENEW YORK PORT ST PETERSPURG

BILL OF LADING

TO BE USED FOR CHARTER PARTIES

No: BL NO 765432

Number of Originals Issued: : 3

VESSEL

OCEAN WARRIOR v101

THIS SINGLE PIECE OF PAPER IS VISIBLY A ’SMUDGY’ PHOTOCOPY

ICC Opinions

TA858rev – on board notation on B/L showing incorrect vessel

13 •

Details of the query:

DC information:

A documentary credit (SWIFT MT700) included the following transport information: 44E: Port of Loading/Airport of Departure ANY PORT IN EUROPE 44F: Port of Discharge/Airport of Destination H PORT, COUNTRY V 46A: Documents Required FULL (3/3) SET OF ORIGINAL CLEAN ‘SHIPPED ON BOARD’ OCEAN BILL OF LADING, MADE OUT TO THE ORDER OF [ISSUING BANK], MARKED ‘FREIGHT PREPAID’ AND NOTIFY APPLICANT WITH FULL NAME AND ADDRESS. B/L MUST SHOW NAME, ADDRESS, TEL NO., FAX NO OF SHIPPING AGENT IN [COUNTRY V]. B/L SHOWS SHIPPING AGENT LOCATED IN COUNTRY DIFFERENT FROM [COUNTRY V] UNACCEPTABLE.


14 •


Document information

Refusal:

B/L ON BOARD NOTATION SHOW[S] PRE-CARRIAGE I/O OCEAN VESSEL

Is this a valid discrepancy?


15 •


Conclusion:

The discrepancy is valid. The Bill of Lading requires a dated on board notation indicating vessel O and Port H

Analysis:

Sub-article 20 (a) (ii) requires that a bill of lading indicate that the goods have been shipped on boarda named vessel at the port of loading stated in the credit, by pre-printed wording or a dated on boardnotation. The rule in sub-article 20 (a) (iii) was not drafted with the intention of covering asituation where a bill of lading indicates that shipment is being effected on two vesselsapparently leaving from the same port.Example 3 in R350 refers to a bill of lading with the same structure as outlined in the query. Theconclusion for example 3 stated that the bill of lading “would require the insertion of an on boardnotation (even if the bill of lading is pre-printed “shipped on board”) which clearly states the date thegoods were loaded on board, the name of the ocean vessel and the port of loading (Hong Kong).

TA853rev – Required data on Draft & Courier receipt

16 •


DC information:1. Field 42: Draft at sight drawn on the issuing bank2. Field 46A (amongst other) Beneficiary’s certificate

certifying that copy documents sent applicant together with the relevant courier receipt

3. Field 47A: All documents to show contract number and dateDocument informationThe contract number and date were not shown on the draft or courier receipt, but were included in the beneficiary’s certificate and on the other documents

Refusal:• Draft does not show contract number and date. • Courier receipt does not show contract number and date.


17 •


Questions:1. Is there a difference in meaning between ‘All documents’ and ‘Shipping documents’? If so, what is the difference? If not, was the nominated bank correct in respect of the discrepancies noted to the beneficiary?

2. Do the exceptions stated in ISBP 745 paragraph A19 (a) for ‘Shipping documents’ also apply to other references to ‘documents’ such as ‘All documents’?

3. If a draft is not to be examined as a document except as stated in ISBP 745 paragraphs B2 to B17, can a draft be declared discrepant when the credit refers to a requirement for certain information to be shown on “All Documents” and the draft does not show the same?

Conclusion:1. The term ‘All documents’ does not include a draft. A draft is an unconditional order in writing and not a document. When a credit refers to ‘Shipping documents’, ISBP 745 paragraph A19 (a) provides a list of the documents that are not included within that term. The nominated bank was not correct.

2. A document stipulated in the credit is subject to any terms and conditions that are to be applied to it, subject to the analysis given.

3. If certain information is to appear on a draft, it must be specifically stated in the credit


18 •


Analysis:

The requirement in the credit was for all documents to show the contract number and date. If the contract number and date were also to appear on the draft, this should have been specifically stated in field 47A

ICC Opinion R696/TA583rev states that a ‘beneficiary statement’ and an accompanying courier receipt form part of the same documentary requirement and either the ‘statement’ and the courier receipt or the ‘statement’ alone may indicate the credit number.

TA869rev – The case of 8 containers

19 •

Presentation information:1. 1st Presentation – USD 26,400.00 - 3 containers with 132 MT2. 2nd Presentation – USD 44,000.00 - 5 containers with 220 MT


DC information:Extracts from the documentary credit:32B Currency Code, Amount: USD 80,000.0039A Percentage Credit Amount Tolerance: 10/1043P Partial Shipments: ALLOWED45A Description of Goods and/or Services:400 MT WIDGETS AT USD200.00/MT, PACKED IN 8 CONTAINERS46A Documents Required:1 ORIGINAL INVOICE, 3/3 ORIGINAL B/Ls47A Additional Conditions:BOTH QUANTITY AND AMOUNT 10 PCT MORE OR LESS ALLOWED


20 •


Presentation information:The issuing bank refused the second presentation citing the following discrepancies:

1. Short shipment in 8 containers2. LC amount short drawn


21 •

Conclusion:The second presentation was not compliant

Analysis:This particular query includes specific requirements i.e.: 400 MT plus/minus 10% (i.e., a quantity between 360 MT and 440 MT) to be packed in 8 containers.

(partial shipment ALLOWED)

By the time 8 containers are utilised, the quantity of goods shipped is to be between 360 and 440 MT.

The second presentation was discrepant for the reason that the quantity of goods shipped and containers utilised in the first two drawings were 352 MT and 8 respectively, with a total drawing amount of USD 70,400 whereas the LC required that where 8 containers were utilised, the quantity shipped would be between 360 and 440 MT with a commensurate value of between USD 72,000 and USD88,000.

The second presentation was discrepant.

1st Commercial Invoice In 3 containers 132 MTBLUE WIDGETSA123B123C123 ___________

USD26,400.

2nd Commercial Invoice In 5 containers 220 MTBLUE WIDGETSD123E123F123 G123H123 ___________

USD44,000.

3RD Commercial Invoice In 2 containers 88 MTRED WIDGETSG123H123

___________USD17,600.

URDG 758 WORDING ON COUNTER GUARANTEE

“BIG COUNTERGUARANTOR BANK”:WE UNDERTAKE TO PAY TO YOU WITHOUT RESERVATION AND

NOTWITHSTANDING ANY CONTESTATION FROM OUR PRINCIPAL OR ANY THIRD PARTY ANY SUM OR SUMS DUE FROM TIME TO TIME NOT EXCEEDING IN TOTAL THE AMOUNT OF MAXIMUM USD 10 MILLION US DOLLARS IN RESPECT OF ALL CONTRACT LIABILITIES PRIMARY OR SECONDARY.

PAYMENT WILL BE MADE UPON RECEIPT BY US OF YOUR FIRST DEMAND QUOTING OUR COUNTER GUARANTEE NO.INTGU007 IN WRITING OR BY AUTHENTICATED SWIFT-MESSAGE WHEREIN YOU STATE THAT YOU HAVE RECEIVED A CLAIM FROM THE BENEFICIARY WHICH IS WITHIN THE VALIDITY AND IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF LOCAL ADVANCE PAYMENT GUARANTEE AND A COPY OF THE BENEFICIARY'S CLAIM HAS BEEN MAILED TO US’

SUBJECT TO URDG758 OF ICC”

“SHORT IS GOOD”

WORDING ON COUNTER GUARANTEE “SHORT IS GOOD”

“BIG BANK IN CHINA:WE UNDERTAKE TO PAY TO YOU WITHOUT RESERVATION AND

NOTWITHSTANDING ANY CONTESTATION FROM OUR PRINCIPAL OR ANY THIRD PARTY ANY SUM OR SUMS DUE FROM TIME TO TIME NOT EXCEEDING IN TOTAL THE AMOUNT OF MAXIMUM USD 10 MILLION US DOLLARS IN RESPECT OF ALL CONTRACT LIABILITIES PRIMARY OR SECONDARY.

PAYMENT WILL BE MADE UPON RECEIPT BY US OF YOUR FIRST DEMAND QUOTING OUR COUNTER GUARANTEE NO.INTGU007 IN WRITING OR BY AUTHENTICATED SWIFT-MESSAGE WHEREIN YOU STATE THAT YOU HAVE RECEIVED A CLAIM FROM THE BENEFICIARY WHICH IS WITHIN THE VALIDITY AND IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF LOCAL ADVANCE PAYMENT GUARANTEE AND A COPY OF THE BENEFICIARY'S CLAIM HAS BEEN MAILED TO US’

SUBJECT TO URDG758 OF ICC”

TOWARDS DIGITISATION OF GUARANTEES

2929

EXTRACT TEXT OF COUNTER GUARANTEE TO LOCAL GUARANTOR

USD10,000,000.00 say ten million united states dollars …….“ WE UNDERTAKE TO PAY TO YOU WITHOUT RESERVATION AND NOTWITHSTANDING ANY CONTESTATION FROM OUR PRINCIPAL OR ANY THIRD PARTY ANY SUM OR SUMS NOT EXCEEDING IN TOTAL THE AMOUNT OF USD 10 MILLION US DOLLARS UPON RECEIPT BY US OF YOUR FIRST DEMAND QUOTING OUR COUNTER GUARANTEE NO.LG612011100018 IN WRITING OR BY AUTHENTICATED SWIFT-MESSAGE WHEREIN YOU STATE THAT YOU HAD RECEIVED A CLAIM FROM THE BENEFICIARY WHICH IS WITHIN THE VALIDITY AND IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF YOUR A/M ADVANCE PAYMENT GUARANTEE AND A COPY OF THE BENEFICIARY'S CLAIM HAS BEEN MAILED TO US.”

EXTRACT TEXT OF GUARANTORS CLAIM ON COUNTER GUARANTOR“WE HAVE RECEIVED A CLAIM FROM THE BENEFICIARY WHICH IS WITHIN THE VALIDITY AND IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF YOUR A/M ADVANCE PAYMENT GUARANTEE AND A COPY OF THE BENEFICIARY'S CLAIM HAS BEEN MAILED BY US TO YOU.

C- GUARANTOR rejection on the fifth business day following presentation stating one single discrepancy:

‘copy of bene's claim was not presented’




Thanks you for your valuable time!