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FRAUDS IN IMPORT EXPORT BUSINESS - TIME TO EXERCISE MORE CAUTION by Dr.

Amit Kumar Chatterjee


Global economic meltdown has severely strained companies engaged in export import business. Absence of buyers from market is driving
many exporters to accept export orders which they otherwise would have declined for lack of prudential norms.
Ironically, this is the time to exercise more caution as fraudsters may exploit present desperation in market to target more exporters with
seemingly lucrative deals. Exporters should be very cautious about certain geographical regions which have become a favorite destination for
fraudsters and con artists. Some may find it sweeping generalization or even unfair treatment - but the fact remains that there is no sign of a
decline in scam proposals even after wide publication of Nigerian and other scams. Worse, the fraudster populations seem to be growing
everyday with newer and more daring con games. Victims have nowhere to go as there is no law court or policing authority against these
fraudsters. Exporters and importers should be careful of various seemingly lucrative proposals coming from certain regions and countries such
as Nigeria, Benin, Togo, Cote' D Ivory etc. and exercise enough caution.
We document here a few scams. Some of these are specific to certain geographic regions - others more universal.
Nigerian Money Offer (419 scam)
This is by far the most popular one - where Nigerian businessman, Bank Manager, Govt Bureaucrat or just about anybody offers huge sums for
small help in siphoning money out of their country. We have written many articles on this scam (also called Nigerian 419 scam). One may get
an exhaustive list of scams and gain more information on suspect regions at this b2b portal for Indian exporters
Nigerian Oil Fraud (Bony Crude)
Bonny Light oil is a grade of crude oil produced in the Bonny region of Nigeria. Fraudsters present lucrative and legitimate looking offer for
this oil. These self-declared oil traders offer to sell as much as 1,000,000 barrels of Bonny Light oil at below market rates. In many cases, they
are able to present legitimate trade and shipping documents, acknowledging the seller's oil allocation rights. Buyers who accept these trades are
persuaded to provide significant cash fees up front. The charges are normally in the region of $50,000. Fraudsters claim the charges are for
anything from agency fees to reassignment charges.
ICC's International Maritime Bureau (IMB) has found that a variety of false supporting documents are being used, all of which allegedly
feature the corporate logos of legitimate international companies, such as the Nigerian National Petroleum Corporation.
In the majority of cases seen by the IMB, this forged paperwork includes the following documents:
- Joint Venture Contract Agreement for the Sale and Purchase of Nigerian Crude Oil; - Charter Party; MOU between Nigerian sellers and
named buyer; - Master's Receipt of Documents; - Certificate of Authenticity; - Joint Venture Bill of Lading; - Master's Receipt for Samples; Cargo Manifest; - NNPC Bonny Terminal Certificate of Quantity; - Certificate of Quality.
Often these meticulously forged documents name vessels that actually loaded oil cargoes at Bonny. The vessel's stamp and master's name though not the signature - are often also correct. The genuine cargo, however, is consigned to a completely different party.
Illegal Immigrants Disguised as Buyers or Agents. Fraudsters run illegal immigration racket in the disguise of export Import Company. They
offer to send buyers or agents for negotiation, inspection of manufacturing facility etc. and request official invitation letter from exporter/
manufacturer. Visa, obtained by producing these genuine papers, is then used to send illegal job-seekers.
When in doubt, please check the age and position of the visitor. Very young or low ranking buyers should arouse suspicion. If you receive
request for groups of buyers - please check the credibility of the company thoroughly.
Un-Collectable Payment
If you receive Letter of Credit (L/c) from an unknown local bank, be sure to check the bank's credibility. If there are any doubts about its
financial condition, it is advisable to request confirmation of the L/C from a reliable bank.
Refusing payment for Remaining Shipment
This is a common trick where the fraudster gains trust of exporter in first part of a deal by making immediate payment by T/T. However, he
refuses to pay for second part of the shipment. When working on a T/T basis, there is very little an exporter can do if importer refuses to pay. It
pays to remain alert - one successful deal should not change all equations.
Avoid Payment through Changed Identity
Some importers deliberately shut down their existing companies and set up new ones in order to avoid payment, leaving exporters unable to
collect money. If your partner suddenly changes his or her company's name and places a big order on credit, it is wise to check the company's
legal status on the export contract and shipping documents.
1.

A documentary credit subject to UCP 500 bears a title "Irrevocable Documentary Credit" has a special condition as follows:
"This documentary credit will become inoperative upon receipt of a cable to this effect from the issuing bank after issuance."
After receipt of such a cable advice, the beneficiary made a presentation nevertheless. The issuing bank sent a refusal notice by SWIFT
pointing out a discrepancy as follows: "Documents presented after expiry of the documentary credit render the presentation discrepant."
Is the issuing bank correct in its refusal? What would be the situation if the same credit is subject to UCP 600?
2. Is the following refusal notice acceptable for a DC subject to UCP 600?
"We refuse the documents and have found the following three discrepancies in the presented documents:
1. The port of discharge in the B/L is not the same as that stated in the DC.
2. Presentation after expiry.
3. Corrections in the certificate of origin are not authenticated by the issuer."
3. What is an "unconfirmed letter of credit" under UCP 600?
4. Is it possible that a confirmed letter of credit subject to UCP 600 becomes an unconfirmed L/C without the consent of the beneficiary?
5. Is the following refusal notice acceptable for a DC subject to UCP 600?
"We have found the following three discrepancies in the presented documents:
1. The port of discharge in the B/L is not the same as that stated in the DC.
2. Presentation after expiry.
3. Corrections in the certificate of origin are not authenticated by the issuer.
Meanwhile we are holding the documents at your disposal and risk."

6. An applicant informed the issuing bank that the goods were rubbish and asked the issuing bank to freeze payment under a DC subject
to UCP 500/600 due to trade frauds although the documents presented were all compliant. Should the issuing bank follow the instructions
from the applicant?
7. Is this refusal notice acceptable for a DC subject to UCP 600?
"We refuse to pay you due to the following three discrepancies:
1. The commercial invoice does not meet the terms and conditions of the DC.
2. Third party B/L presented.
3. Unclean B/L presented.
Meanwhile we are holding the documents at your disposal and risk."
8. A DC subject to UCP500 issued by Bank I was confirmed by Bank C expiring on 1 Sept 2002. There was no restriction on the
presentation. The beneficiary presented the documents to Bank I on 29 Aug 2002. Is this the best practice? What are the risks?
If the DC were subject to UCP 600, would your answer be the same?
9. A presenting bank had the following messages in its covering letter/schedule dated 24 July 2007 presented against a DC subject to
UCP 600: "We have found the following discrepancies in the documents:
1. The port of discharge in the B/L is not the same as that stated in the DC.
2. Presentation after expiry.
3. Corrections in the certificate of origin are not authenticated by the issuer.
The documents are now presented for collection. Please approach the applicant for a waiver and give us your authority to negotiate by
SWIFT message."
The issuing bank sent its refusal notice as follows:
"After consulting the applicant, we determine to refuse the documents due to the three discrepancies with the underlying reasons as
stipulated in your covering letter/schedule dated 24 July 2007. Meanwhile, we are holding the documents at your disposal and risk."
10. A nominated paying bank sent three refusal notices on the same day under a DC subject to UCP 600. The 1st notice was sent by fax
listing all the discrepancies with reasons; the second notice made by telephone advising payment dishonour and the third notice sent by telex
advising that documents were returned to the presenter by local courier. Is this acceptable? Please state yr reasons.
11.
UCP 600 article 3 states that: "Branches of a bank in different countries are considered to be separate banks."
UCP 500 Article 2 states that: "For the purpose of these Articles, branches of a bank in different countries are considered another bank."
Charles del Busto explained in ICC Publication No. 511 "UCP 500 and 400 Compared" that the underlying reason is because branches of the
bank in different countries may be subject to different jurisdictions. What is legal for the head office of a bank may not be also legal in its
branches in different countries. Hong Kong was a British territory before 1 July 1997. After 1 July 1997, Hong Kong became part of the
People's Republic of China (PRC) but it practises "One Country Two Systems" whereby the applicable law in Hong Kong is the Basic Law
(Common Law) whereas that of PRC is Civil Law.
On 24 July 2007, a documentary credit subject to UCP 600 issued by Bank ABC Beijing Head Office was advised by its branch in
Hong Kong. There were disputes on the discrepancies between the Beneficiary and the Bank ABC Head Office. The Beneficiary's law
firm served a strong letter to Bank ABC Hong Kong Branch showing its intent to sue it in Hong Kong unless payment was made
within 14 days. Bank ABC Hong Kong Branch replied as follows:
"Due to different jurisdictions between Hong Kong and PRC, we are in fact a different bank according to the provisions of UCP 600 article
3, based on the interpretation of Charles del Busto in ICC Publication No. 511 "UCP 500 and 400 Compared". Hence as an advising bank
we have no payment obligations. Your client, as a beneficiary, should sue our Head Office in Beijing instead."
Is the defence of Bank ABC Hong Kong Branch correct?
12. The applicant showed to the beneficiary a written undertaking from the issuing bank for its agreement to issue a letter of credit subject
to UCP 600. However, due to change in financial position of the applicant, the issuing bank later decided not to do so. The beneficiary wrote
to the issuing bank to force its commitment in writing. Is the beneficiary successful? Please give your reasons.
13. Under which condition that a confirmed L/C subject to UCP 600 may become unconfirmed without the consent of the beneficiary?
14. In determination of the compliance of a refusal notice with the UCP600, should the stipulations of UCP600 articles 14 &16 be read
separately for (a)document examination for compliance, (b)determination of refusal or acceptance & (c)sending of the refusal notice
respectively?
15. One set of Drafts drawn on the drawee bank presented under a documentary credit subject to UCP 600 expiring on 30 Aug 2007 was
accepted on 30 July 2007 for 30 days deferred payment but was unpaid on maturity 30 August 2007. According to UCP 600 article 7 (a) (iv)
the beneficiary made a new set of "replacement" Drafts drawing on the issuing bank on 3 September 2007. The issuing bank refused to pay
the Drafts because they were drawn and presented after expiry of the DC. Is the issuing bank correct in its decision? Please state yr reasons.
16. An issuing bank sent its refusal notice on the 5th banking day after receipt of the docs presented under UCP 600. In fact a simple set of
docs was presented for sales of kitchenware, consisting of a total of 12 pages of docs. Is this refusal notice sent within reasonable time?
17. An issuing bank sent its refusal notice to a presentation under UCP600 to a presenting bank overseas by courier. Is this acceptable?
18. Under UCP600, can a beneficiary, through a presenting bank, have the right to present docs against a confirmed L/C directly to the
issuing bank?
19. A standby letter of credit subject to UCP 600 was issued to back up an "open account" transaction where payment was made only 30
days after the "shipped on board" date. The standby required presentation of Drafts in duplicate, one Default Statement signed by the
Beneficiary, one copy of Commercial Invoice and one copy of "shipped on board" B/L. It also specified that no presentation could be made
until after default in payment. The Issuing Bank sent its Refusal Notice as follows:
"We refuse to pay due to the following discrepancy in the B/L:
The copy of B/L was presented more than 21 days after shipment, which is against the stipulation in UCP 600 article 14 (c)."
Is the Issuing Bank correct in its refusal decision?
20. For a DC subject to UCP 600, what should the presenting bank advise the beneficiary who asks for direct presentation to the issuing
bank, thereby by-passing the confirming bank?

21. A standby LC issued by Bank I was confirmed by Bank C expiring on 1 September 2002. There was no restriction on the presentation.
The beneficiary presented the documents to Bank I on 29 August 2002 but was wrongly dishonoured 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 2002. The beneficiary presented the same documents without
any alteration to the confirming bank on 6 September 2002. 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:
"Purchase Contract No. 123456 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 2007 12:12:22 pm". Is thisB/L 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 instalment shipment
made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three instalment shipments.
However, the issuing bank did not clarify whether or not the DC was still valid for subsequent instalment shipments.
After a period of time, the beneficiary presented compliant documents for the second instalment 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 dishonour 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 instalment shipments. So the issuing bank
should bear the serious consequences for its negligence and should effect payment of the second instalment 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 instalment shipments after waiving the discrepancy in the first instalment shipment.
b. Discrepancy and waiver are two separate issues. The wavier cannot change the nature of a discrepancy. A
discrepancy always remains a discrepancy, whether being waived or not.
c. The discrepancy will trigger the following two consequences:
1. To dishonour payment according to UCP 600 articles 7, 14 & 16, and
2. To make the DC no more available for all future instalment shipments according to UCP 600 article 32.
d. So the wavier only waives the first consequence regarding payment but the second consequence affecting balanced
instalment shipments remains unwaived.
e. As a result, the issuing bank has no payment obligation for the second and the third instalment 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 UCP600 calls for full set of insurance policy but is silent on the No of originals issued. The Issuingbank refuses to pay due
to the insur.pol. presented does not indicate No of originals issued. Is the Issuingbank 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?
31. An insurance policy is issued on 10 August 2007 and the DC specifies the latest shipment date as 15 August 2007. The loaded on bard
date in the bill of lading is 9 August 2007. 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:
1. 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".
2. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC.
3. Partial shipments made and this is not allowed in the DC.
Is the issuing bank correct in its refusal?
26. 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 dishonoured due to name of Consignee in the bill of lading was not meeting the DC requirement. Is
this a discrepancy?
27. 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"?
28. Reimbursement instructions
A DC subject to UCP 600 specified a reimbursement instruction that reads:
"Upon receipt of full set of documents in conformity with the L/C 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 docs were however lost in transit by the courier co. The issuing bank refused reimbursement b/c reimbursement would only be effective
"upon receipt of docs" as specified in the reimbursement instruction quoted above. Is the issuing bank correct in its refusal decision?
29. 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?
30. 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?
31. 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:
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?
32. 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:
i.
"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.
ii.
Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms 2000.
Is the Issuing Bank correct in its determination of this discrepancy? Please state your reasons.
26. 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:
i.
"Come by chance in Canada" means "Any port at which the goods happen to be discharged in Canada". Come by Chance is
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).
ii.
Republic of China (Taiwan) is an independent country and not part of "China" according to President Chen Shui-bien and the
Democratic Progressive Party. Accordingly "China" should mean "People's Republic of China".
iii.
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?
27. Transport documents issued by freight forwarder not acceptable The L/C subject to UCP 600 states "Transport docs issued by
freight forwarder not acceptable" and a port-to-port B/L signed by freight forwarder as a carrier is presented. Is the B/L acceptable?
28. Freight Forwarder's Bill of Lading Acceptable The DC subject to UCP 500/600 states "Freight Forwarder's Bill of Lading not
acceptable" and the bill of lading presented is issued by a freight forwarder in the capacity of a carrier. Is the bill of lading acceptable?

29. Negotiation by A Confirming Bank


An acceptance L/C subject to UCP 600 was confirmed by a confirming bank with drafts drawn on the confirming bank at 180 days after
shipment date. The issuing bank, upon request by the applicant, who accepted the request from the beneficiary, later amended the L/C to be
available for negotiation by the confirming bank. The confirming bank then requested the issuing bank to amend the L/C for drafts to be
drawn on the issuing bank.
Q1
Is this a violation of international standard banking practice where the drafts should be drawn on the confirming bank after
confirmation was added?
Q2 What is the intent of the confirming bank for making such a request?
Q3 What is the risk for the issuing bank after accepting such a request?
30. Bill of Lading Consigned to Order of Issuing Bank
A DC subject to UCP 600 required presentation of copy of a set of original bills of lading consigned to order of Issuing Bank in country A
with full set of originals sent directly to the Applicant, quoting DC No. on bills of lading.
The Issuing Bank refused payment due to valid discrepancies by giving valid notice of refusal.
Meanwhile a third party sent for D/Acollection under URC522 full sets of same original bills of lading to another Branch of Issuing Bank in
countryB (now acting as RemittingBank) to endorse to another CollectingBank to facilitate delivery after acceptance of drafts.
The Beneficiary claimed payment from the Issuing Bank due to its endorsement on the original bills of lading, resulting the goods being
delivered by the Applicant. Should the Issuing Bank be liable for this claim?
31. Extension of Confirmation After An Amendment
A DC, subject to UCP 600, available for 30-day deferred payment of USD200,000, covering furniture items of Reconnaissance design
shipped from Hong Kong to Jeddah, Saudi Arabia was confirmed by the Advising & Nominated Bank. An amendment added USD100,000
for framed oil paintings with pornographic themes. The Confirming Bank advised the amendment without adding confirmation to
USD100,000 because pornographic works would be confiscated by the Saudi Arabian import authorities due to religious reasons. The
Beneficiary argued that (a) DC deals with documents not with goods (b) A bank should not speculate the intention of the parties in
international trade and (c) since both the Issuing Bank and the Applicant agreed to the amendment, they were the parties to take this risk, not
the Confirming Bank that could claim reimbursement from the Issuing Bank regardless as whether the goods were confiscated or not,
according to UCP 600 articles 7 (c) and 12 (b).
Q1. Does the Confirming Bank have a right to do so under UCP 600?
Q2. Would your answer be the same if it were DC transfer other than confirmation?
25. Restricted Endorsement on Bills of Lading The DC subject to UCP 600 required presentation of one set of original bills of lading
endorsed to the order of the applicant whilst the set of original bills of lading presented was endorsed in blank. Is this acceptable?
26. Open Endorsement on B/L The DC subject to UCP 600 required presentation of one set of original B/L made out to order and
endorsed in blank. A set of original B/L was presented made out to order of the beneficiary endorsed to the order of the applicant. Is this
acceptable?
27. Freight Receipt A DC subject to UCP 600 required presentation of a freight receipt without specifying its issuer and data content. A
freight receipt issued by the beneficiary was presented, certifying that the freight was received by the carrier. Is it acceptable?
49. Is an issuing bank obligated to transfer if the nominated transferring bank refuses to transfer?
A credit subject to UCP 600 provides transfer restricted to a nominated paying bank T that does not agree to transfer. The beneficiary asks for
transfer by the issuing bank I, regarding that since bank I chooses to provide transfer by a nominated bank T and that bank does not wish to
transfer, then bank I should have the obligation to transfer. Otherwise why bank I provides transfer in the first place if it does not wish to do
the transfer? Also a principle should carry out the task refused by its nominated agent.
50. Can an issuing bank refuse presentation of complying documents from a second beneficiary through a transferring bank?
A credit subject to UCP 600 is totally transferred to a second beneficiary S. The first beneficiary F fails to substitute the invoice and drafts
upon demand. The transferring bank T presents the complying documents from the second beneficiary S to the issuing bank I for honour. The
issuing bank I refuses to honour based on the following reasons:
a. The presentation is not from the first beneficiary F.
b. The unit price in the invoice is smaller than that stated in the credit.
c. The total value (in both the drafts and invoice) is less than that stated in the credit, creating under drawing.
51. Under UCP 600 can a transferring bank change the credit currency from USD to CAD in its transfer?
In a credit subject to UCP 600, the first beneficiary requests the transferring bank to change the currency of the credit from USD to
CAD in its transfer to the second beneficiary.
Q1
Can the transferring bank accept such request?
Q2
If the transferring bank nevertheless accepts the request, what terms and conditions should the transferring bank take?
52. UCP 600 uses terms like "banks", "banking days" and "international standard banking practice". Would this imply that UCP 600
couldn't be applicable to credits issued by non-banks? To answer this question we have to go back to the original intent of the UCP 600
Drafting Group.
53. Is "advance or agree to advance funds" in the definition of "negotiation" in UCP 600 article 2 same as "giving of value" or
"undertaking an obligation to make payment" in ICC Position Papers No. 2?
Negotiation is one of the most misled terms in UCP operations because the meaning of negotiation may be different from one region to
another, such as North America, Europe, Middle East and Asia. Hence it is almost impossible to create a perfect definition for "negotiation"
in UCP. As a result, the definition of "negotiation" in article 2 of UCP600 is not perfect and is still subject to disputes during the drafting
stage as well as after approval by the ICCNationalCommittees. For example, some bankers start asking ICCBanking Commission to provide
the definition of "purchase" used in article2 of UCP600. The more new words are introduced, the more clarification will be requested.
54. The scope of application for UCP 600 article 38 (k)
A credit subject to UCP 600 is fully transferred to a second beneficiary without any reduction in unit price and total value. The issuing bank
has been notified for the details of this transfer by the transferring bank. Meanwhile the first beneficiary has also received outside the credit

operations an agreed amount from the second beneficiary as its reasonable share of profits in the underlying transaction. In this arrangement,
it is obvious that there is no need for substitution of documents by the first beneficiary. Then can the second beneficiary bypass the
transferring bank and make direct presentation to the issuing bank?
55. Master Air Waybill v. House Air Waybill According to ICC Document 470/TA.621, if a credit requires expressly a master air
waybill, a house air waybill is also acceptable based on the following reasons:
i.
Wordings like "HAWB (house air waybill) No. XXXXX" in an air waybill is acceptable even if the credit expressly requires
a "master air waybill" .
ii.
The intent of this condition (requiring presentation of a master air waybill in a credit) is unclear.
iii.
Under Article 27 of UCP 500, as far as the air waybill is signed by a "carrier", it is acceptable. UCP 500 does not care
whether the carrier is an actual carrier or a contracting carrier.
iv.
This "master air waybill condition" does not prohibit signature by a freight forwarder.
v.
This ICC decision is based on ICC Opinion No.R 221(where the credit does not expressly require a master air waybill).
Do you agree with this ICC decision?
50. Lost of letter of credit advice If a credit advice by local mail is lost, is this advice duly given by the advising bank? A credit advice
has been lost in local mail.
Q1
Is such an advice considered as sent by the advising bank?
51. What Is A Banking Day?
After a long holiday, a letter of credit document checker Bob went to his office to work overtime on Sunday 6 July 2008 in Hong Kong. His
old classmate Jim called his mobile phone to invite him to lunch. When Jim knew that Bob was working in his office, he went to Bob's office
to pick him up for lunch at a restaurant just two blocks from Bob's office. He went into Bob's room and handed over Bob one set of
documents presented under a local letter of credit subject to UCP 600 where the issuing bank was Bob's bank branch. The presentation
consisted of a simple set of stipulated documents.
The notice of refusal was sent by fax on Monday 14 July 2008 pointing out 7 valid discrepancies. Jim's boss Don demanded payment from
Bob's bank because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived
automatically under article 16 (f) of UCP 600. Bob's office is not open on Saturday and Sunday.
Q1
Is Don correct in his demand?
Q2
What should Don have done to claim payment?
52. What Is A Place under Article 2 of UCP 600?
Bank I invited its VIP customer C to attend a real estate mortgage promotion campaign held on Tuesday 8 July 2008 on board a 100 feet
yacht near Lantau Island, Hong Kong, where the Hong Kong Disneyland is located. C met D on the yacht. D was a letter of credit document
checker for Bank I. C handed over to D one set of documents presented under a local letter of credit subject to UCP 600 where Bank I was
the issuing bank. The presentation consisted of a simple set of stipulated documents.
The notice of refusal was sent by fax on Wednesday 16 July 2008 pointing out 5 valid discrepancies. C demanded payment from Bank I
because the notice of refusal was sent on the sixth banking day and as a result of this, the discrepancies would be waived automatically under
article 16 (f) of UCP 600. Bank I was open on Tuesday 8 July 2008 but is not open on Saturday and Sunday.
Q1
Is C correct in his demand?
Q2
What should C have done to claim payment from Bank I?
53. Presentation to an Overseas Branch of a Bank
A credit subject to UCP 600 issued by the head office of an Indian international bank in New Delhi stated in SWIFT MT700 field 31D:
Presentation to us on or before 1 July 2008.
After being aware that there was not enough time to send the stipulated documents by courier to the head office of the issuing bank in New
Delhi, the beneficiary presented them to its branch in Hong Kong. When the documents arrived the head office, the expiry date was over and
a notice of refusal was sent to the beneficiary due to presentation after expiry.
The beneficiary argued that us on its face should include all branches of the Indian bank. If the issuing bank did really mean presentation
exclusive to the head office, the credit should have stated so clearly and precisely. Otherwise the benefit of doubts should go to the
beneficiary due to confusions created by such loose wordings.
Q1
Should the issuing bank honour the presentation under such circumstance?
54. Presentation to a Local Branch of a Bank
A credit subject to UCP 600 issued by State Bank of India head office in New Delhi stated in SWIFT MT700 field 31D:
Presentation to us on or before 1 July 2008.
Field 41a states:
Available with the State Bank of India by sight payment.
After being aware that there was not enough time to send the stipulated documents by courier to the New Delhi head office of the State Bank
of India, the beneficiary in Bangalore presented them to its branch in Bangalore, India. When the docs arrived the New Delhi head office, the
expiry date was over and a notice of refusal was sent to the beneficiary due to (i) presentation to the wrong branch and (ii) after expiry.
The beneficiary argued that us in field 31D and State Bank of India in field 41a, on their face, should include all branches of the State
Bank of India. If the issuing bank did really mean presentation exclusive to the New Delhi head office, the credit should have stated so
clearly and precisely. Otherwise the benefit of doubts should go to the beneficiary due to confusions created by such loose wordings.
Q1
Is the argument by the beneficiary valid?