ICC Official Opinion

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ICC Official Opinion

Postby shahriar - Bangladesh on Tue Apr 26, 2011 11:22 am

Dear all,

a quote from LC views

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 dishonored due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy?

Answer (from T.O. Lee) From the "function of a document" point of view (a concept stated in paragraph 41 of ISBP 681 and article 14 (v) of UCP 600), such an endorsement (from B to A) is even better than the original endorsement (shipper S to A) as required by the credit.


is there any official opinion on this issue? Thanks for your help. :)

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I'm not sure

Postby ghubshawi - on Wed Apr 27, 2011 2:14 am

I'm not sure whether there is an official opinion or not, but IMHO, I see the answer given by T.O.Lee is not accurate as the requirement of the letter of credit is very clear with regard to the indorsement in the name of party A, hence the bank is not required to make any guess.

Rgds,

Ghubshawi (after v.long time)

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consignee on BL

Postby mia vervacke - on Wed Apr 27, 2011 2:00 pm

I refer to CDCS practise test no. 4 on this site question 5

A letter of credit calls for a bill of lading issued to the order of the issuing bank. The presented BL shows that it was made out to order of shipper and endorsed to order of issuing bank. Is this BL acceptable?

Choose at least one answer: YES
NO


Correct answer is NO

I will try to find an official opinion on this.

Mia

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multiple endorsements

Postby loankim - Viet Nam on Wed Apr 27, 2011 3:08 pm

Dear All,
Pity that i do not have the answer for Shahriar's case, but anyway it makes me think abt this from Mr. Collyer.
Ask: The LC requirement was ‘Full set of 3/3 clean on board Charter Party Bill of Lading made out to Order and blank endorsed.Documents rejected by the Issuing Bank quoting the following discrepancy - ‘B/L endorsed by shipper to the order of [name of bank] and then they endorsed to [named company] who then endorsed in blank, which is different from LC requirement”.The discrepancy picked up by the issuing bank is valid I invalid? ”.
Answer: Provided the endorsement made by [named company] was in blank i.e., they did not endorse to another [named] patty then the document would be acceptable. The language in the IC does not prohibit multiple endorsements, provided that the final endorsement is in blank.

It seems that the answer aimed at LC as tool of payment than tool of refusal. But im thinking abt the answer from T.O. Lee, such an endorsement is better, can i infer multiple endorsements is better than once?? Just link with what Collyer said ".. The language in the LC does not prohibit multiple endorsements.."- If it is better so why do people think abt prohibition in the content of credit in reality ??!
I would like to seek yr comments !

Rgds,

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ICC Opinion

Postby abrar - on Wed Apr 27, 2011 6:12 pm

I too have been searching for an Official Opinion on this issue but without success.

The commonsense view is that the document as made out should be acceptable, because the end result achieves the intention. I am surprised that the practice questions as indicated by Mia would show this as a discrepancy, whereas Garry Collyer's view is the one that most practioner's would agree on. To an extent, refusal on this basis would lead us back to pre UCP600 days allowing banks to reject more documents on frivolous technicalties, rather than attemting to facilitate payment.

On the issue raised T.O. Lee, whilst I agree that a endorser of the B/L is better protected under negotiable instruments law, the position of an endorsee is no different under such a B/L than that under a B/L made out to (or to order of ) Party A. Whereas, under a bill of exchange, each successive holder (by endorsement) acquires a better title than the previous endorser (free of any claims of fraud etc) a Bill of Lading is considered to be a "quasi" negotiable instrument, because this inherent quality does not apply to B/Ls, and each holder takes on the defects in title (if applicable) of the previous endorsers.

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Endorsement

Postby berry - on Wed Apr 27, 2011 7:25 pm

i always had difficulty understanding this issue. however someone told me that even the purpose is served, the fact is these two are not same from legal point of view and there could be many a slip between the cup and the lip. so its better to count it as a discrepancy. later i found this from collyer

Question A credit calls for the bill of lading to be issued to the order of the issuing bank. The presented bill of lading has been issued to order of the shipper or to order, and endorsed by the shipper on the back of the document, to the order of or in favour of the issuing bank. Please advise whether this bill of lading is acceptable.
Answer The credit required presentation of a bill of lading issued to order of the issuing bank NOT "issued to order or endorsed to the order of the issuing bank". If the bill of lading is not issued to order of the issuing bank it does not comply with the credit terms.


:(

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Opinion

Postby abrar - on Wed Apr 27, 2011 7:49 pm

berry wrote:i always had difficulty understanding this issue. however someone told me that even the purpose is served, the fact is these two are not same from legal point of view and there could be many a slip between the cup and the lip. so its better to count it as a discrepancy. later i found this from collyer

Question A credit calls for the bill of lading to be issued to the order of the issuing bank. The presented bill of lading has been issued to order of the shipper or to order, and endorsed by the shipper on the back of the document, to the order of or in favour of the issuing bank. Please advise whether this bill of lading is acceptable.
Answer The credit required presentation of a bill of lading issued to order of the issuing bank NOT "issued to order or endorsed to the order of the issuing bank". If the bill of lading is not issued to order of the issuing bank it does not comply with the credit terms.


:(


But doesn't this contradict Garry Collyer's earlier comments?

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contradict

Postby berry - on Wed Apr 27, 2011 9:28 pm

dear abrar, i believe it contradicts with many thing. by the way, could you please tell me which answer from collyer you are referring to? it would be nice if you could please quote it for us

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ICC opinion

Postby abrar - on Wed Apr 27, 2011 11:59 pm

berry wrote:dear abrar, i believe it contradicts with many thing. by the way, could you please tell me which answer from collyer you are referring to? it would be nice if you could please quote it for us


Sorry, I was intending to refer to loankim's comments as below which contained the said reference.

"Dear All,

Pity that i do not have the answer for Shahriar's case, but anyway it makes me think abt this from Mr. Collyer.

Question: The LC requirement was ‘Full set of 3/3 clean on board Charter Party Bill of Lading made out to Order and blank endorsed.Documents rejected by the Issuing Bank quoting the following discrepancy - ‘B/L endorsed by shipper to the order of [name of bank] and then they endorsed to [named company] who then endorsed in blank, which is different from LC requirement”.The discrepancy picked up by the issuing bank is valid or invalid? ”.

Answer: Provided the endorsement made by [named company] was in blank i.e., they did not endorse to another [named] party then the document would be acceptable. The language in the IC does not prohibit multiple endorsements, provided that the final endorsement is in blank. "

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contradiction?

Postby mia vervacke - on Thu Apr 28, 2011 1:52 am

IMHO there is no contradiction between the two answers of Mr Collyer.

The statement quoted by Loankim considers the endorsement of a bill of lading

multiple endorsements

Ask: The LC requirement was ‘Full set of 3/3 clean on board Charter Party Bill of Lading made out to Order and blank endorsed.Documents rejected by the Issuing Bank quoting the following discrepancy - ‘B/L endorsed by shipper to the order of [name of bank] and then they endorsed to [named company] who then endorsed in blank, which is different from LC requirement”.The discrepancy picked up by the issuing bank is valid I invalid? ”.
Answer: Provided the endorsement made by [named company] was in blank i.e., they did not endorse to another [named] patty then the document would be acceptable. The language in the IC does not prohibit multiple endorsements, provided that the final endorsement is in blank.



The statement quoted by Berry considers the consignee of a bill of lading


Question A credit calls for the bill of lading to be issued to the order of the issuing bank. The presented bill of lading has been issued to order of the shipper or to order, and endorsed by the shipper on the back of the document, to the order of or in favour of the issuing bank. Please advise whether this bill of lading is acceptable.
Answer The credit required presentation of a bill of lading issued to order of the issuing bank NOT "issued to order or endorsed to the order of the issuing bank". If the bill of lading is not issued to order of the issuing bank it does not comply with the credit terms.

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Contradiction ?

Postby abrar - on Thu Apr 28, 2011 2:18 am

mia vervacke wrote:IMHO there is no contradiction between the two answers of Mr Collyer.

The statement quoted by Loankim considers the endorsement of a bill of lading

multiple endorsements

Ask: The LC requirement was ‘Full set of 3/3 clean on board Charter Party Bill of Lading made out to Order and blank endorsed.Documents rejected by the Issuing Bank quoting the following discrepancy - ‘B/L endorsed by shipper to the order of [name of bank] and then they endorsed to [named company] who then endorsed in blank, which is different from LC requirement”.The discrepancy picked up by the issuing bank is valid I invalid? ”.
Answer: Provided the endorsement made by [named company] was in blank i.e., they did not endorse to another [named] patty then the document would be acceptable. The language in the IC does not prohibit multiple endorsements, provided that the final endorsement is in blank.



The statement quoted by Berry considers the consignee of a bill of lading


Question A credit calls for the bill of lading to be issued to the order of the issuing bank. The presented bill of lading has been issued to order of the shipper or to order, and endorsed by the shipper on the back of the document, to the order of or in favour of the issuing bank. Please advise whether this bill of lading is acceptable.
Answer The credit required presentation of a bill of lading issued to order of the issuing bank NOT "issued to order or endorsed to the order of the issuing bank". If the bill of lading is not issued to order of the issuing bank it does not comply with the credit terms.



Yes. Absolutely right! On reviewing the queries (properly this time #-o ) I would concede that the correct responses have been given and are not in themselves, contradictory. However, I still believe it is the effect of the final version of the document after any/all endorsements have been made that should determine compliance.

Turning the query on its head, if for example, the LC had called for B/Ls made out “to order” and blank endorsed, and the presented B/L evidenced Party A as consignor and “To order of” Party B as consignee, but bearing blank endorsement by Party B, such a document would be discrepant by virtue of the analysis, because the consignee is not shown as “To order” and omits to bear endorsement in blank by Party A. The effect would have been achieved but the document would still be discrepant on a mere technicality

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