When “Better” Is Not Good Enough

Intro

In documentary credit practice, banks deal not with common sense but with strict compliance. Even if a document seems more reliable than what was asked for, the key question remains: does it match the LC conditions exactly?

Question

An L/C stated in Field 47A:

“AT LEAST 14 DAYS DEMURRAGE AND DETENTION FREE AT DESTINATION TO BE CONFIRMED ON B/L OR SEPARATELY CERTIFICATE ISSUED BY BENEFICIARY INDICATING THAT AT LEAST 14 DAYS DEMURRAGE AND DETENTION FREE AT DESTINATION MUST BE PRESENTED.”

In the presentation:

• The bill of lading did not contain the required statement.
• A separate certificate did contain the statement, but it was issued by the carrier’s agent (who also issued and signed the bill of lading), including the B/L number and date, vessel name, and voyage number.

The issuing bank rejected the documents, citing:

“Certificate required in Field 47A not issued by beneficiary.”

The nominated bank disagreed, reasoning that the certificate was even stronger since it came from the carrier’s agent, and drew an analogy to ISBP 821 paragraph L3(c)(i).

Who is correct?

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(Question taken from Trade Services Update Forum)

Answer

The LC wording provided two alternatives:

• Either the bill of lading itself must contain the required statement, or
• A separate certificate must be issued by the beneficiary.

In this case, the bill of lading did not carry the statement, and the certificate, though it contained the required wording, was issued by the carrier’s agent—not the beneficiary.

It may be argued that a certificate from the carrier or its agent is “better” than one from the beneficiary. However, this reasoning is not supported by UCP 600 or ISBP. On the contrary, ISBP paragraph A20 is clear: if a credit specifies that a document must be issued by a particular entity, then it must be issued by that entity.

Conclusion

Commercially, the nominated bank’s argument appeals to common sense, but under strict compliance, the issuing bank is correct. The discrepancy is valid for refusal.

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Mr. Old Man