An Unaccepted L/C Amendment: Can the Bank Refuse the Documents?

A Question Worth Discussing

An amendment changes the applicant’s address, but the bill of lading still shows the original address as required by the original L/C. The confirming bank refuses the documents, citing UCP 600 sub-article 14(j).

Is the bank right, or has it overlooked a fundamental principle governing the acceptance of amendments?

Arun Ambar raises an interesting question about the interaction between sub-articles 10(c) and 14(j) of UCP 600. Let’s examine the case.

Question

Dear Old Man,

Hope you are doing well.

I am seeking your opinion on the correct interpretation of UCP 600 Article 14(j). The case is as follows:

1. Field 50 (Applicant) of the original L/C states:

John Doe Company
746, ABC Street, Lex Avenue
Singapore

2. The bill of lading clause in the L/C states:

3/3 OBL consigned to order and showing notify party as “John Doe Company, 746, ABC Street, Lex Avenue, Singapore.”

3. An amendment was subsequently issued to the L/C.

Field 50 of the amendment states:

John Doe Company
746, ABC Street Corner, Lex Avenue, Off Cross 4th and 6th Street
Singapore

However, the bill of lading clause was not amended.

4. Documents were presented under the L/C as follows:

• The invoice continued to mention the applicant’s name and address as stated in the original L/C.
• The notify party details on the bill of lading also corresponded to the original L/C.

The confirming bank refused the documents, citing Article 14(j) of UCP 600, on the grounds that when the applicant’s address appears in the notify party field, it must comply with the L/C. According to the bank, the applicant’s address had been changed by the amendment.

My argument is that, since the L/C explicitly specifies the name and address to be shown in the notify party field, this requirement overrides the provision of Article 14(j). Furthermore, the bill of lading clause was not amended.

Had the L/C simply required the notify party to be shown as the applicant, without specifying the applicant’s address, Article 14(j) would have applied, and the amended address would have been required.

I would appreciate your expert opinion.

Best regards,
Arun Ambar

____

Answer

Dear Arun,

The relevant provision supporting your argument is UCP 600 sub-article 10(c), which states that the terms and conditions of the original credit remain in force for the beneficiary until the beneficiary communicates its acceptance of the amendment to the bank that advised the amendment.

In your case, assuming the beneficiary has not communicated its acceptance of the amendment, the presentation should be examined against the original L/C terms, not the unaccepted amendment.

Therefore, provided the documents comply with the original L/C, the confirming bank’s refusal is not justified on the grounds stated.

However, suppose the beneficiary has communicated its acceptance of the amendment.

In that case, under sub-article 14(j), the invoice would still be acceptable because the applicant’s address need not be identical to the address stated in the L/C, provided it is in the same country.

The bill of lading, however, would be discrepant because its notify party details do not correspond to the amended L/C requirement.

Best regards,
Mr. Old Man

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Further question

Thank you for your mail, Mr. Old Man. Let’s assume for a while that LC amendment has been accepted by the Bene.

I wanted to put forth following points for your consideration:

1. Applicant’s address has been changed in amendment.
2. The BL clause in original LC specifies what to mention under Notify Party. Any deviation from that would constitute a discrepancy. Am I right?
3. If the BL mentions new address of Applicant under Notify Party, will it not contradict LC conditions?

Hope you get my confusion. Please help to explain.

best,
Arun Ambar

+++

Answer

Dear Arun,

I would draw your attention to the second part of UCP 600 sub-article 10(c), which provides that if the beneficiary fails to give notification of acceptance of an amendment, a presentation that complies with the credit and any amendment not yet accepted by the beneficiary will be deemed to constitute notification of acceptance of that amendment.

Therefore, if the amendment is deemed to have been accepted by the beneficiary, the presentation must comply with the amended L/C terms.

In other words, the bill of lading must show the notify party details as required by the amended L/C.

Best regards,
Mr. Old Man