AMBIGUOUS CLAUSE

QUESTION TTL

Hi,

I receive an LC application in which applicant insists on the following point:

Full (3/3) set of Original clean Shipped On Board Ocean Bill of Lading made out to the order of Negotiating Bank in Bangladesh and endorsed to the order of issuing bank, marked “Freight Prepaid”, notify applicant.

In my opinion, BL made out to order of negotiating bank endorsed to order of issuing bank is the same as BL made out to order of issuing bank except for the negotiating bank's endorsement. Now the inconvinience is on the applicant's side. For example, BL made out in such maner is not endorsed by negotiating bank, which is a discrepancy and the applicant is willing to accept it. Then it will be difficult for them to take the delivery of goods as now issuing bank has no right to endorse to transfer the title of goods to the applicant.

Besides, I find it confusing as additional condition states that "if moisture exceeds 16% then excess moisture will be deducted from weight and invoice value as per SGS report". It is not clear whether it is a non-reciprocal allowance 1:1 or not. How am I supposed to understand it?

I really appreciate your clarification.

Thank you.

TTL

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ANSWER

Hi,

1) It is true that where the B/L is not endorsed by the negotiating bank, the aplicant (who is accept the discrepancy) will not be able to take delivery of the goods. If the beneficiary expects the payment from the issuing bank, it should ask the negotiating bank to endorse the B/L before forwarding the documents to the issuing bank.

2) If some clause in the the L/C application is not clear, the issuing bank should approach the applicant for clarification. Like you Mr. Old Man is also confused with such a clause.

Best regards,

Mr. Old Man

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QUESTION FROM TTL

Hi,

Thank you for your reply.

As point no.02 is not clear, we did contact the applicant for the clarification. It can be understood that for each percentage of moisture in excess of 16%, the Seller shall reimburse 1% of contract price per tonne to the Buyer, and the allowance shall be deducted directly from invoice value.

Of course, we offer to put that easier-to-be-understood clause in the LC but the applicant refuses to amend his application and insists that the clause should remain unchanged. I know that the applicant bear the risk of any ambiguity in his instruction to issue a credit but I still feel uncomfortable to issue the credit.

Could you please give me some advice?

Many thanks to you, Mr. Oldman.

TTL

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ANSWER

So, an example of calculation should be added to clarify the clause.

Mr. Old Man