RIDICULOUS CLAUSES?

QUESTION

Dear Mr Old Man,

Have a good day…

Our customer asks us to add below special conditions in the credit:

1) Documents including BL dated prior to the issuance date of this credit are ACCEPTABLE.

2) Short form/black back BL NOT ACCEPTABLE.

3) Documents showing consignee as “TO ORDER’ and notify as “APPLICANT” are ACCEPTABLE.

4) Copy of documents presented by fax or email or any other means are ACCEPTABLE for negotiation and payment.

5) Documents ACCEPTABLE as presented .

Note: Charter Party BL is ACCEPTABLE.

Please give your opinion on each clause and its intention.

What should we add/amend precaution clauses in our credit in this case ?

Will really appreciate your help in this regards.

Best regards,

Ziyad

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ANSWER

Hi Ziyad,

I would like to answer your questions one by one as follows:

1) According to UCP 600 Article 14 (i), a document may be dated prior to the issuance date of the credit, but must not be dated later than its date of presentation. Therefore, the fact that documents including bills of lading dated prior to the date of the credit is acceptable.

The issuing bank may accept this clause.

2) UCP 600 requires transport documents to contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage.

Short form or blank back bill of lading is the bill of lading without terms and conditions of the carrier (rights, responsibilities and liabilities of the carrier and the shipper). Charter Party Bill of Lading is an example of short form bill of lading which contains an indication that it is subject to a charter party.

The issuing bank may accept this clause, , i.e., short form/blank back bill of lading not acceptable.

3) Where a credit requires presentation of bill of lading made out to order blank endorsed, the issuing bank should insist full set of original bills of lading be presented to the issuing bank to ensure that the applicant can take delivery of the goods only after it has fulfilled its obligations under the contract for opening the credit.

The clause that allows the bill of lading to indicate consignee as “APPLICANT” iis quite normal.

The issuing bank may accept this clause.

4) What a ridiculous clause! No bank accepts to negotiate or pay faxed or photocopied documents that could be fraudulent documents.

The issuing bank should not accept this clause.

5) “Documents acceptable as presented” is another ridiculous clause, too. According to ISBP 745, the expression means that a presentation may consist of one or more of the stipulated documents provided they are presented within the expiry date of the credit and the drawing amount is within that which is available under the credit. The documents will not otherwise be examined for compliance under the credit or UCP 600, including whether they are presented in the required number of originals or copies.

The issuing bank should not accept this clause.

Kind regards,

Mr. Old Man