A Few Questions and Answers on UCP - Part 3

Question : Buyers in Italy get quick stay from the Court preventing payment being effected under letters of credit. Can ICC do something about it?

Answer: ICC is continually seeking to address the issue of injunctions being obtained to stop payment under credits. Banks are expected for the sake of protecting their name and goodwill to move the courts to get the injunctions vacated. It is deplorable that not many banks do that, which is not desirable.

Question: Many times documents are dispatched directly to the beneficiary who takes delivery of goods and then has documents rejected by the Issuing Bank. What should be done in such cases? In this connection it was pointed out that it should be stipulated in the UCP that once buyer has taken delivery of goods, he must pay. Also many times documents could be corrected. The exporter should, therefore, be given an opportunity to do so. Should ICC not appoint a panel to see whether discrepancies are there or not?

Answer: If the feeling is that this type of situation arises because of documents getting refused after goods have been dispatched directly to the buyer, then the best course will be to get the credit amended. This requires greater caution even at the stage of entering into purchase-sales contract and ensuring that there is a provision of the issuance of an L/C which does not provide for goods going direct to the buyer.

As regards the suggestion of making the buyer pay, if he has taken delivery of goods despite documents being discrepant, it is not feasible for how will you convert this into a documentary requirement. What type of documents will meet the requirement, who will issue it and whether it will be possible to get such a certificate, are some of the questions deserving attention.

Question: In a letter of credit issued by one of the Korean Banks the reimbursement conditions was that the Issuing Bank will reimburse to the Negotiating Bank in accordance with their instructions provided all the terms and conditions of the credit have been complied with.

The Negotiating Bank negotiated documents and sent a reimbursement claim to the Issuing Bank with a request to affect payment value three working days later as per the reimbursement conditions. The Issuing Bank, however, did not meet its obligations and did not reimburse to the Negotiating Bank on value date.

While the reimbursement instructions stated that the Issuing Bank will make reimbursement in accordance with the Negotiating Bank’s instructions, they have not met the value date requested. Kindly clarify what is the correct position.

Answer: If an Issuing Bank includes reimbursement instructions in their credit requiring the Negotiating Bank to claim from them and they will honour the claim according to the Negotiating Bank’s instructions this does not necessarily apply to the honouring of the claim with the value date requested by the Claiming Bank.

The claim for interest, if any, would need to be based on what is deemed to be the ‘reasonable time’ for the Issuing Bank to honour the claim and not that the Claiming Bank received payment on a date later than that requested in the telex claim.

Question: Kindly clarify on the following points where airfreighting of consignments under house airway bills issued by freight forwarders are concerned.

• Does the act of issue of a delivery order by a freight forwarding agent who is in control of the consignment (and the consequent authorization of delivery) to a party other than the named consignee of the airway bill without obtaining authorization from the named consignee fall under the purview of the Warsaw Convention?

• If so, do the limits of liability for such an act as stipulated in Article 18 and 22 of the Amended Convention apply for such an act? Or would such an act be looked into under the framework of Article 25 and 25A which indicate the conditions under which the limits of liability are not applicable.

• Is it a practice in New Delhi for Airfreight forwarding agents to hand over consignments to a party other than the named consignee of an airway bill without obtaining from such a consignee proper authorization to do so?

• If it is a practice, isn’t the freight forwarder responsible for his own acts of resorting to such a practice? Is or is not the freight forwarder liable for the consequences of such an act?

Answer: The issue of a delivery order by a freight forwarding agent to a party other than the named consignee of the airway bill without obtaining authorization from the named consignee will be outside the purview of the Warsaw Convention for as explained above the provisions of Warsaw Convention get complied with as soon as the airlines has handed over the delivery to the freight forwarding agent in New Delhi.

• In view of what has been stated above limits of liability as stipulated under various provisions of Warsaw Convention will not apply.

• There is no practice in New Delhi for airfreight forwarding agents to hand over consignments to a party other than the named consignee of an airway bill without authorization from such a consignee.

• The freight forwarder is liable for consequences of such an act.