INTERNATIONAL

SETTLEMENT
DOCUMENTARY CREDIT
Ph.D MAI XUAN DAO

Group 2
 MEMBER
01 LƯU MỸ VÂN
LÊ MINH THANH HUYỀN
02 NGUYỄN TRẦN KHÁNH VY
03 NGUYỄN NGỌC THANH UYÊN

04 VŨ NGỌC TƯỜNG VY

05 NGUYỄN THỊ XUÂN THUỲ

06 PHẠM NGUYỄN LAM THUYÊN

07 NGUYỄN QUỲNH NHƯ Ý

 CASE 1
"Documents must be presented within 21 days from the date of the B/L but
within expiry of the Credit"

Shipment must be made not later than 31 August 2007.

The expiry date: 21 September 2007.
The credit has been transferred to two second beneficiaries in two other
countries.
The B/L presented is a pre-printed "received for shipment" B/L with an
on board notation stamp dated 1 August 2007.
The issuing date of the B/L: 5 August 2007.
After receipt of documents from the second beneficiary, first presentation to the nominated
bank by the first beneficiary is on 12 August 2007.
The date of last presentation to the nominated bank after amending discrepancies is 23
August 2007.
The presentation is rejected by the issuing bank based on UCP 600, article 14i as the B/L is
presented more than 21 days after shipment date (which is the on board notation date
according to UCP 600 article 20(a)(ii)
Is the issuing bank right upon refusal?
 18 days

1/8 5/8 12/8 23/8 31/8 21/9

Date of Issuing First Last presentation Expiry Expiry

shipment date of presentation date of date
the B/L shipment of Credit

"Documents must be presented within 21 days from the date of the

B/L but within expiry of the Credit"
 UCP 600
Article 14i: A document may be dated prior to the issuance date of the
credit, but must not be dated later than its date of presentation.

Article 20(a)(ii): The date of issuance of the bill of lading will be deemed to be
the date of shipment unless the bill of lading contains an on
board notation indicating the date of shipment, in which case the date stated in
the on board notation will be deemed to be the date of shipment.

THE ANSWER
Although the delay in amendments causing the final presentation to be
on 23rd August, it still doesn’t fall outside 21 days from 5th August to
23rd August(18 days). It was also not dated after its date of presentation
and within the expiry of the credit. Therefore, the issuing bank is not
right upon the refusal.
 - In October, a French company sells 200 sets of electronic computers (at $1,000 each) to a Chinese
company, with payment secured by an irrevocable L/C. Delivery occurred in December at the Port of
Marseille.
- On 15th November, Bank of China (Shanghai Branch) - the issuing bank - made the L/C and
commissioned a French bank in Marseille to notify and negotiate this L/C.
- On December 20th, the seller loaded the goods onto a ship and obtained necessary documents as
required by the L/C. The Marseille bank confirmed that the documents were compliant and paid
$200,000 to the seller.
- Ten days after the ship left Marseille's harbor, it sank in a storm, causing the complete loss of the cargo.
By that time, the issuing bank have received the whole set of docs and the buyer had already known
about the loss.
- The issuing bank intended to reimburse the negotiating bank to pay the payment on grounds that its
customers could not except for the goods.

1. When would the risk of the consignment be transferred from the seller to the
buyer?
CASE 2. Whether the issuing bank would be exempted from the payment obligations
due to the total loss of the goods, if so, on what basis?
2 3. How to compensate the loss of the buyer?
 THE ANSWER(1)
UCP 600 doesn't directly address risk transfer. Point of risk transfer depends on
the delivery conditions agreed upon by the parties in the contract. If the contract
does not clearly stipulate, we must rely on normal terms of carriage.

(For example, if the parties agree to use the FOB rule in the Incoterms 2020, the
risk will be transferred when goods are delivered on board the ship at the port of
export. If nothing else is specified in the contract, the risk has shifted from the
seller to the buyer when the goods are loaded onto the vessel.
 THE ANSWER(2)
The letter of credit transactions are independent from the sales contract. And the
Bank is only responsible for document examination. As long as the documents are
in line with the terms of the credit, the issuing bank is required to assume its
payment obligations. So the issuing bank is not exempt from the payment
obligations due to the total loss of the goods.

UCP 600, Article 5: Documents v. Goods, Services or Performance:

“Banks deal with documents and not with goods, services or performance to which
the documents may relate”.
UCP 600, Article 15: clause a Complying Presentation:
“When an issuing bank determines that a presentation is complying, it must
honour”.
THE ANSWER(3)

- The buyer can compensate for the loss by purchasing marine

insurance, ensure the cargo is covered by marine insurance, which
specifically protects against risks at sea, including storms.

- If the L/C has the insurance policy, the buyer can

claim compensation from the insurance company.
 CASE 3
The issuing date of a credit was 20th June 2013, delivery date
stipulated in the credit was 1st july 2013. After delivery, the
exporter presented documents to claim payment from the issuing
bank on time. Yet the issuing bank refused to pay because the
presentation was not in line with the credit’s terms and
conditions. Specifically, the following documents were issued
and signed before the delivery date stipulated in the credit:
-Packing list was signed on 15th June 2013, even before the
issuing date of the credit.
-Certificate of origin was signed on 28th June 2013.
Was that the issuing bank refused to make a payment right or
wrong?
15/6 20/6 28/6 1/7

The Issuing Certificate of origin Delivery date

packing date of was signed
list was credit
signed
 THE ANSWER
The issuing bank was wrong to refuse to make payment. According to Article 14i, the packing list and
certificate of origin were signed before the date of presentation, so to say that the presentation was not in
accordance with the terms and conditions of the credit is incorrect.
In reality, after signing a foreign trade contract, the importer takes care of arranging to open a L/C, while the
exporter does not necessarily have to wait until the L/C is issued before collecting goods and completing
export and goods procedures. The application can be made at the same time as the goods are released from
the warehouse to carry out export procedures and deliver the goods to the port. Or immediately after
receiving the preliminary L/C notice, the beneficiary has a solid basis to prepare for delivery and prepare a
set of documents, including making an invoice, while the main L/C, the formula was only released later.

The articles of UCP 600 apply:

Article 14i: A document may be dated prior to the issuance date of the credit,
but must not be dated later than its date of presentation.
 CASE 4
On 10th July, a foreign trade company has signed a sales contract (CIF) worth
150,000 USD with foreign investors, and the payment shall be made through
irrevocable letter of credit. The contract provided for the goods should be shipped
out in August.
On 28th July, The advising bank informed the company that it had received letters of credit
from the other parties issued by a foreign bank. And the company found that the letter of
credit terms and the terms of the contract were consistent with each other. However,
before shipment, the company received a modification of the credit, asking the seller to
make the shipment before 15th August. As the trade company had booked a liner to sail on
25th August and temporary change procedures were cumbersome, the modification of the
letter was ignored. And it made the shipment and negotiation for the payment according to
the original letters of credit, and then submitted the full set of documents to the issuing
bank. But the issuing bank refused to pay on the grounds that the shipping documents are
inconsistent with the modification of the credit.
Please analyze whether the issuing bank has the reason to refuse payment or not?
 CASE 4
Summary:
On 10th July: a foreign trade company has signed a sales contract (CIF) worth
150,000 USD with foreign investors, and the payment shall be made through
irrevocable letter of credit. The contract provided for the goods should be
shipped out in August.
On 28th July: The advising bank informed that it had received suitable letters of
credit.
However, before shipment: the company received a modification of the credit,
asking the seller to make the shipment before 15th August.
Company: had booked a liner to sail on 25th August and temporary change
procedures were cumbersome. The modification of the letter was ignored. And it
made the shipment and negotiation for the payment according to the original letters of
credit, and then submitted the full set of documents to the issuing bank.
Issuing bank: refused to pay on the grounds that the shipping documents are
inconsistent with the modification of the credit.

Please analyze whether the issuing bank has the reason to refuse payment or not?
 ANSWER
According to article 10c UCP 600, “The terms and conditions of the
original credit (or a credit incorporating previously accepted
amendments) will remain in force for the beneficiary until the
beneficiary communicates its acceptance of the amendment to the bank
that advised such amendment. The beneficiary should give notification
of acceptance or rejection of an amendment. If the beneficiary fails to
give such notification, a presentation that complies with the credit and
to any not yet accepted amendment will be deemed to be notification of
acceptance by the beneficiary of such amendment. As of that moment
the credit will be amended”

Ø The company has delivered the goods and completed procedures according to the
original contract and original letter of credit, does not notify acceptance or rejection of
modifications so, credit modifications are accepted. Their failure to comply with the
credit adjustment is a breach of their contractual obligations.
 ANSWER
According to article 16a UCP 600, When a nominated bank
acting on its nomination, a confirming bank, if any, or the issuing
bank determines that a presentation does not comply, it may
refuse to honour or negotiate.

 The issuing bank had a reason for refuse payment because

the company breached its contractual obligations by ignoring
the credit amendment and submitting mismatched documents.
 CASE 5
• A credit stipulates some conditions as follows:
- Partial shipment is not allowed.
- Port of loading: Pulsa port of Korea.
- Goods: Huyndai truck, quantity: 25 units
- The Korean importer submits the following Bills of Lading:
+ B/L 1: 7th Feb 2009, Quantity: 10 units, Port of loading: Ulsa, Shipping
vessel: Hangin4, Port of discharge: Saigon port.
+ B/L 2: 7th Feb 2009, Quantity: 5 units, Port of loading: Ulsa, Shipping
vessel: Hangin4, Port of discharge: Saigon port.
+ B/L 3: 15th Feb 2009, Quantity: 10 units, Port of loading: Ulsa,
Shipping vessel: Hangin4, Port of discharge: Saigon port. Questions:
1. What is delivery date?
2. Does the importer breach the term "Partial shipment is not
allowed" of the credit? Why?
 1. What is delivery date ?

Answer: According to clause b, Article 31, if the presentation

consists of more than one set of transport documents (in this
case there are 3 B/L), the latest date of shipment recorded on
any of the 3 B/L mentioned above will be the delivery date.
Therefore, the Delivery Date is the latest day of the 3 B/Ls and
that is the 15th

According to clause b, Article 31 UCP 600: If the

presentation consists of more than one set of transport
documents, the latest date of shipment as evidenced on any of
the sets of transport documents will be regarded as the date of
shipment.
 2. Does the importer breach the term "partial shipment
is not allowed" of the credit? Why?

Answer: The credit stipulates the condition "partial shipment is not

allowed" but the importer submits the bill of lading into 3 B/Ls for
partial shipment. For B/L 1 quantity is 10 units, B/L 2 quantity is 5 units
and B/L 3 quantity is 10 units.
However, the importer still does not violate the clause "partial shipment
is not allowed" because: according to clause b, article 31, although the
delivery date is different but the ship name, POL and POD of this
shipment are the same, Delivery with 1 ship Hangin4.

According to clause b, Article 31 UCP 600: A presentation consisting of more

than one set of transport documents evidencing shipment commencing on the same
means of conveyance and for the same journey, provided they indicate the same
destination, will not be regarded as covering a partial shipment, even if they
indicate different dates of shipment or different ports of loading, places of taking in
charge or dispatch
A credit with following contents:
Form of documentary credit: Irrevocable
Currency code and amount: about $50,000.
Partial shipment: allowed
Documents required:
CASE 6
+ Commercial invoice: 3 originals
+ Certificate of origin
+ Full set (3/3) of original clean shipped on board ocean bill of lading made out to the order of ABC
Bank, marked freight prepaid and notify the applicant.
The beneficiary negotiated the documents with XYZ bank under without-recourse condition. After
negotiation, XYZ bank delivered the documents to ABC bank to claim payment. However, ABC bank
sent a refusal notice to XYZ bank after examination with the following reasons:
No signature of the exporter in the Commercial invoice.
No signature of the issuer in the C/O.
Value of the contract: 20,000 USD.
Consignee in the B/L: SIFICO
Question: That ABC bank refused to make payment is right? Why?
In this case, ABC Bank's refusal to make payment is RIGHT.

First Point: "The commercial invoice does not have the exporter’s signature":

Based on UCP 600, Article 18 Commercial Invoice, clause iv:

iv. need not be signed.

Therefore, the absence of the exporter's signature on the commercial invoice is permissible.

Second Point: "The certificate of origin does not have the issuer’s signature":

Based on ISBP 745, A20 regarding the issuer of documents

Issuer of documents

A20) When a credit requires a document to be issued by a named person or entity, this
condition is satisfied when the document appears to be issued by the named person or entity
by use of its letterhead, or when there is no letterhead, when the document appears to have
been completed or signed by, or for [or on behalf of],the named person or entity.
⇒ This means that if the L/C requires a signature from the legally designated issuer of
the document (in this case, the signature of the issuer of the CO), the document must
show that it has been issued or signed by them.
Based on ISBP 745, A3 regarding certificates, certifications, declarations, and
statements:
Certificates, certifications, declarations, and statements
A3) When a certificate, certification, declaration or statement is required by a credit, it
is to be signed. ⇒ Therefore, the certificate of origin must have the issuer's signature.

Conclusion:
ABC Bank's notification of refusal to make payment is entirely justified. While the
commercial invoice does not need to be signed, the certificate of origin must be
signed. The bank has the right to refuse payment because the document does not meet
the requirements and does not authenticate the accuracy of the certificate.
 CASE 7
A credit stipulate its contents as follows:
Field 45A:
-100 tons of chemicals A(tolerance 5%), the latest delivery date:
15th May 2009
-200 tons of chemical B(tolerance 5%), the latest delivery date:
25th May 2009
Field 43P: Partial shipment allowed.
Field 40E: Applicable rules: UCP 600.
On 18th May 2009 the bank received a presentation for the first
delivery in which showed that the commodity was 90 tons of
chemical A and the delivery date was 14th May 2009.
Question: Can the bank deem that shipment as short delivery?
 ANSWER
"Short delivery" in this case means that the seller delivered
less of the goods specified in the credit than the minimum
acceptable amount.

-Field 45A: The credit specifies 100 tons of chemical A with a tolerance of
5%.This means that the acceptable range is between 95 tons and 105 tons.
-Presentation: The presentation shows only 90 tons of chemical A, which falls
below the minimum acceptable quantity (95 tons).

-Field 43P: Partial shipment allowed

-Field 40E indicates the credit is governed by UCP 600
 ANSWER

Based on Article 31a in UCP 600 (Partial drawings or shipments are allowed.)
=>The bank cannot deem that shipment as short delivery .
 ANSWER
According to the presentation, 90 tons of chemical A were delivered on the
14th May, which is not the lastest delivery date. Therefore, the bank must wait
until the next delivery to compare the delivery date on the presentation with the
latest delivery date of chemical A.
 ANSWER
Case 1:
Based on Article 31a in UCP 600, the seller may continue to deliver on the 15th
May and the commodity will include the remaining quantity of chemical A.
If the bank deem that shipment as short delivery before, it can have many
negative effects on the seller.
 ANSWER
Case 2:
If the seller does not continue to deliver on the 15th day, whether or not the
seller delivers the remaining quantity of chemical A according to field 45A.
=> The bank can deem that shipment as short delivery.
Thank you!
Do you have any questions?