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lcviews premium an example: Non-Documentary

Conditions

The lcviews premium pages have taken year to build. There have been different writers
but all pages have been through the same editorial process for language
consistency.

Below is an example of one premium page showing how it is linked to different pages
and how other pages links to it.

The page in this example is a commentary to ISBP 745 paragraph A26 Non-
Documentary conditions and conflict of data. This page is written by the great Vijay
Kumar:

Quote

045 ISBP 745 Paragraph A26 (Non-Documentary conditions and conflict of data)

Relevant references:

UCP 600 article 5, 14(h), 14(a), 14(d), Uniform Civil Code(USA) UCC Section 5-108g

ICC Opinion 136 (UCP 400) [Credit should not require sailing date]

ICC Opinion R237(UCP 500) [description of goods on the packing list]

ICC Opinion R 321 (UCP 500) [Certificate of origin requirement under special condition
of LC]

ICC Opinion R 326 (UCP 500) [Demurrage should be account of beneficiary]

ICC Opinion R 388 (UCP 500) [Guarantee requirement under special condition]
ICC Opinion R389 (UCP 500) [Data content on the Certificate of Origin]

ICC Opinion R411 (UCP 500) [ Non-documentary condition to be disregarded]

ICC Opinion R412 (UCP 500) [Instructions appearing on the 47A under MT700]

ICC Opinion R511 (UCP 500) [Condition of payment]

ICC Opinion R631 (UCP 600) [Data in the transport document inconsistent with a
condition deemed non-documentary]

ICC Opinion R743 (UCP 600) [Goods must be shipped in export standard packing and
clearly marked [with] country of origin and shipping marks in each and every
package/carton/bag/container]

ICC Opinion TA799 (URDG 758) (LC requirement: Bank guarantee from international
first class bank payable in country X)

UCP in court:

Gian Singh & Co Ltd v. Banque de lIndochine [1974]

Banque de lIndochine v. J H Rayner(Mincing Lane) Ltd [1983]

Astro Exito Navegacion SA v. Chase Manhattan Bank NA, The Messiniaki Tolmi [1986]

Korea Exchange Bank v. Standard Chartered Bank [2006]

Oliver v. Dubai Bank Kenya Ltd [2007]

Uzinterimpex JSC v. Standard Bank PLC[2008]

United Overseas Bank(Malaysia) Bhd v. Indian Bank (2013) (relying on UCP Article
14(h) for payment).

Comments:

This paragraph guides on how to deal with the so-called non-documentary conditions
i.e. the situation where an LC contains a condition without stipulating the document to
indicate compliance with the condition. The paragraph is closely linked to UCP 600
article 14(h), which indicates that such condition will be deemed as not stated and
therefore disregarded.

As it will appear from the following there are situations where such non-documentary
conditions should not be disregarded.
Below are 4 external definitions of Non-documentary conditions:

1: T.O. Lee:Non-documentary conditions are those conditions named in a documentary


credit that cannot be checked for compliance solely on the face of the stipulated
documents.

2: Gary Collyer:Non-documentary condition can be defined as any instruction or


condition that is not clearly attributable to a document to be stipulated in documentary
credit.

3: Professor James E. Byrne:A non-documentary condition is a condition whose


fulfillment must be ascertained by a factual determination of the occurrence of an event
as opposed to giving conclusive effect to a documentary representation of the
occurrence of the condition.

4: ISP98 Rule 4.11(b)Terms or conditions are non-documentary if the standby does not
require presentation of document in which they are to be evidenced and if their
fulfillment cannot be determined by the issuer from the issuers own records or within the
issuers normal operations.

Banks deal only with the documents called for by the LC and examine a presentation
to determine on the basis of the documents alone, whether or not the documents
appear on their face to constitute a comply presentation.

From the above, it is understood that the beneficiary is not obligated to provide any
document(s) in evidence of compliance with any non-documentary conditions.

However, if the beneficiary chooses to state the non-documentary conditions in a


document called for by the LC, then the data on that document must comply with the
conditions in the LC including the non-documentary condition.
Any data in a document required by the LC must not conflict with the conditions
stipulated in the LC including any non-documentary conditions. I.e. the standard for the
examination is UCP 600 article 14(d).

If the beneficiaries choose to present a document not required by the LC in order to


satisfy the non-documentary conditions, such document will be disregarded and may be
returned to the presenter (UCP 600 article 14(g)).

Examples of Non-documentary conditions:

(Most of the LC contains non-documentary conditions under MT700 Swift field 47A
(Additional conditions). However, it may also appear under 46A (Documents required)
field.)

* Phytosantiary certificate to be sent applicant within 3 workings after shipment.

* Goods are of Indian Origin.

* Goods are packed in Jute bags and marked with shipping marks.

* Goods are shipped in FCL/FCL.

* Goods are shipped under CY/CY basis.

* Labels sewn with textile clothes should evidence instructions for cleaning in the
Vietnamese language.

* HS code of the commodity 2805.00.00

* Beneficiary should send the shipment advice by fax mentioning the details of shipment
for insurance purpose to applicant and insurance company.

* Beneficiary should sent the copies of all documents to the applicant after shipment.

* Shipment to be sea freight vessel sailing to Mombasa Port via Suez Canal.

* Shipment should be effected through conference liner and also the vessel must not be
more than 25 years old.

* Applicant will cover the insurance.


From the above examples, it applies that none of them requires a document to satisfy
the conditions stated in LC.

Precautionary measure:

1: Applicant should refrain from including non-documentary conditions in their LC


application. If they nevertheless do, such should be linked to the documents in order to
evidence its compliance. Otherwise, the applicant bears the risk of the ambiguity created
(ISBP 745 paragraph 7).

2: Issuing bank should discourage from including non-documentary conditions in their


LCs.

3: Confirming bank should take precaution about the non-documentary conditions during
their confirmation to the LC. If they do so, they should approach the beneficiary to initiate
an amendment before confirmation of the LC.

4: Beneficiary should approach the issuing bank and applicant for clarification.

Note: UCP600 Article 14(h) rescinds the ICC Opinion R212 and ICC Position Paper 3.

Unquote

From this page there are links to reviews of the relevant ICC Opinions on the issue for
example ICC Opinion TA644rev. Clicking on that one you will find the following review:

Quote

Title: Non-documentary condition


Links:

UCP 600: Article 14(d) and (h)

ISBP 745: A26

Topic: Standard for Examination of Documents

Details of the query:

Is a condition that stipulates details of transport and latest shipment date without the LC
requires a document indicating compliance with the condition a non-documentary
condition?

ICCs opinion:

Details as above may be disregarded for the purpose of determining a complying


presentation and need not be stated in any other stipulated document that is presented.

However, the data in the other stipulated documents will still be subject to review under
sub-article 14 (d) to ensure that any data is not conflicting with the data in the LC.

Full transcript

This review is written by LC Views.

For the full transcript of the Official ICC Opinion please contact ICC Books or DC-Pro.

Reference:

Official Opinion R631 / TA644rev - 2005-2008

Unquote
Of course one could have started it search for the practice regarding non-documentary
conditions in the page that includes a commentary to UCP 600 article 14(h) Standard
for Examination of Documents (Non-documentary condition). In this page there is the
following text:

Quote

UCP 600 Article 14(h) Standard for Examination of Documents (Non-documentary


condition)

Article 14(h)

Standard for Examination of Documents (Non-documentary condition)

This article bears a warning to the issuing bank that banks are expected to disregard a
condition in the LC that is not documentary. I.e. a condition in the LC that does not
stipulate the document to indicate compliance with the condition.

This provision is qualified by ISBP 745 paragraph A26 which indicates that data in any
document required by the LC are not to be in conflict with the non-documentary
condition.

For example if the LC mentions Goods origin: Spain, then there is no requirement that
this be indicated in any document. However, if for example, the invoice indicates the
origin of the goods, then this must not be in conflict with Spain.

Unquote

This page of course also links to reviews of both the relevant ICC Opinions (like the one
quoted above) AND ISBP 745 paragraph A26.
So now you have the practice on non-documentary conditions in on place all linked
together.

Take care of each other and the LC!

Best regards

Kim

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