Draft a letter of credit compliant with the standards of the UCP ANSWER POINTS

Draft a letter of credit compliant with the standards

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65. Draft a letter of credit compliant with the standards of the UCP.ANSWER:POINTS:DIFFICULTY:LEARNINGOBJECTIVES:NATIONALSTANDARDS:STATESTANDARDS:Answer not provided.1ChallengingIBLE.SADE.12.2 - Essay/Writing AssignmentsUnited States - BUSPROG - Reflective ThinkingUnited States - AICPA - AICPA - BB-LegalBank Collection, Trade Finance, and Letters of CreditKEYWORDS:Bloom's: ApplicationEssay66. Global MegaBank (GMB) issued an irrevocable letter of credit on behalf of its customer Beer Importers of America,Inc. (BIA) for up to $150,000 covering shipments of "Belgian Trappist Ales" from "Beer of the World Distributor"(BWD). BWD subsequently presented its draft and commercial invoice with its name properly spelled as "Beers ofthe World Distributor." The submitted documents also referred to the shipment of "Belgian Abbey Ales" although theshipments themselves were of "Belgian Trappist Ales." GMB refused to accept these documents because of thesediscrepancies. GMB noted that use of the name "Trappist" is limited by Belgian law to 6 breweries operated bymonastic orders in Belgium. By contrast, abbey ales are brewed by non-monastic entities under licenses to use thenames of monasteries or religious icons in their titles. BWD claimed that GMB wrongfully dishonored thedocuments. BWD claimed the difference in names was excusable as a minor typographical error and that abbey andtrappist ales are brewed in the same manner and thus so closely resemble one another as to excuse the discrepancybetween the letter of credit and documents.Who would prevail in litigation between GMB and BWD? Please explain your answer. Would the result be differentif the court was to apply UCP 600 or the functional standard of compliance? Why or why not?ANSWER:The rule of strict compliance requires the terms of the document presented to theissuing bank to strictly conform to the letter of credit and the Uniform Customs andPractice for Documentary Credits (UCP). Even a small discrepancy can cause thebank to reject the documents. Utilizing this rule, the discrepancy in the name of theseller may be excused as a minor typographical error, but the discrepancy in thedescription of the goods would most likely result in its rejection. The result utilizing UCP600 would be the same. If the discrepancy occurred in any document other than thecommercial invoice, it would be governed by Article 14, which provides that "[d]ata in adocument...need not be identical to, but must not conflict with [other data in the samedocument], any other stipulated document or the credit." The distinction betweenBelgian trappist and abbey ales is significant enough to create a conflict prohibited byArticle 14. If the discrepancy was in the commercial invoice, Article 18 would requirerejection as it provides "[t]he description of the goods, services or performance in acommercial invoice must correspond with that appearing in the credit." The "functionalstandard" of compliance in which a court examines the whole of the documents rather
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