A U.S. buyer purchases computer chip from Sine-Tech, a manufacturer in Taiwan, under a contract calling for payment by letter of credit. The buyer's bank advises the Taiwanese manufacturer of the credit as follows:
Payment against the letter of credit will be made upon the submission of a commercial invoice, full set original on board bills of laden in triplicate, certificate of insurance, and inspection certificate. All documents to refer to Altima III central Processing Units at 1250 MegaHertz and 2048 Random Access Memory Chips shipped from Sine-Tech. All documents must strictly conform to the terms of this credit in light of standard international banking practices.
The buyer's senior vice president for sales stops by Sine-Tech while on a business trip to Asia and is able to inspect the shipment of chips. The vice president signs the inspection certificate and writes a handwritten note on the certificate: "Samples fit our contract specifications precisely. Note to bank: Please pay seller without delay."
Sine-Tech subsequently ships the chips and submits the documents, including the inspection certificate signed by the buyer's vice president, to its own bank in Taiwan. The seller's bank then forwards the documents to the buyer's bank in the United States along with a slight draft. The bill of lading refers to:
Altima III CPUs @ 1250 MHz and 2048 RAM memory chips shipped from Sino-Tech
The examiner in the credit department of the buyer's bank looks at the documents and writes a memo to the head of the credit department: "I have two master's degrees in computer science and I know for a face that the terms that
Standard for Examination of Documents
A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation.
A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank shall each have a maximum of five banking days following the day of presentation to determine if a presentation is complying. This period is not curtailed or otherwise affected by the occurrence on or after the date of presentation of any expiry date or last day for presentation.
A presentation including one or more original transport documents subject to articles 19, 20, 21, 22, 23, 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar days after the date of shipment as described in these rules, but in any event not later than the expiry date of the credit.
Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit.
In documents other than the commercial invoice, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit.
If a credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the document as presented if its content appears to fulfil the function of the required document and otherwise complies with sub-article 14 (d).
A document presented but not required by the credit will be disregarded and may be returned to the presenter.
If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.
A document may be dated prior to the issuance date of the credit, but must not be dated later than its date of presentation.
When the addresses of the beneficiary and the applicant appear in any stipulated document, they need not be the same as those stated in the credit or in any other stipulated document, but must be within the same country as the respective addresses mentioned in the credit. Contact details (telefax, telephone, email and the like) stated as part of the beneficiary's and the applicant's address will be disregarded. However, when the address and contact details of the applicant appear as part of the consignee or notify party details on a transport document subject to articles 19, 20, 21, 22, 23, 24 or 25, they must be as stated in the credit.
The shipper or consignor of the goods indicated on any document need not be the beneficiary of the credit.
A transport document may be issued by any party other than a carrier, owner, master or charterer provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24 of these rules.
Discrepant Documents, Waiver and Notice
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.
When an issuing bank determines that a presentation does not comply, it may in its sole judgement approach the applicant for a waiver of the discrepancies. This does not, however, extend the period mentioned in sub-article 14 (b).
When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter. The notice must state:
i. that the bank is refusing to honour or negotiate; and
each discrepancy in respect of which the bank refuses to honour or negotiate; and
that the bank is holding the documents pending further instructions from the presenter; or
that the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives further instructions from the presenter prior to agreeing to accept a waiver; or
that the bank is returning the documents; or
that the bank is acting in accordance with instructions previously received from the presenter.
The notice required in sub-article 16 (c) must be given by telecommunication or, if that is not possible, by other expeditious means no later than the close of the fifth banking day following the day of presentation.
A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time.
If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation.
When an issuing bank refuses to honour or a confirming bank refuses to honour or negotiate and has given notice to that effect in accordance with this article, it shall then be entitled to claim a refund, with interest, of any reimbursement made.