| The credit opened by company Y requires clean on board ocean bill of Lading. But the presented original B/L states "packaging damaged and contents exposed". Accordingly, payment was denied because such documents can not be regarded as Clean transport shipping documents.
Case study
1. The meaning of Clean transport documents
The clean transport Document is a shipping documents that has no indication for any defective condition on the products or on the packages as well.
2. The meaning of Clean transport documents on board
The clean on board transport document is referred to a shipping document that fulfilled condition stipulated in the credit terms. (The Article 23 ~ 30 of U.C.P.)(The Sub-Article 32(c) of U.C.P 500)
For the Clean transport documents, if there is inconsistency with the credit terms, a bank may refuse to pay but for the clean on board transport document, a bank has no relevant reason to refuse payment if the contents are not inconsistent to the other documents.
3. The examples indication for products and packaging defects
(1) contents leaking
(2) packaging broken/ hole/ torn/ damaged
(3) insufficient packaging
(4) packing contaminated : The examples which can not be regarded as a packing contamination
(1) second-hand packaging materials used
(2) old packaging materials used
(3) Reconditioned packaging materials are not to be regarded as a defect per I.C.C.
Conclusion
For this case, the indication "packaging damaged and contents exposed" can be regarded as a foul shipping documents as per the Article 32 of UCP.
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