| (1) Application principles |
| - The priority in order to interpret L/C is |
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1 the said country's legislation
2 special agreement
3 can be determined by UCP regulations. |
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| - UCP indicates interpretation standard for unclear terminologies in various areas. |
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(2) Examples of obscure expressions |
| - UCP recommends not to use the following unclear expressions. |
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<1> Terminologies that refers to documents issuer--well known, first class, qualified, independent, official(The Sub-Article No. 20-1 of UCP)
<2> Terminologies that verifies transportations payment--Freight prepayable, Freight to be paid
<3> Terminologies for insurance--Usual risks, customary risks, Insurance against all risks(The Article No. 35 of UCP)
<4> Indicating shipping dates--prompt, immediately, as soon as possible (The Sub-Article No. 46b of UCP)
<5> Transferability indication--divisible, fractionable, assignable (The Sub-Article No. 48-b of UCP) |
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(3) Terms that are misguided and used on L/C |
- According to the ICC publication issue No. 270, the definition for Shipping document is written as "Document evidencing shipment or dispatch or taking in charge".
- In another words, the Shipping documents are the documents that prove shipping, dispatching or receiving.
- L/C that requires marine transportation includes only Marine Bills of Lading as the Shipping documents and the L/C that requires Air transportation includes only
Airway bill.
<1> Stable B/L |
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- Sometimes on the L/C established by banks indicates "stale B/L acceptable" wording and an opening bank explains such wording are indicated because as per the sub-article No 43-a of UCP provision, if documents are presented 21 days after the shipping date, the documents are accepted as vice.
- In spite of the UCP provision, if an opening has purpose to accept the documents that are presented 21 days after the shipping date, "Documents presented later than 21 days after the date of shipment acceptable" wording should be used.
- For this matter, the ICC Pub 371 p.88 explains and determined that a word "stale" should not be used with L/C but if used, supplementing details are necessary. - Also, according to the ICC Pub 416 p.37 and p.67, it instructs that a word "stale B/L" or "stale document" should not be used with L/C opening application and on L/C itself. |
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- If Third party B/L (or documents) acceptable wording is used in L/C and if a bank is intended to accept even though the name indicated on consignee of B/L is not a beneficiary it is already regulated in the article no. 31 of UCP (iii) to be accept.
- But if insist to clearly state in L/C sentences such as "B/L indicating as the consignor of the goods a party other than the Beneficiary of the Credit acceptable" should be used. |
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| <3> Other terminologies being used due to wrong recognition |
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- Some presents a photo taken original certificate photocopy when a copy of Certificate of Origin is requested. In English, the original meaning of 'Copy' refers to the sets of the documents or originals not a photo taken duplicates.
- Some purchasing banks request to a beneficiary to bring a certificate of guarantee when the presented documents have vice for L/G Nego(Obtain a certificate of guarantee first and Nego) which is an example of wrong terminology usage.
- A purchasing bank conducts Negotiation against indemnity or the right to compensate Negotiation under reserve for the documents with vice. |
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(4) Quantity and amount |
<1> Terminology interpretation for 'about, circa, approximately etc.'
- If there is a pre-fixed terms in front of the terms that represents amount of L/C, unit price and quantity, the following standard should be taken to interpret.
(The sub-article No 39-a of UCP) |
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1 If above term is used with L/C amount and quantity of goods, the tolerance limit for more or less is +-10%.
2 The terms are restricted to be used with amount, unit price and quantity only not for periods.
3 The terms above are effective only when it is attached to the items.
Ex)-About 1,000pcs means the maximum is 1,100pcs and minimum is 900 PCs however, it can not be interpreted that the amount is changing in accordance with this term.
4 If there is maximum or not exceeding expressions, it means not necessary to use all the L/C amount. |
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<2> Tolerance limitation for 'more or less'
- Bulk cargos that re difficult to provide the exact number of quantities such as minerals, grains and crude oils due to the goods character, it should be interpreted as accepting more or less in +-5% since the bulk cargos are subjected for this application however, if there is 'about, circa' indications, tolerance up to +-10% is permitted.
- But this standard has the following restrictions. |
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1 Goods that are countable in units are excluded.
2 Although excess shipping has been made, the amount of invoice and the amount of bill should not exceed L/C amount. If exceeded, the excess shipping portion's payment should be processed separately by remit method or such. |
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<3> Fluctuation expression for amount
- Basis on amendment, when 'by' is used to increase or decrease L/C amount, it will only expressing only the actual increase (or actual decrease) portion but if 'to' is used, it means the entire amount including the increased amount.
Ex)-increased by US$5,000, increased to US$20,000 |
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(5) Period |
| <1> Terminologies to avoid and the interpretation for the terminologies |
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- If terms 'prompt, immediately, as soon as possible' are used for shipping period, the L/C is consider to be without shipping period.(The Sub-Article No. 46-b of UCP)
- If term "On or about" is used together with the confirming date, it means shipping has to be made within 5 days before/after from the date is indicated (total 11days) therefore, if B/L issuance date is out of the period, it becomes a reason for payment refusal. (The Sub-Article No. 46-c of UCP) |
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| <2> Starting point of period calculation |
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- If there is only month indication at the valid period date (for one month, for six month), interpret the maturity date of the L/C opening date as the initial day in reckoning and calculate from the first day to the day before the maturity date.
- With specific date indication, terms such as' to, until, till, from' are to be included. (The Sub-Article No. 47-a of UCP).
- If a specific date is indicated using term 'after', the indication date is excluded. (The Sub-Article No. 47-b of UCP).
the first half and later half of the month are to be indicated as 'first half of a month, second half of a month',
- The beginning, middle and last of the month are to be indicated as 'beginning of a month, middle, end...' (The Sub-Article No. 47-c of UCP). |
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| <3> Documents presenting period |
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| 1 Calculating the actual expiration date |
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- If "The transportation documents must be presented within ~ days after the shipping date" sentence is indicated on L/C (i.e.-...presented within 10days after...) : The actual maturity date for the L/C is within the valid period and from the actual shipping date to the document presented period (10 days). (The Sub-Article No. 42-a of UCP).
- Condition of L/C that allows installment shipping : Without a question, there is always special agreement for the presenting period. |
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| 2 If the presenting period for shipping documents are not clearly stated. |
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- If documents are presented after 21 days to a purchasing bank from the actual shipping date, it is consider to be the rason for payment refusal consider it as a stale B/L. (The the back of the Sub-Article No. 43-a of the UCP).
- If there is 'this office' indication in front of 'not later than' or 'on or before'
(i.e.: Draft must be presented at this office on or before~) A opening bank is the documents presenting location so a beneficiary should consider for the mailing time and send the documents to an opening bank. |
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| <4> Calculating the transportation documents issuance date |
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| - On the standard L/C form that is approved by ICC indicates Loading on board, dispatch and taking in charge terms on a shipping marking section. |
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- Marine transportation using General cargo ship: The valid transportation date is the date that a cargo is actually loaded on a vessel and it is regarded as the same date as B/L issuance date (shipped B/L).
- In this case, if an exporter received B/L from a shipping company, the later confirmed on board notation by a ship commander becomes the valid shipping date. (The Sub-Article No. 23-a-ii of the UCP)
- Marine transportation using a container : A operator of a contain is the receipt issuer and the D/R becomes the valid shipping date. |
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| 2 Airlines and mail transportations |
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- The date indicated on Airway bill or Mail Receipt is regarded as the actual shipping date.(The Article No. 27 and 29 of UCP).
- Airway bill : If cargo loaded date and the air line operating date is indicated at the same time, the later one becomes the shipping date. (The Sub-Article No. 27-a-iii of UCP). Mail transportation : Since a receipt per the unit of parcel is issued, the date on the mail receipt (Stamp date)becomes the valid shipping date regardless of the arrival date.
(The Sub-Article No. 27-a and No. 29 of UCP) |
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| 3 Combined transportations |
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- In order to eliminate risks by transship, combined transportation must use container for the transportation means.
- When using a container transportation, the day cargo is stowed (Full container Load) in container or the date cargo was received from the Container Freight Station and such (Less than container Load) is the date for B/L issuance and it becomes the valid transportation date.
- The type of B/L by combined transportation if Received B/L and the received B/L is valid as long as L/C is not requiring 'on board' by a
written statement. |
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| <5> Off days of banks and vessel companies |
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- If L/C validity maturity date is a holiday of a purchasing bank : Automatically extend to the next business day of the bank. At this time the bank indicates expiration date due to holidays on the covering Letter and send it to an opening bank. (The Sub-Article No. 44-a,c of UCP).
- If holiday of bank is due to a strike, riot, war and such of force majure: Expiration will not be extended but will be terminated. (The Article No. 17 of UCP) |
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| 2 Holiday of vessel companies |
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- If the final shipping date of L/C falls in the holiday of the exporting country : Automatic extension is not allowed.(The Sub-Article No. 14-b of UCP).
- Because vessel companies and the transportation organization are on loading duty on the holidays also.
- If only shipping date is indicated without L/C Expiry Date: Consider Expiry Date and the shipping date as same. If only Expiry Date is indicated without shipping period, the date is the shipping. |
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(6) Installment shipping and transship |
| <1> Interpretation when there is no indication on L/C |
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- For installment shipping : On the article No 40 of UCP, it clearly states as "Interpret as permission". For transship: Since there is not clearly stated regulation, there is an objection for interpretation.
- In actual practice, in order to protect a importer and to eliminate exporter's risks burden while Nego it is safer to interpreted it as "Not permitted". |
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| <2> For the same vessel, same route installment shipping |
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- If L/C restricts installment shipping : It is clearly stated in the regulation that the number of shipping by the same vessel, same route are not consider as installment shipping although the date of shipping and the shipping port is different. (The Sub-Article No. 40-b of UCP).
- But if L/C arranged the shipping port in written statement, it would be consider as a violation against duty regulation for departing from a nominated shipping which needs cautious. |
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| <3> Exception for multimodal transportation and container |
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- UCP inevitability if there is no direct port route between the export/import countries and if the means of transportation is container, trailer, rash vessel, it permits transship with special clause since there is no risks in this case. (The Article No. 23 and Sub-Article No. 24-d of UCP)
- If transship prohibit clause is not in L/C: If marine carrier, as long as the whole route is covered with the same transportation documents, the transportation documents that indicated transship in schedule is acceptable. (The Sub-Article No. 23-b,c and Sub-Article No. 24-b,c of UCP)
- Although L/C has prohibition clause for transship, the transportation documents equipped with following terms are acceptable. |
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1 If "vessel company's transship is reserved" is included in L/G clause as "print clause" clause. (The Sub-Article No. 23-c-ii of UCP)
2 If L/C allows multimodal transportation, air line transportation, land road, rail road , inland and water way transportation method (The Sub-Article No. 26-b of UCP)
3 If there is an indication that the goods are transporting to the final destination by container, trailer, rash vessel. (The Sub-Article No. 23-d,i and Sub-Article No. 24-d,i of UCP)
4 If shipping port and intended port is indicated as CFS or CY of the said port. |
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(7) Others |
| <1> Interpretation on the permission condition of on deck stowage |
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| 1 Prohibition of On deck shipping as a general rule |
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- Since there are many hazardous factor if cargo is loaded on a deck, the L/G indicated on deck stowage is refused for acceptance by a bank as a general rule.(The Sub-Article No. 31-i of UCP)
- If a cargo is inevitable but to on deck shipping because the contents are alive animals and material woods and such: On deck stowage allowing clause should be indicated on L/C. |
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| 2 Allowing on deck shipping reserve statement |
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- If a cargo is to be transport by a dedicated vessel because of the container internal goods: A vessel company should indicate "Might be ship to on board" intention on B/L as print clause and a bank accepts the B/L if such reserve statement is accompanied. (The Sub-Article No. 31-i of UCP)
- If on deck stowage is not print clause but rubber stamp, typing, or hand written: Banks will obviously refuse to accept such B/L. |
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| <2> The validity of documents that are issued before establishing L/C |
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- With BWT transaction, usually subject-matters are already loaded in a vessel before establishing L/C or carried in to a bonded warehouse of importing country and the UCP regulates these goods availability under certain conditions. (The Article No. 22 of UCP).
- For such documents to be lawfully accepted, the following conditions are to be fulfilled.
- Acceptance refusal indication for the documents are not to be on L/C.
- The documents are to be presented to a bank within L/C validity period.
- For the transportation documents, they have to be presented within 21 days from the issuance date or there should be a special wording such as "Stale B/L Acceptable". |
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| <3> Indication for tariff payment |
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| 1 If price term is FCR, FAS and FOB |
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| - In the L/C there should be a departing port indication after term FOB and freight on B/L should be indicated as collect. |
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| 2 If price term is CFR, CIF, CPT and CIP |
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- AFter CIF or CIP term, there should be indication for the arrival port and on freight section, it should be indicated as paid or prepaid.
- If 'to be paid' or 'payable' is indicated instead: Bank will refuse to accept (The Sub-Article No. 33-c of UCP)
- But if the transport method is by Courier service : If on the transportation page, there is "Transportation fee is burden by others of consignee" indication, a bank will accept such transportation documents. (The Sub-Article No. 33-b of UCP) |
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| 3 Surcharges with stevedoring charge |
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| - If there is a tenor that the unloading expense, loading expense other than the original tariff are to be added is indicated on B/L: If L/C is not prohibiting as a written statement, a bank will accept.(The Sub-Article No. 33-d of UCP) |
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Trade Helper 
L/C(Letter of Credit)
{1} Letter of credit
[7] Interpreting L/C 
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