ICC Rules Study_ International Chamber of Commerce Opinion
This official opinion is still quite lengthy, covering two aspects. The narrator’s argumentation process is long, and the ICC’s analysis includes another official opinion’s analysis and conclusion. However, despite the extensive content, the case details are not complex, making the reading process not tedious, though somewhat time-consuming:
R820
Must an issuing bank issue a refusal notice in order to be able to claim its discrepancy fee?
The designated bank did not review the documents submitted by the beneficiary and sent the documents to the issuing bank. The issuing bank did not send a refusal notice, directly paid the documents, and deducted a discrepancy fee at the time of payment. The designated bank believes that since the issuing bank did not send a refusal notice, it has no right to deduct the discrepancy fee, while the issuing bank believes that if the designated bank wants to know the details of the discrepancies, it should make a request.
The designated bank disagrees with the issuing bank’s viewpoint and has a different opinion on the previous conclusion of the International Chamber of Commerce. Let’s take a look at how this case differs from the “Situation D” in the previous official opinion, and also understand the correct practice of the issuing bank when deducting a discrepancy fee.
107
Opinion R820(TA795rev)
Can a Discrepancy Fee Be Deducted Without Issuing a Refusal Notice?
R820(TA795rev)2012~16
Issue Review
QUERY
QUOTE
We have faced the following situation: L/C available with advising bank (us) by payment, however we did not act under our nomination and have sent documents presented by the beneficiary to the issuing bank without examining them (in accordance with the beneficiary’s request). No message was received from the issuing bank, only on the fifth working day we received a MT910 from our correspondent bank informing us of the credit entry on our account and containing information in field 72: /EUR100 deducted as discr.fee/.
The documentary credit included the following clause: “discrepancy fee of EUR 100.00 will be deducted from the proceeds of any drawing if documents are presented with discrepancies”.
We have contacted the issuing bank arguing that since they had not acted in accordance with UCP 600 sub-article 16 (c) (ii), i.e. quoting every single discrepancy, they should be precluded from deducting a discrepancy fee.
An answer was received that its action has nothing to do with UCP 600 article 16 and that if we want to find out about discrepancies we will have to ask for it. It seems that they are acting in line with the conclusion of a/m Opinion. Nevertheless, we cannot agree with it.
In our opinion, and according to UCP600 sub-article 16 (a), an issuing bank determines if a presentation does not comply. By deducting its discrepancy fee it obviously wanted to indicate that the presented documents did not comply.
As per article UCP 600 sub-article 16 (b), an issuing bank may, in its sole judgment, approach the applicant for a waiver, but that does not extend the period of time mentioned in UCP 600 sub-article 14 (b), nor does it (in our opinion) annul the provisions of UCP 600 sub-articles 16 (c), (d), (e) and (f).
Achieving applicant’s acceptance of discrepancies does not justify the action of not listing all discrepancies, even when sending a message indicating acceptance (such as in MT752).
Such practice disables the beneficiary from disputing controversial or groundless discrepancies or at least to get information of what was “wrong” as to improve it in the next presentation. It disables the beneficiary in any way to disprove doubtable deductions, however small they can be. It is our opinion that the beneficiary is entitled to be informed within 5 working days of presentation of every possible discrepancy, giving them the opportunity to correct documents if they want. It should be their decision, as after all, documents belong to them. It could also be argued that without giving the opportunity to correct discrepant documents or to dispute discrepancies, this could also potentially have the effect of implying that the supplier is unable to fulfil the terms of its contract.
As it went out from this particular case, it seems that the result is that the beneficiary can get information of what went “wrong” in its presentation only after additional correspondence, engaging additional resources, time and cost, as if they are not entitled to that information by the presentation of documents itself.
It seems that the possibility to deduct a discrepancy fee, without giving the explanation to the beneficiary (since there is no obligation or penalty for such action), has encouraged practice which would be contrary to any other usual charging of any other amount. Charging of any amount should be accompanied by a proper bill and specification of what the beneficiary is paying for. It allows unilateral assessment of the basis of deduction from the issuing bank’s side only. Even though we are talking of small amounts, such actions are not justified.
Implications of practice that recovery of small amounts rarely take place, should not affect the basic rights of the beneficiary.
We think that if an issuing bank determines that the presented documents contain discrepancies, all discrepancies should be quoted either in a separate MT734 or in a MT752 within 5 working days. Otherwise, they are precluded claiming that documents are discrepant (and accordingly not allowed to deduct a discrepancy fee).
Consultant’s Inquiry to ICC:
We would like to seek an official opinion and possible reconsideration of the Official Opinion R741/TA700rev (Document 470/TA.700rev) (situation D) regarding charges deducted by issuing banks from their reimbursements / settlements under documentary credit issued subject to UCP 600.
ICC Analysis
ANALYSIS
The situation described in this query is similar to that covered by Opinion 470/TA.700rev Situation D. A presentation of documents has been paid by the issuing bank after deducting its discrepancy fee. Prior to payment, no notice of refusal has been sent nor had any information on discrepancies been provided by the issuing bank. The Analysis and Conclusion under 470/TA.700rev (and previous ICC Opinions R380 and TA.659 to which it referred) also covered the issue of deduction of charges which exact amount had not been described in the documentary credit:
Analysis:
If the issuing bank wishes to make a deduction from the proceeds in respect of this [a] fee, then the credit should clearly indicate the amount or percentage of charges that will be deducted. In assessing what additional charges may be due to an issuing bank, where the credit states ‘all charges outside country X are for account of beneficiary’, a line needs to be drawn between those charges that are known or distinct possibilities i.e., a discrepancy charge, and those charges that materialise through requests of the nominated bank i.e., a request for an authenticated message confirming the due date, that payment has been effected etc. When an issuing bank finds discrepancies in documents, it has two options available to it under article 16: to provide a refusal message to the presenter in terms of sub-articles 16 (c) and (d) or, to approach the applicant for a waiver without first providing a notice of refusal (sub-article 16 (b)). When the option of approaching the applicant for a waiver is chosen, and such waiver is given and accepted by the issuing bank, the practice is for the issuing bank to honour, and such honour will be less any discrepancy fee that was stated in the credit. When this course of action is taken, the issuing bank should provide the presenter, as part of their payment message or in a separate communication, details of the discrepancies that were observed. The presenter can then choose to dispute the discrepancies, therefore questioning the relevance of the deduction representing the discrepancy fee. If the issuing bank does not provide such an indication, the presenter may seek, and the issuing bank must provide, such details. The actions of the issuing bank, as described in situation D, do not represent preclusion under sub-article 16 (f).
Conclusion:
Situation D: The issuing bank is entitled to a discrepancy fee as outlined in the credit, but it should inform the presenter of the discrepancies that were found, either in the advice of payment or in a separate communication. The issuing bank is not required to send a notice of refusal to the presenter if it elects to contact the applicant for a waiver and to receive a waiver that is acceptable to it. Sub-article 16 (f) does not apply in these circumstances. If the covering schedule listed the discrepancies that the presenter had found, the issuing bank should either advise the presenter that the documents were taken up despite the discrepancies that had been identified by the presenter, or list the discrepancies for which the issuing bank had sought waiver from the applicant.
The issuing bank in the current query stated that it would only give information of the discrepancies found in the presentation if specifically requested to do so. This is not in line with the conclusion of 470/TA.700rev, which states that an issuing bank should inform the presenter of any discrepancies that were found, either in the advice of payment or in a separate communication.
ICC Conclusion
CONCLUSION
When a bank deducts a discrepancy fee on the basis of a “discrepancy fee clause” in a credit, it is good banking practice to inform the presenter of any discrepancies that were found in the documents, either in the advice of payment or in a separate communication. In the event it fails to do so, this does not preclude it from providing such information subsequently.
This opinion is still quite lengthy, mainly because another official opinion is nested within the analysis process. The nested opinion does not even have paragraphs, and to make the text easier to read, it was divided into paragraphs during the Chinese translation.
Although the narrator’s argumentation process is long, the reading process is not dull, and it can be considered reasonable and somewhat aggrieved.
Mingyue | Original
# Music Time and Space
……
Fragmented Thoughts
Butterfly, Lift Purchase Restrictions, 11A
Due to this year’s first typhoon “Butterfly”, I had to spend a “rain-soaked forest” weekend. On Friday, Guangzhou’s announcement of lifting purchase restrictions also stirred a ripple in my long-silent heart. Previously, I didn’t care about housing prices or the real estate market, using Guangzhou’s purchase restrictions as an excuse. When this policy was lifted, I realized the real reason was still poverty.
I remember that Huangpu District lifted the purchase restrictions two years ago, and after asking around my colleagues, I found that in places I consider “suburban”, the housing prices are still ridiculously high. In recent years, I have been going to Luogang more often for business, and speaking of the natural environment, that area is really comfortable. Every time I walk out of the subway, I feel the sky is clearer, the view is broader, the sunlight is stronger, and the clouds are whiter. There is also a large public square where many elderly people exercise and relax, but unfortunately, I am just a hurried passerby.
On my way to and from work, there is a demolition area under construction, the foundation has not been laid yet, but the sales office has already been built magnificently. According to a friend, when he wanted to take a look, he was stopped by the sales lady because he needed to verify his funds first. Perhaps I am too out of touch and do not know what this routine is.
A few days ago, an Indian plane crashed, and almost all the people on board perished, with only one male survivor. The TV host specifically emphasized his seat number: 11A, which, from the seat map, should be the front row window seat in economy class, also close to the emergency exit. However, generally, domestic tickets refer to the front row in economy class as “premium economy”, and the ticket price is a bit higher, making such seats not easy to choose. I have heard that seats near the emergency exit are usually assigned to taller men, who can help the flight attendants open the door for passengers to escape in dangerous situations. In recent years, Boeing accidents have occurred frequently, and I hope our domestic aircraft can develop quickly so that we can fly on our own planes in the future.
There are four major issues that one must face in life: clothing, food, housing, and transportation. The first two are not too different for everyone, but the latter two require a lot of competition, such as ability, strength, luck, etc. Sometimes, no matter how hard you try, you cannot obtain them, and no matter how careful you are, you cannot avoid them; you can only go with the flow.
Summer
SUMMER
2025.6.16 Monday
Health does not come from stability, but from adaptation, reconstruction, and strengthening after fluctuations.
WeChat ID: CDCS-2018
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4. Interpretation of ICC Rules
5. Mingyue’s Thoughts
