Best Trade Solution

some one please help me on the issue.

say i issued a letter of credit covering import of garments product. now under the required document the credit has a clause like this

"certificate to the effect that the labor rights are maintained as per EU standard."

UCP 600 article 14 f says

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).

that means the beneficiary can issue the certificate. now say the beneficiary is the middle man from HongKong and not the manufacturer. the ultimate manufacturer is in china which is identified in the credit. can the beneficiary still issue the certificate? i think no. any opinion?

regards

mitra

dear mitra,

very good question. strictly sticking to UCP600, i will accept the document from anybody. if this example is modified a bit, it will initiate a very good debate. wanna have some?

iLC

The document in question should follow the art. 14d in reviewing it. Therefore I would accept a document issued by beneficiary on the stregth of the quoted article. Although the banks are not required nor permitted to go beyond docs to see the 'facts' I would comment that this is actually possible. Suppose the middle man have inspected the process of manufacturing in manufacturer mill and have ascertained based on many particulars that all 'labour rights are maintained as per EU standard'. Therefore is he entitled to further certify this to the buyer? I would consider this will exclusively depend on the contractual relation and are outside of scope of UCP and also I would refer to art.4 UCP600.
regards
Cristian

i would surely like to have one dear iLC. got your gesture. how about a freight payment receipt under a FOB contract? who can issue it? dear cristian, any comment?

mitra

Dear Mitra,
Tricky question indeed, technically speaking and also given your vague information FOB condition and freight payment receipt.
My question is from the exporter point of view: who cares about a freight receipt in FOB conditions (i.e. the buyer/applicant is to receive this receipt following the contract of carriage concluded with carrier). So what's the point in presenting a document by beneficiary which is beyond a FOB delivery and this document has nothing to do with beneficiary?
Regards
Cristian

mitra,

again a not so good example on this topic. a perfect one would be "EXW". i think in that case i will look for a payment receipt from the carrier or shipowner or freight forwarders. again, as per UCP a beneficiary can issue the certificate. but i think that wont fulfill its function. however if the condition is for a certificate, then i think a beneficiary can be the issuer.

iLC

Dear iLC
Allow me to correct you in one point . The same situation is in EXW from the seller point of view.He is not required to produce evidence of freight payment. Such conditions will start from CIP/CIF up to DDP conditions.
regards
Cristian

dear cristian,

there may be sometimes when you may want to modify the standard incoterms which talks about risk and payment of freight charges at the same time. there may be cases where the seller dont want to bear the risk but the same time will pay the freight at the request for the buyer. do you agree?

shahriar

Dear Shahriar,
I perfectly agree with what you have written and have no comment on that. This is because INCOTERMS are set of rules intended to bring closer the understanding of both parties entering into a contract . Nonetheless particular conditions to such a contract may override the standard terms and this fact is worldwide recognized.
Nevertheless you may have noticed that I usually answer questions straight to the point (EXW in that case without further information) and not in general manner where modifications may occur.
Hope I was clear enough for this time:)