Amended Credits and ICC Opinion R795

Among the 82 International Chamber of Commerce opinions contained in "ICC Banking Commission Opinions 2012-2016" (ICC Publication No.785E)，perhaps the most difficult one to comprehend is R795 (TA820rev4) -- which deals with a bank credit that is amended. In the following analysis，I will try to demonstrate the problems with the logic behind this opinion and how it deals with the issue of what is referred to as "without taking into account the amendment."

In order to better understand the issue，below is the full text of opinion R795:

When a credit is amended and the beneficiary makes a subsequent presentation under it，but without taking into account the amendment，is the amendment considered rejected or can it be accepted at a later date by the beneficiary for use with any future presentations?

One of the members of our National Committee has made the following query regarding practical application of Uniform Customs and Practice for Documentary Credits 600 sub-article 10 (c).

On December 19，2014 the issuing bank issued an amendment to the credit through the advising bank which is also the nominated bank. As per MT 730 of the nominated bank the amendment was advised to the beneficiary on December 23，2014. On January 7，2015 the nominated bank took up a presentation and claimed reimbursement under the credit. The presentation was made after the amendment date，but it did not comply with the amended credit. At the same time the beneficiary did not communicate his acceptance or rejection of the amendment. Much later，the nominated bank informed that the beneficiary accepted the amendment on January 21，2015 without specifying any details.

We kindly request to provide us with an opinion of the officers of the ICC Banking Commission regarding the following questions:

1. If a presentation is made after the amendment date and complies with the original credit terms (not taking into account the amendment issued)，whether such presentation should be deemed to be notification of rejection of the amendment by the beneficiary in absence of another instruction to this effect from the beneficiary?

2. Should this presentation be honored as complying?

3. Is it available for a beneficiary to accept an amendment at any time as well after several presentations made later than the amendment was advised to him?

4. Is it available for a beneficiary，when making a presentation，to communicate at the same time his acceptance of the amendment regarding any further presentation，but not this one?

5. Does the answer depend on whether one or all the documents presented are issued before the date of amendment? Or after the date of amendment?

Analysis

The amendment was dated 19 December 2014 and the nominated bank，via its Swift MT730 dated 23 December 2014 confirmed that the amendment had been advised to the beneficiary.

The nominated bank did not receive beneficiary's acceptance or rejection to the amendment until 21 January 2015. In the meantime，the beneficiary made a presentation on 7 January 2015 that did not comply with the amendment. The nominated bank accepted the presentation as compliant under the original credit and claimed reimbursement as per credit terms.

Since neither the beneficiary's acceptance nor rejection of the amendment dated 19 December 2014 had been received by the nominated bank at the time of presentation，neither the nominated bank nor the issuing bank knew if the amendment had been accepted or rejected. This has been addressed in ICC Opinion R634/TA638rev: a presentation that is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary.

The subsequent information from the nominated bank，regarding the beneficiary's acceptance of the amendment on 21 January 2015 would evidence the beneficiary's due compliance to the amended terms of the credit for any future presentation(s) under the credit.

Conclusion

1. When a beneficiary makes a presentation without having communicated either its acceptance or rejection of an amendment，and such presentation complies with the original credit terms but would not comply with the amended credit (i.e. not taking into account the amendment issued)，the amendment will be deemed to have not yet been accepted or rejected by the beneficiary.

2. Yes¡ªif otherwise in order and complying to the original credit terms and any other accepted amendments till that time.

3. Yes.

4. Yes.

5. No¡ªthe entire presentation and every single document within such presentation must evidence and ensure either compliance with the terms of the credit after amendment or before amendment. Any document reflecting amended terms may also be issued prior to the amendment.

'Not taking into account the amendment' is equal to 'not complying with the amendment'

Non-native speakers of English might find it a little difficult to appreciate the meaning of the expression presentation "without/not taking into account the amendment (issued)." In describing the background information in the query，the inquirer stated that "the presentation was made after the amendment date，but it did not comply with the amended credit." A bit later，in asking the first question，the inquirer claimed that the presentation is made after the amendment date and complies with the original credit terms (not taking into account with the amendment issued). That suggests "not taking into account the amendment" equates to "not complying with the amendment." In the conclusion，the banking commission stated that "and such presentation...would not comply with the amended credit (i.e. not taking into account the amendment issued)." That clearly demonstrates "not taking into account the amendment" means "not complying with the amendment."

'Not taking into account the amendment' and 'not impacted by the amendment'

In R795，the focus that requires utmost attention is the first question and its answer from the banking commission. The question is: "If a presentation is made after the amendment date and complies with the original credit terms (not taking into account the amendment issued)，whether such presentation should be deemed to be notification of rejection of the amendment by the beneficiary in absence of another instruction to this effect from the beneficiary?" After a brief restatement of the background events contained in the query，the banking commission replied: Since neither the beneficiary's acceptance nor rejection of the amendment dated 19 December 2014 had been received by the nominated bank at the time of presentation，neither the nominated bank nor the issuing bank knew if the amendment had been accepted or rejected. This has been addressed in ICC Opinion R634/ TA638rev: a presentation that is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary. Obviously，the banking commission committed a fault in offering an answer not to the question. It appears that the banking commission takes it for granted that presentation "not taking into account of the amendment" means the same as presentation "not impacted by the amendment." In fact，the two expressions have completely different meanings. That is evidenced by ICC opinion R634.

'Not impacted by the amendment' equates to 'no notification made'

In the fifth question of ICC opinion R634，after citing the provisions of sub-article 10 (c) of UCP600，the inquirer claimed: A question has arisen regarding amendments that do not impact a presentation of documents. Example: where under a credit for US$100,000 permitting part shipments，and the issuer amends the credit to reduce it by US$50,000，a beneficiary presents documents for US$50,000 without stating it has accepted or rejected the amendment. In this case，the bank cannot construe the beneficiary's silence regarding the amendment as acceptance to reduce the credit to zero，because the amendment had no impact on the presentation，and therefore the beneficiary has neither expressed consent nor rejection of the amendment. A beneficiary may not even have received such an amendment，and to construe silence as acceptance when the documents are not impacted by the amendment directly conflicts with the rights of the beneficiary stated in sub-article 10 (a).

Please confirm that a presentation of documents which is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary. A position to the contrary is in direct conflict with sub-article 10 (a). An amendment which does not impact a presentation of documents may not be automatically enforced against the beneficiary.

The banking commission replied: The example provided in the query outlines the type of issue that UCP600 Drafting Group sought to clarify by proposing a change in the language that appeared in UCP500 sub-article 9 (d) (iii)，now UCP600 sub-article 10 (c). Keeping the wording as appeared in UCP500 sub-article 9 (d) (iii) would mean that the nominated bank or issuing bank cannot，in the circumstance shown in the query，make any determination as to whether the beneficiary has accepted the amendment. Even if the nominated bank or issuing bank were to ask the beneficiary as to whether it has accepted the amendment，the beneficiary could refer to the contents of sub-article 10 (c) and state that it has yet to make up its mind.

You are correct in saying that a presentation that is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary.

Does 'not complying with the amendment' equate to 'not impacted by the amendment'?