The DC subject to UCP 600 required the Consignee of a negotiable bill of lading made to the order of Party A but the negotiable bill of lading presented was consigned to the order of Party B. However, there was an endorsement from Party B to the order of Party A on the face of the bill of lading. The issuing bank dishonoured due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy?

Why?

Common to all negotiable instruments, including bills of exchange, the "second holder A in BL" should stand a better position in law than the "first holder B in BL/first holder A in credit" as "second holder A in BL" is more innocent on the background of the underlying transaction, compared with "first holder B in BL/first holder A in credit" or the shipper S. As a result, "second holder A in BL" should enjoy all the protection and benefits of a "holder in due course" even though a trade fraud has been discovered by the applicant. "Second holder A's" interests should not be affected by the fraudulent acts. This may not hold equally true for the shipper S or "first holder B in BL/ first holder A in credit" as they are closer to the underlying transaction and may know or "ought to know" (as regarded by the judges in many judicial decisions on fraud cases) the fraudulent act. In some fraud cases, they may be even the accomplice or silent supporters of the trade frauds.

Having said that, in most legislations, a B/L is regarded only as a "quasi-negotiable" instrument. As a result, the "holder in due course" of a B/L may not enjoy the full protection after a fraud has been uncovered, in the same degree as a bill of exchange that is deemed to be a fully negotiable instrument in law. I think it is not fair to treat the B/L and the bill of exchange differently in law, from a common sense point of view. Otherwise, commodity traders would be discouraged to perform commodity transactions by endorsements in Bs/L.

So taking the common sense rule, if the credit asks for an insurance certificate or declaration under an open cover, and the document provided is an insurance policy, this should be more than acceptable as per article 28 (d) of UCP 600. Take another example; if the credit asks for a 14K gold ring packed in a rosewood gift box and an 18K gold ring packed in a Tiffany 24 hour fire proof safe deposit gift box hand crafted by a descendant of Michelangelo is supplied, it should be more than acceptable. But based on the doctrine of strict compliance, it is a discrepancy.

So I would give a Bravo! to this BL, not only accepting it.

Having said that, I can anticipate that some bankers may disagree with my opinions and insist that this is a valid discrepancy, judging purely from a "banker's perspective" as many credit experts and technical advisers do. Sometime, although not necessarily all the time, such excuse is a convenient means to avoid spending time understanding the trade practices of other trades, and learning the key concepts of other trades, such as transport and cargo insurance. That is the reason why some ICC opinions are in conflict, if not inconsistent with other trade practices or backbone doctrines. Some (not all) of those bankers are lazy people and try to use "banker's perspective" as their shields.

I agree to disagree. It all depends on the real motive behind.

T. O.