Standard of Documentary Compliance in letter of Credit Cases

July 02, 2001 | BY

clpstaff &clp articles

The 1993 revision of Article 13 of the Uniform Customs and Practices for Documentary Credits (UCP500), as drafted by the International Chamber of Commerce…

The 1993 revision of Article 13 of the Uniform Customs and Practices for Documentary Credits (UCP500), as drafted by the International Chamber of Commerce (ICC), set the standard for banks in their examination of documents presented by the beneficiary for payment. Not only must these documents appear to be in compliance with the terms or conditions of the letter of credit, but they must also appear to be consistent with one another.

Recent leading cases decided and published by the Supreme People's Court (SPC) shed light on these issues. The landmark case of Tsaolian Material (Hong Kong) Co. Ltd. v. The Agricultural Bank of China, Hunan Branch, demonstrates that they will scrutinize every detail in applying a strict compliance standard. Beneficiaries must be especially careful when letters of credit include so-called "soft clauses".

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