Documents Acceptable as Presented: Unresolved Ambiguities in ISBP A19-g

Author: Adv. Balaji KAS

Objective:

To highlight a long-standing concern arising from the interpretation of the expression “Documents acceptable as presented” under Paragraph A19-g of both ISBP 745 and ISBP 821, which remains unresolved since its introduction.

Introduction:

The expression “Documents acceptable as presented” is interpreted as part of “Expressions not defined in UCP 600” under paragraph A19-g of both ISBP 745 and ISBP 821. However, if it is applied in a documentary credit as per the current interpretation, as widely understood, it leads to several risks, including commercial and compliance risks. It appears that the real intent of this expression is not properly reflected in the interpretation given by ISBP – Paragraph A19-g.

Background:

Inclusion of this expression in a letter of credit is usually sought by applicants when dealing with regular suppliers who may have been repeatedly frustrated in earlier transactions due to delayed payments and discrepancy charges arising from the presentation of discrepant documents. Based on such past experiences, the supplier may insist on including this clause as a precondition to supplying goods, to obtain assurance that the issuing bank will honour the documents irrespective of discrepancies.

Interpretation as per ISBP:

When the expression “Documents acceptable as presented” is included in the LC without defining its meaning in the credit, its meaning as per ISBP is – “a presentation may consist of one or more of the stipulated documents, provided they are presented within the expiry date of the credit and the drawing amount is within that which is available under the credit. The documents will not otherwise be examined for compliance under the credit or UCP 600, including whether they are presented in the required number of originals or copies.”

It is widely understood that the inclusion of this expression binds the issuing bank to honour, subject to the following conditions:

1. At least one stipulated document is presented
2. Presentation must be made within the expiry date of the credit
3. The drawing amount is within the amount permitted by the credit

For example, if a letter of credit requires presentation of the following documents:

Commercial Invoice

Packing List

Bill of Lading

Certificate of Origin

As per this interpretation, the beneficiary may present only a packing list within the expiry date of the credit and still claim the full amount of the LC. How the value can be determined based on a packing list alone is a significant question that remains unaddressed.

Ambiguity in Interpretation:

Though point 2 is clear, points 1 and 3 raise doubts as to whether the intent of the interpretation is correctly understood, given the construction of the sentence.

The wording “a presentation may consist of one or more of the stipulated documents” may also be understood as: “If the LC requires one document, then the presentation must include one document; or if the LC requires multiple documents, then the presentation must include all stipulated documents.”

It also states that “The documents will not otherwise be examined for compliance under the credit or UCP 600, including whether they are presented in the required number of originals or copies.” As such, the term “documents” (plural) suggests that more than one may be expected.

The interpretation does not explicitly state “a presentation must consist of at least one stipulated document.” When a provision included in ISBP is intended to clarify an undefined expression, it is expected that the clarification be stated explicitly, without room for interpretation or ambiguity.

Additionally, point 3 raises uncertainty as to how the drawing amount can be determined when documents like a packing list, which do not specify value, are presented without a commercial invoice or draft.

Practical Implications:

Assumption 1: All required documents to be presented:

• The beneficiary is protected and gets paid regardless of discrepancies
• The applicant receives all stipulated documents, both commercial and official, for clearance of goods at the destination
• The issuing bank can perform regulatory screening checks for AML/sanctions
• The intent behind including this condition in the LC is fulfilled, allowing for the handling of a legitimate transaction

Assumption 2: At least one document from the stipulated documents is sufficient: 

This may lead to several commercial and regulatory risks, including but not limited to the following:

• Risk of non-presentation of transport documents when the movement of goods is involved
• Risk of non-presentation of official documents required for clearance of goods
• Screening checks cannot be performed — i.e., origin of goods, routing of goods, parties involved, vessel flag, etc.
• The beneficiary may draw the full value against part shipments
• There is a risk that the applicant and beneficiary may collude to simulate a legitimate transaction and facilitate the transfer of illegitimate funds

Conclusion:

Among the expressions listed under ISBP A19 as “Expressions not defined in UCP 600,” none except “Documents acceptable as presented” has raised interpretative challenges. ISBP itself cautions that such expressions should not be used without clearly defining their meaning in the credit. However, when ICC chooses to provide a clarification, as it did in A19-g, that clarification must be sufficiently clear and unambiguous.

If ICC had chosen not to define the expression, it would have been left to the issuing bank and the beneficiary to interpret and agree upon its meaning based on the credit’s context. But once ICC issues a standardised interpretation, it becomes binding in practice and must uphold the principles of clarity and certainty expected of international standard banking practice.

In view of the ambiguities identified in this paper, particularly concerning what constitutes a sufficient presentation and how drawing amounts are to be determined, it may be appropriate for ICC to revisit and revise the current wording of A19-g in the next version of ISBP to ensure both commercial and compliance integrity are preserved.