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I NTERNAT I ONAL COMMERC I AL LAW
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“reasonableness test” is inevitable and requires a flexible interpretation
and application in individual cases, which cause complexity and
uncertainty in banking practice. UCP600 is specifically designed to avoid
a “reasonableness test” by removing the wording “reasonable time” and
instead stipulating a fixed period of 5 (five) banking days for bankers’
examination and refusal of documents.
Refusal notice
Two points are important and should be paid attention to:
(i) UCP600 clearly stipulates that a refusal notice, “
must state that
the bank is refusing to negotiate or honor
,” whilst UCP500 only
implies such a requirement.
(ii) UCP600 allows a refusal notice to state that, “
the issuing bank is
holding the documents until it receives a waiver from the applicant
and agrees to accept it, or receives further instructions from the
presenter prior to agreeing to accept a waiver”
, whilst under
UCP500 it is not allowed because from the perspective of the law
such a conditional statement cannot bind the beneficiary as it is only
a unilateral modification of UCP Article d(ii) imposed only by the
issuing bank but unaccepted by the beneficiary. UCP600 proposes
making this type of conditional statement to the beneficiary, and
consequently makes it not unilateral.
However, the beneficiary should bear in mind that given that the
documents belong to the beneficiary as long as he or she has not been paid
for them, whether the disposal clause discussed above is incorporated into
the credit or stated in UCP, it may introduce a possibility of depriving the
beneficiary of the alternative of selling goods to a third party as it is not
uncommon that upon receipt of a refusal notice the beneficiary may choose
a new buyer considering high demurrage, a rising market for the goods,
or the nature of the goods (e.g., perishables). So, allowing and accepting
the new stipulation discussed above in UCP, the beneficiary or presenter
will automatically waive the right of disposal of the refused documents
so long as the issuing bank waives the discrepancies and honors the said
documents. It follows that, in this connection, the incorporation of the
clause into UCP or the credit seems unfair and disadvantageous to the
presenter or the beneficiary. Therefore, the beneficiary or presenter should