[edit] Supreme Court Decision 2001Da29469 delivered on October 11, 2002 [Payment under the Letter of Credit]
【Main Issues】
[1] In the event that, notwithstanding that a letter of credit specified a "marine bill of lading" as a required document, a bill of lading using different names such as a "combined transport bill of lading" is present, whether Article 23 of the Fifth Amended Uniform Customs and Practice for Documentary Credits (hereinafter referred to as 'Uniform Customs') governing marine bills of lading applies with respect to document review by the opening bank (affirmative)
[2] Requirements under the Uniform Customs regarding the recording of the loading onto a designated ship, which is required as a condition of accepting the received bill of lading, and the basis for determining whether such requirements are met
[3] The conditions of a letter of credit and the basis for determining whether the recorded loading port must be the same as the recorded discharging port for the purpose of entry into the marine bill of lading
【Summary of Decision】
[1]Under the Uniform Customs, Article 23 specifies the related documentary requirements where the letter of credit requires a marine bill of lading (also known as ocean bill of lading or port-to-port bill of lading) and Article 26 specifies the related documentary requirements where the letter of credit requires a combined transport document (also known as the multi-modal transport document). Unless otherwise specified in the letter of credit, a bank is required under the Uniform Customs to accept the foregoing documents, however named, so long as such documents meet all the requirements set forth in the Unified Customs governing transport documents required under a letter of credit). Therefore, the bank at which the letter of credit is opened may not refuse to make payment on the letter of credit for the reason that the bill of lading presented by the beneficiary uses a different document title such as a combined transport bill of lading and therefore that the document presented is different from the document required under the letter of credit. Furthermore, the bank must consider whether the applicable transport document meets the acceptance requirements set forth in the letter of credit in terms of the type of the document required, rather than the name used, in determining whether to make payment on the letter of credit.
[2] Article 23(a)(ii) of the Uniform Customs specifies that, where the letter of credit requires a shipped bill of lading, i.e., a bill of lading that applies to port-to-port loading, the notation of loading may be made using pre-printed language on the bill of lading, but where the letter of credit requires a received bill of lading, i.e., a bill of lading used when the cargo is not loaded prior to the issuance of the bill of lading, a notation should be made on such bill of lading that the cargo was loaded on the designated ship and the date on which such cargo was loaded (the "On Board Notation"). The purpose of such rule is to clarify the legal relationship among the parties involved in the loading of cargo by clearly recording on the received bill of lading that the cargo was properly loaded onto the designated ship since such fact cannot be confirmed solely by the language on the received bill of lading. Therefore, the question of whether the On Board Notation was properly made in compliance with the Uniform Customs must be strictly construed on the basis of the recording made on the applicable bill of lading and not on the basis of notations on other documents such as the letter of credit.
[3] Article 23(a)(iii) of the Uniform Customs specifies that, where the letter of credit requires a port-to-port marine bill of lading, the port of discharge as recorded on such bill of lading must match the entry in the letter of credit (if the letter of credit requires a port-to-port bill of lading, the reference to "for transportation to" has the same meaning as the port of discharge), and that, to the extent that the recorded port of discharge is the same, it is irrelevant whether the bill of lading specifies a different final destination. Since the purpose of such provision is that the process and methodology of transport as specified in the letter of credit must be confirmed by the bill of lading presented in connection therewith, the question of whether the loading and discharge of the applicable cargo was made as required under the letter of credit must be strictly construed.
【Reference Provisions】 [1] Articles 23 and 26 of the Unified Customs (1993 revision) / [2] Article 23 Paragraph a item ii of the Unified Customs (1993 revision) / [3] Article 23 Paragraph a item ii of the Unified Customs (1993 revision)
Article 23 of the Unified Customs (1993 revision) Marine/Ocean Bill of Lading (Article 25 of the old Unified Customs) a. If a Credit calls for a bill of lading covering a port-to-port shipment, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which:
i. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by:
- the carrier or a named agent for or on behalf of the carrier, or
- the master or a named agent for or on behalf of the master.
Any signature or authentication of the carrier or master must be identified as carrier or master, as the case may be. An agent signing or authenticating for the carrier or master must also indicate the name and the capacity of the party, i.e. carrier or master, on whose behalf that agent is acting, and
ii. indicates that the goods have been loaded on board, or shipped on a named vessel. Loading on board or shipment on a named vessel may be indicated by pre-printed wording on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment. In all other cases loading on board a named vessel must be evidenced by a notation on the bill of lading which gives the date on which the goods have been loaded on board, in which case the date of the on board notation will be deemed to be the date of shipment.
If the bill of lading contains the indication "intended vessel," or similar qualification in relation to the vessel, loading on board a named vessel must be evidenced by an on board notation on the bill of lading which, in addition to the date on which the goods have been loaded on board, also includes the name of the vessel on which the goods have been loaded, even if they have been loaded on the vessel named as the "intended vessel". If the bill of lading indicates a place of receipt or taking in charge different from the port of loading, the on board notation must also include the port of loading stipulated in the Credit and the name of the vessel on which the goods have been loaded, even if they have been loaded on the vessel named in the bill of lading. This provision also applies whenever loading on board the vessel is indicated by pre-printed wording on the bill of lading, and
iii.indicates the port of loading and the port of discharge stipulated in the credit, notwithstanding that it:
(a) indicates a place of taking in charge different from the port of loading, and/or a place of final destination different from the port of discharge, and/or
(b) contains the indication "intended" or similar qualification in relation to the port of loading and/or port of discharge, as long as the document also states the ports of loading and/or discharge stipulated in the Credit, and
iv. consists of a sole original bill of lading, or if issued in more than one original, the full set as so issued, and
v. appears to contain all of the terms and conditions of carriage, or some of such terms and conditions by reference to a source or document other than the bill of lading(short form/blank back bill of lading), banks will not examine the contents of such terms and conditions, and
vi. contains no indication that it is subject to a charter party and/or no indication that the carrying vessel is propelled by sail only, and
vii. in all other respects meets the stipulations of the Credit.
b. For the purpose of this Article, transhipment means unloading and reloading from one vessel to another vessel during the course of ocean carriage from the port of loading to the port of discharge stipulated in the Credit.
c. Unless transhipment is prohibited by the terms of the Credit, banks will accept a bill of lading which indicates that the goods will be transhipped, provided that the entire ocean carriage is covered by one and the same bill of lading.
d. Even if the Credit prohibits transhipment, banks will accept a bill of lading which:
i. indicates that transhipment will take place as long as the relevant cargo is shipped in Container (s), Trailer(s) and/or "LASH" barge (s) as evidenced by the bill of lading, provided that the entire ocean carriage is covered by one and the same bill of lading, and/or
ii. incorporates clauses stating that the carrier reserves the right to tranship.
Article 26 of the Unified Customs (1993 revision) Multimodal Transport Document (Article 25 of the old Unified Customs)
a.If a Credit calls for a transport document covering at least two different modes of transport(multimodal transport), banks will, unless otherwise stipulated in the Credit, accept a document, however named, which:
i. appears on its face to indicate the name of the carrier or multimodal transport operator and to have been signed or otherwise authenticated by:
- the carrier or multimodal transport operator or a named agent for or on behalf of the carrier or multimodal transport operator,
- the master or a named agent for or on behalf of the master.
Any signature or authentication of the carrier, multimodal transport operator or master must be identified as carrier, multimodal transport operator or master, as the case may be. An agent signing or authenticating for the carrier, multimodal transport operator or master must also indicate the name and the capacity of the party, i.e. carrier, multimodal transport operator or master, on whose behalf that agent is acting, and
ii. indicates that the goods have been dispatched, taken in charge or loaded on board. Dispatch, taking in charge or loading on board may be indicated by wording to that effect on the multimodal transport document and the date of issuance will be deemed to be the date of dispatch, taking in charge or loading on board and the date of shipment. However, if the document indicates, by stamp or otherwise, a date of dispatch, taking in charge or loading on board, such date will be deemed to be the date of shipment, and
iii. (a) indicates the place of taking in charge stipulated in the Credit which may be different from the port, airport or place of loading, and the place of final destination stipulated in the Credit which may be different from the port, airport or place of discharge, and/or
(b) contains the indication "intended" or similar qualification in relation to the vessel and/or port of loading and/or port of discharge, and
iv. consists of a sole original multimodal transport document or, if issued in more than one original, the full set as so issued, and
v. appears to contain all of the terms and conditions of carriage, or some of such terms and conditions by reference to a source or document other than the multimodal transport document(short form/blank back multimodal transport document); banks will not examine the contents of such terms and conditions, and
vi. contains no indication that it is subject to a charter party and/or no indication that the carrying vessel is propelled by sail only, and
vii. in all other respects meets the stipulations of the Credit.
b. Even if the Credit prohibits transhipment, banks will accept a multimodal transport document which indicates that transhipment will or may take place, provided that the entire carriage is covered by one and the same multimodal transport document.
【Plaintiff, Appellee】 Hyo Sung, Inc. (Law Firm Sae Chang, Attorney Ahn Young-hwan and 9 others, Counsel for plaintiff-appellee)
【Defendant, Appellant】 The Bank of China (Attorneys Lee Im-soo and 3 others, Counsel for defendant-appellant)
【Court of First Instance】 Seoul District Court Judgment 99Gahap101936 delivered on October 13, 2000
【Court of Second Instance】 Seoul High Court Judgment 2000Na59083 delivered on April 3, 2001
【Disposition】 The judgment of the court below shall be reversed and the case shall be remanded to the Seoul High Court.
【Reasoning】 The grounds for appeal are examined as follows.
1. We accept the following findings of fact based on the judgment of the court below and records.
A. The Export Contract and the Opening of the Letter of Credit
The plaintiff entered into a contract with Hugang Company located in Shantou of China to export 29,350 MT of aluminum foil at a price of 113,170.74 dollars. On December 27, 1997, pursuant to the request from Shanghai Packaging Import and Export Pudong Company, an import agent of Hugang with respect to said export, the Shanghai branch office of the defendant opened a letter of credit in the amount of 204,050 dollars with the plaintiff as the beneficiary and the date of payment as 90 days after the date of loading, with the final loading date to be March 20, 1998. Notice of such opening was made to and accepted by the plaintiff.
B. The Provisions in the Letter of Credit
(1) The letter of credit at issue required in clause 46A thereof one of the three original copies of a "clean on board ocean bill of lading" as one of the required documents thereunder. The letter of credit also expressly permitted transshipment and specified the port of loading (on board/disp/taking charge) as a "South Korean Main Port" (see clause 44A) "for transportation to" Donghai, China (see clause 44B).
(2) The letter of credit at issue stated that it will be governed by the "Uniform Customs and Practice of Documentary Credits, 1993 Revision, ICC Publication No. 500 Effective January 1, 1994 (herein after "Uniform Customs")."
C. The entries in the bill of lading the plaintiff submitted along with the letter of credit
Following the loading of the export cargo, the plaintiff sent to the defendant a bill of exchange, commercial invoice, insurance certificate, packaging specifications, quality assurance guarantee, a copy of the notice of shipment, a beneficiary certificate, among others. However, instead of presenting a marine bill of lading as required under the letter of credit, the plaintiff presented a 'combined transport bill of lading,' which recorded Busan, Korea as the port of loading, Hong Kong as the port of discharge, and Donghai, China as the place of delivery. The plaintiff's bill of lading did not have an On Board Notation, and had no further marks, except for a date-stamped mark of "1998. 3. 20." on the right of middle the bill and someone's signature underneath.
D. Refusal by the defendant bank to make payment on the letter of credit
In response to the plaintiff's demand for payment on the letter of credit, the defendant refused to make payment on the grounds that (1) the bill of lading submitted by the plaintiff did not have an On Board Notation and (2) the port of discharge recorded on the bill of lading was 'Hong Kong', not 'Donghai, China'.
2. The judgment of the court below
A. Among its reasons for refusing to make payment on the letter of credit, the defendant cited the omission to record in the bill of lading that the cargo was loaded to the designated ship (hereinafter the "On Board Notation"). The court below rejected the defendant's claim on the following grounds.
(1) Clause 46A of the letter of credit at issue lists a 'clean on board ocean bill of lading' as one of the documents required to be presented at the time of demanding payment, and Article 23(a)(ii) of the Uniform Customs requires that, where a letter of credit requires a port-to-port bill of lading, such bill of lading "specifies that the goods were loaded on board, or loaded to the designated ship." However, since the bill of lading at issue does not contain an On Board Notation as required under the letter of credit and the Uniform Customs, the bill of lading at issue facially appears not to comply with the requirement of the letter of credit.
(2) However, the bill of lading at issue is not a simple ocean bill of lading, but a combined transport ocean bill of lading. Given that the defendant did not cite such discrepancy as its reason for refusing to make payment, a combined transport ocean bill of lading must be viewed as meeting the requirements of the letter of credit at issue. Under Article 26(a)(ii) of the Uniform Customs, where a letter of credit requires a combined transport ocean bill of lading, the required 'on board notation' is that the bill of lading "indicates that the goods have been dispatched, taken in charge or loaded on board," which is different from the corresponding language in Article 23(a)(ii). Therefore, if the bill of lading at issue contains language required under Article 26(a)(ii), then such bill of lading should be deemed to satisfy the requirements of a bill of lading set forth under the letter of credit at issue.
(3) On the top right of the bill of lading at issue, there is print that states to the effect "Received by the Carrier from the Shipper in apparent good order and condition unless otherwise indicated herein." In the middle right, without additional notation, an initial is signed by the master under the date of March 20, 1998. Therefore, the bill of lading at issue should be deemed to contain the language required under Article 26(a)(ii) of the Uniform Customs.
B. In addition, the court below rejected the defendant's other reason for refusing payment, namely the difference in notation of the port of delivery between the bill of lading and the letter of credit. The lower court recognized the different notations between the port of discharge as recorded in the letter of credit at issue and the port of delivery as recoded in the bill of lading at issue. That is, the letter of credit at issue lists "South Korean main port" as the port of loading ("on board/disp/taking charge"), and Donghai, China as the port of delivery ("for transportation to"), whereas the bill of lading at issue lists Busan, Korea as the "port of loading," Hong Kong as the "port of discharge" and Donghai, China as the "place of delivery" and "final destination." However, under Article 26(a)(iii)(a), where the letter of credit requires a combined transport bill of lading, the bank must accept documents "that indicate the same final destination as indicated on the letter of credit, even if the final destination as indicated in the letter of credit may be different from the port of discharge." Therefore, since the bill of lading at issue indicates Donghai, China as the final destination, the same as in the letter of credit at issue, the lower court accepted such bill of lading as meeting the requirements of the letter of credit at issue, even if the bill of lading at issue referred to Hong Kong as the port of discharge, whose reference was absent in the letter of credit.
3. Judgment of this Court
A.Under the Uniform Customs, Article 23 specifies the related documentary requirements where the letter of credit requires a marine bill of lading (also known as ocean bill of lading or port-to-port bill of lading) and Article 26 specifies the related documentary requirements where the letter of credit requires a combined transport document (also known as the multi-modal transport document). Unless otherwise specified in the letter of credit, a bank is required under the Uniform Customs to accept the foregoing documents, however named, so long as such documents meet all the requirements set forth in the Unified Customs governing transport documents required under a letter of credit). Therefore, the bank at which the letter of credit is opened may not refuse to make payment on the letter of credit for the reason that the bill of lading presented by the beneficiary uses a different document title such as a combined transport bill of lading and therefore that the document presented is different from the document required under the letter of credit. Furthermore, the bank must consider whether the applicable transport document meets the acceptance requirements set forth in the letter of credit in terms of the type of the document required, rather than the name used, in determining whether to make payment on the letter of credit.
B. The court below viewed that the present bill of lading, as a combined transport ocean bill of lading that assumes the transshipment of goods and made its ruling under the assumption that such bill of lading, is governed by Article 26 of the Unified Customs that applies to combined transport documents.
However, the title of the bill of lading at issue is not "Combined Transport Ocean Bill of Lading" but "Combined Transport Documents," and the bill of lading at issue follows the form of a combined transport document applicable to the use of two or more modes of transportation. However, as discussed above, the document specifically required by the letter of credit at issue is a clean on board ocean bill of lading, and it is clear from the letter of credit at issue and related documents that the cargo in our case is not to be shipped using two or more means of transport, i.e., a multi-modal transport. Therefore, the bank at which the letter of credit was opened must look to Article 23 of the Uniform Customs in order to determine whether the bill of lading presented by the plaintiff beneficiary as a required document under the letter of credit meets the conditions of acceptance to the conditions of acceptance as set forth under such article, however such bill of lading is named.
In sum, we hold that the court below finding that Article 26 of the Uniform Customs applicable to multimodal transport documents governs in this case simply because the phrase "Combined Transport" is included in the title of the bill of lading at issue (the term "Ocean" referenced in the court below decision is not so included) is in error when interpreting the conditions of accepting transportation documents, including the ocean transportation documents, as set forth in the Uniform Customs and clearly suffered from such errors.
Therefore, the ground for appeal with respect to the foregoing point is justified.
C. Next, we review whether the bill of lading at issue had the On Board Notation, one of the conditions of acceptance set forth in the letter of credit.
Article 23(a)(ii) of the Uniform Customs specifies that, where the letter of credit requires a shipped bill of lading, i.e., a bill of lading that applies to port-to-port loading, the notation of loading may be made using pre-printed language on the bill of lading, but where the letter of credit requires a received bill of lading, i.e., a bill of lading used when the cargo is not loaded prior to the issuance of the bill of lading, a notation should be made on such bill of lading that the cargo was loaded on the designated ship and the date on which such cargo was loaded (the "On Board Notation"). The purpose of such rule is to clarify the legal relationship among the parties involved in the loading of cargo by clearly recording on the received bill of lading that the cargo was properly loaded onto the designated ship since such fact cannot be confirmed solely by the language on the received bill of lading. Therefore, the question of whether the On Board Notation was properly made in compliance with the Uniform Customs must be strictly construed on the basis of the recording made on the applicable bill of lading, and not on the basis of notations on other documents such as the letter of credit.
We find that the bill of lading at issue did not use pre-printed language to indicate whether the cargo was loaded, and therefore under Article 23(a)(ii) of the Uniform Customs, the present case requires an On Board Notation that the cargo was loaded onto the designated ship. However, the On Board Notation claimed by the plaintiff is, as discussed before, no more than the date stamped mark of "1998.3.20 on the center right of the bill of lading and someone's signature underneath.
Therefore, even assuming that such signature was made by the master, as the plaintiff claims, (although we note that the bank that reviewed the documents related to the letter of credit did not have the means to confirm the identity of the person who made the signature, and unlike the Fourth Amended Uniform Customs, the Fifth Amended Uniform Customs that govern this case does not require that a signature or initialing by the carrier or its agent with respect to the On Board Notation), such notation does not necessarily amount to a notation of the fact that the cargo was loaded on the designated ship. Therefore, the notation at issue does not meet the requirements of an On Board Notation as set forth in Article 23(a)(ii) of the Uniform Customs. In sum, the bill of lading at issue is a transportation document that clearly fails to meet the requirements set forth in the letter of credit.
Inconsistent with the above reasoning, the court below erred in matters of law in misunderstanding the Uniform Customs by finding that the bill of lading in this case does not require "On Board Notation" or alternatively such entry has been already made.
Therefore, the grounds for appeal with respect to the foregoing point is justified.
D. Next, we review whether the port of discharge as entered in the bill of lading at issue meets the requirement of the letter of credit.
Article 23(a)(iii) of the Uniform Customs specifies that, where the letter of credit requires a port-to-port marine bill of lading, the port of discharge as recorded on such bill of lading must match the recording on the letter of credit (if the letter of credit requires a port-to-port bill of lading, the reference to "for transportation to" has the same meaning as the port of discharge), and that, to the extent that the recorded port of discharge is the same, it is irrelevant whether the bill of lading specifies a different final destination. Since the purpose of such provision is that the process and methodology of transport as specified in the letter of credit must be confirmed by the bill of lading presented in connection therewith, the question of whether the loading and discharge of the applicable cargo was made as required under the letter of credit must be strictly construed.
The bill of lading at issue records Hong Kong, not Donghai, China, as the port of discharge and records Donghai, China in the next line entitled 'place of delivery' and 'final destination'. Such notations are clearly in non-compliance with the requirements of the letter of credit. Further, the bill of lading at issue does not specify that Hong Kong is merely a port of transshipment and that the final port of discharge is Donghai, China. Therefore, the opening bank has no obligation to accept a bill of lading that differs from the requirements of the letter of credit (furthermore, as discussed above, since the bill of lading at issue takes the form of a combined transport document, it is unclear from the recordings on such bill whether a ship made an ocean transport of the cargo from Hong Kong to Donghai, China, as required under the letter of credit).
Therefore, the court below's judgment which held a different view that the port of discharge as entered in the bill of lading at issue complies with the requirements of the letter of credit was in error in misinterpreting the legal principles of the Uniform Customs with respect to the notations of the port of discharge in the letter of credit and the ocean bill of lading, which clearly affected the conclusion of its judgment.
Therefore, the grounds for appeal with respect to the foregoing point is also justified.
4. Conclusion
Therefore, the judgment of the court below shall be reversed and the case shall be remanded to the court below for retrial and determination. This decision is delivered with the assent of all Justices who reviewed the appeal.
Justices Yoon Jae-sik (Presiding Justice)
Song Jin-hun (Justice in charge)
Byun Jae-seung
Lee Kyu-hong
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