ICC Technical Advisory Briefing No. 1 (TAB-1) - on Non-Documentary Conditions

As the first of its anticipated series of educational briefings on matters encountered by trade finance practitioners which either need clarification or guidance, the ICC Banking Commission released on 13 January 2022 its “Technical Advisory Briefing No. 1” on the topic of Non-Documentary conditions in Documentary Credits subject to UCP 600.

The three-page document (TAB-1), produced by a TA Briefing Team comprised of ICC Banking Commission Technical Advisors and 16 specialists nominated by their respective ICC National Committees, first sketches out the issue that non-documentary conditions appear in documentary credits from time to time due to various reasons specified. TAB-1 then offers an introduction of the topic in which examples of non-documentary conditions are given and discussed. An analysis section follows which references places in UCP 600, ISBP 745, and certain ICC Official Opinions where non-documentary conditions have been addressed. TAB-1 concludes with a summary section discussing problems associated with non-documentary conditions and offering recommendations what parties can do to avoid non-documentary conditions.

In a 26 January 2022 ICC Banking Commission session conducted via Zoom, Senior Technical Advisor David Meynell presented a review of TAB-1 and preview of future TABs in the works (see page 4). In his initial remarks, Meynell explained that non-documentary conditions was taken up in this inaugural Technical Advisory Briefing because it has been the subject that the ICC Banking Commission has received the most questions about. Meynell spotlighted the very important point that discrepancies should not be raised for non-documentary conditions. “That’s a repeated problem we’ve seen”, he said. The Briefing states: “A bank may not refuse to honour or negotiate a presentation on the basis that a non-documentary condition is not addressed in any stipulated document that is presented.”

In other discussion circles since release of TAB-1, a degree of attention has been focused on the following sentence: “Issuing banks should exercise due care in ensuring that a documentary credit does not include a non-documentary condition as this may lead to unnecessary disputes or incorrect identification of discrepancies.”

As UCP600 does not impose a duty on issuers to protect applicants, beneficiaries, or nominated banks from the UCP600-dictated consequences of non- documentary conditions, concern has been expressed that if an issuer honors after disregarding a non- documentary condition under UCP600 Article 14(h), the applicant may complain that the issuer should have, but did not, exclude the non- documentary condition from the LC text, even though nothing in UCP600 obligates the issuer to do so.

An ICC spokesperson indicated that the Briefing is not yet available on the ICC website as the website is presently undergoing a general review. Thereafter, TAB-1 will be publicly available and have a permanent place in the Banking Commission section of the ICC website.