ICC Briefing Takes Up Topic of Lost Documents

In the latest of its ongoing educational series, the ICC Banking Commission addresses the subject of “Documents presented by a nominated or confirming bank under UCP 600 and lost in transit” in Technical Advisory Briefing No. 4 (TAB-4) dated 21 September 2022.

From the outset, TAB-4 makes clear that it is addressing documents lost – not delayed – en route to their destination. The briefing then analyses two aspects of lost documents. It first covers the UCP position regarding a bank’s liability or responsibility for lost documents. It then deals with the situation when a nominated bank has determined that a complying presentation has been made but documents have been lost in transit. Documents sent between banks are rarely lost in transit. When they are, UCP600 Article 35 addresses the impact and consequences.

The briefing quotes the first paragraph of UCP600 Article 35 (Disclaimer on Transmission and Translation) and emphasizes that Article 35’s protections only extend to a nominated bank or confirming bank that has followed the LC’s requirements in its sending of documents to the issuing bank. The briefing reminds that this is not a new UCP requirement, but that its origin can be traced back to UCP82 and has been modernized in subsequent UCP versions. If a bank deviates from the LC’s transmitting or sending requirements then “it does so at its own risk should the documents be lost in transit.”

On the second situation, the briefing references the UCP600 Article 35 second paragraph protections for nominated banks and explains that those protections do not apply when a presentation is discrepant or was not examined by a nominated bank. The briefing states: “The essence of the approach stated in article 35 is that it is not considered appropriate that an issuing bank or confirming bank can walk away from their undertaking to the beneficiary and/or to the bank that acted upon its nomination to honour or negotiate by virtue of a complying presentation being lost in transit.”

In the event that documents are lost in transit, the briefing explains that an issuing bank or confirming bank “cannot insist upon replacements of original documents being presented to them”, but they would be entitled to request copies of all stipulated documents for their own review.

The briefing goes on to discuss various past ICC Opinions on the topic. The briefing states: “Not all nominated banks or confirming banks retain copies of documents, but it is noted in Opinion R561 [TA639rev (2007)] that such practice may ease problems in the event that documents are lost in transit and it is agreed that the complying presentation needs to be ‘re-created’. It does need to be understood that this is additional work, is entirely optional, and may not necessarily be justified for such a rare occurrence.”

It follows that UCP does not contain recommended operational procedures for dealing with such a rare occurrence. If it does occur, the briefing states that “it is the responsibility of the concerned parties to find a solution” and goes on to suggest one viable solution could be an LC requiring documents sent in two mailings. Admittedly this approach increases costs that banks may not want to incur given the infrequency of documents lost in transit.

Although TAB-4 and previously issued technical advisory briefings are available at the ICC Digital Library, some experienced trade finance specialists contend the briefings are hard to find and question whether they are effectively reaching target audiences. “ICC’s strategy to educate LC users cannot be overstated. Yet it is difficult to be aware of the briefings’ existence. In my view, most LC users will also find the briefings hard to digest and likely dull for the younger professionals”, said Khalil Matar of Alinma Bank (Saudi Arabia). He recommends: “Make the briefings available on professional and social media sites. The content should be simple, appealing, and perhaps visually animated.”