Making sense of UCP sub-article 14(h)

I have been haunted by UCP 600 sub-article 14(h) for quite some time now, especially when I had to discuss it in my recent book on LCs^[1]. Sub-article 14(h) states, “If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.” Sounds simple enough, till you analyse the operational significance of it.

The issues that I was grappling with were the following:

1. Is this sub-article an unconditional one, with no exceptions – no ifs, buts, whereas or however? I mean, is the document checker empowered to disregard it irrespective of its data content, say, data that conflicts with the presentation, or offers a hint of fraud?
2. If there are exceptions to the rule, what are they? Where are these enumerated?

These presented a dilemma of Hamletian proportions, because the domain experts never explained the issues fully, or convincingly enough. Totally confused, I wrote an article about it (‘Non-documentary condition and data conflict’, see https://rnbose.blogspot.com/2018/02/non-documentary-condition-in-lc-and.html.) hoping for some answers. None came. So, I put the issue on the table about two months ago. The responses helped to provide some clarity, but no definitive answers.

A common misconception that needs to be removed is that sub-article 14(h) is not about the manner of handling a document presented against a non-documentary condition. This sub-article is only about a non-documentary condition in a credit and how to respond to it while examining a presentation. It states that a non-documentary condition is to be disregarded. So what is one supposed to do with a document presented against a non-documentary condition? It’s answered through sub-article 14(g): “A document presented but not required by the credit will be disregarded and may be returned to the presenter.” Simple, obvious, isn’t it?26 October 2020 .......contd...

[This article is continued in the book 'Beyond Trade Finance', published on 13-Apr-2021 by Notion Press, and available at https://notionpress.com/read/beyond-trade-finance or at https://www.amazon.in/dp/1638508666]

     

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[1] “Letters of credit: Theory and practice”, Notion Press (April 2020). Available at all reputed e-commerce sites.