ICC Guidance – ICC Technical Advisory Briefings
In the interests of providing guidance and support, the ICC Banking Commission established a process whereby regular Briefings (TAB) would be released on issues surrounding a particular contentious circumstance, or set of circumstances, with a recommended handling solution.
https://library.iccwbo.org/tfb/tfb-briefings.htm
To date, 12 have been published, with a number of others in the pipeline. This issue of TraydTalks covers Briefings 7-9.
Title of Invoice
Discussions among trade finance practitioners and across social media platforms have highlighted widespread confusion concerning which types of invoices are acceptable for presentation under a documentary credit. These observations have revealed a number of common misinterpretations, especially in relation to the distinction between commercial invoices, provisional invoices, pro-forma invoices, and other invoice variants. The issue is not one of mere terminology but of compliance with UCP 600 and adherence to international standard banking practice as outlined in ISBP.
The starting point for understanding invoice requirements lies in UCP 600 sub-article 18 (a), which outlines the fundamental criteria that any invoice must meet. Unless otherwise specified in the credit, the invoice must appear to be issued by the beneficiary, be made out in the name of the applicant (subject to article 38 exceptions), be in the same currency as the credit, and need not be signed. Additionally, under sub-article 18 (c), the invoice must include a description of the goods or services corresponding to what is stated in the credit.
Notably, UCP 600 does not prescribe a required title for an invoice. That issue is clarified in ISBP, specifically paragraph C1. This paragraph is divided into two key components. Sub-paragraph C1 (a) addresses the acceptability of different types of invoice titles. It confirms that if a credit calls simply for an “invoice” without further elaboration, any invoice type may be presented, whether termed a commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, or similar. However, a critical restriction is made: invoices described as “provisional” or “pro-forma” are not acceptable unless explicitly permitted in the credit. This is due to their provisional nature and the fact that they do not provide final confirmation of a transaction.
A provisional invoice, often used in trade involving goods whose final value depends on post-shipment inspection, is generally viewed as a temporary accounting document. It might reflect up to 95% of the shipment’s estimated value and is normally followed by a final invoice once the goods have been assessed at their destination. Because of this, it fails to meet the expectation of finality and certainty that a commercial invoice must convey. Similarly, a pro-forma invoice is essentially a quotation, a declaration of intent rather than a confirmation of sale. For this reason, neither document type satisfies the evidentiary role required under UCP 600 unless the credit specifically allows their use.
ISBP 821 paragraph C1 (b) addresses the use of the term “commercial invoice” and makes it clear that a document simply titled “invoice” is sufficient to meet a credit’s requirement for a “commercial invoice.” Furthermore, an invoice bearing additional descriptions, such as “tax invoice”, remains compliant, as such terms fall within the range of acceptable invoice types. The practical implication is that a credit requiring a “commercial invoice” can be fulfilled by a wide variety of invoice formats, provided they satisfy the content requirements of UCP 600 article 18.
ISBP reinforces this flexible approach in paragraph A39, which clarifies that a document, such as an invoice, may be titled exactly as called for in the credit, may bear a similar title, or may even be untitled, so long as the content clearly fulfils the function of the required document. This principle aligns with the broader theme of ISBP, which is to provide practical guidance on the examination of documents in a way that reflects commercial reality rather than rigid formalism.
In summary, for the purposes of UCP 600, the terms “invoice” and “commercial invoice” are treated as interchangeable, and a wide range of invoice types may be accepted so long as the credit does not state otherwise. What is essential is that the invoice fulfils its functional role as confirmation of a completed sale or shipment, and that it complies with the specific conditions of the credit. Provisional and pro-forma invoices, unless specifically authorised, fall short of this standard and are rightly treated as non-compliant. Practitioners should therefore ensure a proper understanding of ISBP in order to avoid unnecessary disputes and ensure smooth processing of documentary credits.
Handling of Certificates under Documentary Credits subject to the UCP 600
Although certificates are not the most complex of documents presented under a documentary credit, there remains a noticeable lack of general awareness in the trade finance community regarding how they should be handled. While not a major source of discrepancies, misinterpretations around certificates can still lead to unnecessary delays, confusion, and refusals. ISBP provides extensive guidance on this subject, with paragraphs L1–L8 covering Certificates of Origin, P1–P4 dealing with Beneficiary’s Certificates, and Q1–Q11 addressing analysis, inspection, health, phytosanitary, quantity, quality and other related certificates under the general category of “Certificate”.
At the core of this issue lies the principle that a certificate must perform the function for which it is required. As per ISBP paragraph Q1, a certificate does not need to carry an exact title, so long as it bears a similar title or is untitled but clearly certifies the results of the specified action. The same principle applies to beneficiary-issued certificates, as outlined in paragraph P1. For instance, an inspection certificate must certify that an inspection occurred, while an analysis certificate must confirm the analysis and its results. The documentary credit may add specific requirements, but in all cases, the certificate must be consistent with the broader presentation and not conflict with the credit, any other documents, or UCP 600, particularly sub-article 14 (d).
There are also cases where a certificate must evidence that an action occurred before or on the date of shipment. ISBP clarifies that this can be achieved through the issuance date itself, wording within the certificate, or even its title, such as “pre-shipment inspection certificate”. These provisions give flexibility, but they rely on clear language and an understanding of the credit’s requirements.
Certificates of origin merit special mention. Paragraph L1 requires that such documents be signed, relate clearly to the invoiced goods, and specifically state the origin of the goods. Vague references, such as a statement that goods comply with a free trade agreement, are insufficient unless accompanied by a direct statement of origin. Where a specific format is required, such as a GSP Form A, paragraph L2 requires that this be observed. In such cases, origin may be indicated by a code or letter in line with trade agreement templates, which modifies the general requirement of stating the country by name.
Another important consideration is the issuer. If the documentary credit names a specific entity, only that entity may issue the certificate. If no issuer is named, any entity, including the beneficiary, may issue it. This is aligned with UCP 600 article 4, which separates the credit from the underlying contract, and article 3, which stipulates that words such as “qualified” or “independent” imply that the issuer cannot be the beneficiary. In the case of certificates of origin, ISBP confirms that Chambers of Industry, Economic Chambers, and similar entities are acceptable issuers even when the credit specifies a Chamber of Commerce.
The content of a certificate must also align with accepted practice. It may reference only a sample of the goods, state a higher quantity than indicated elsewhere, or list more holds or tanks than those on a bill of lading. These are not discrepancies, provided they do not contradict the credit or other documents. A frequent mistake in beneficiary certificates is the inclusion of verbatim credit wording rather than a proper certification. For example, repeating the credit’s instruction that “the beneficiary must send documents by courier” does not meet the requirement. The certificate must instead state that the beneficiary has sent them.
Non-documentary conditions can also give rise to confusion, especially when a credit includes a requirement (e.g., that goods must be inspected) but does not stipulate the document to evidence compliance. In these cases, any reference in a presented document must not conflict with the stated requirement, as explained in paragraph Q7.
When credits are silent on the required findings in a certificate, statements that might otherwise seem negative, such as “not fit for human consumption”, are not necessarily reasons for refusal, unless they contradict the credit’s terms. The consignee and consignor details also have specific rules: the consignee shown in a certificate must not contradict the consignee on the transport document, but more flexibility is allowed where the consignee is stated as “to order” or similar. The consignor shown on a certificate can be different from the shipper in other documents, as can the invoice number, date or routing, provided the consignor is not the beneficiary.
Further clarifications are provided in the general principles section of ISBP. Paragraph A3 states that certificates must be signed, regardless of whether the credit specifies this. Dating requirements depend on the wording and type of certificate, and not all copies need to be signed or dated unless expressly required. Boxes or fields within a certificate do not need to be completed unless the credit stipulates this. Similarly, slash marks (virgules) and commas used in credit text may imply multiple options, and a certificate referencing one or more of those options will generally be acceptable.
Shipping marks on certificates must not conflict with those on the credit or other documents but need not be displayed identically. In some cases, a single certificate may cover multiple functions, such as quality and quantity. If two documents are required but the presenter supplies one document serving both roles, two originals must be submitted, each satisfying a separate documentary requirement.
In summary, the handling of certificates under documentary credits is governed by a combination of UCP 600 and ISBP, with the latter providing the interpretive clarity often needed to avoid discrepancies. Practitioners should familiarise themselves with ISBP certificate-related paragraphs, L1 through L8, P1 through P4, and Q1 through Q11, alongside relevant general principles. Doing so will improve consistency, reduce the risk of incorrect presentations, and support the smooth processing of credit transactions.
Direct presentation of documents to an Issuing Bank under a documentary credit subject to UCP 600
In the operation of documentary credits, it is generally assumed that when a credit names a nominated bank, whether or not it is also the confirming bank, presentation of documents will be made through that nominated bank. However, in practice, presenters sometimes choose to send documents directly to the issuing bank, bypassing the nominated bank entirely. This may be done intentionally, for operational convenience, or due to miscommunication. While this practice is permitted under UCP 600, it raises important considerations, particularly regarding the responsibilities of the issuing bank and the implications for the nominated bank.
UCP 600 provides the framework for such situations. Article 2 defines “presentation” as the delivery of documents under a credit to either the issuing bank or a nominated bank. A nominated bank is defined as the bank with which the credit is available, or any bank in the case of a credit available with any bank. Under sub-article 6 (a), it is clarified that a credit made available with a nominated bank is also, by default, available with the issuing bank. This means that the beneficiary or any presenter has the option to submit documents directly to the issuing bank, regardless of whether a nominated bank is named.
Sub-article 6 (d) (ii) further confirms that the issuing bank remains a valid place for presentation even if another place, such as that of a nominated bank, is also named. Therefore, from a purely procedural standpoint, a presentation made directly to the issuing bank is entirely valid. This is reinforced by ICC Opinion R518, which affirms that the issuing bank’s obligation to honour a complying presentation remains unaffected by the choice to bypass the nominated bank.
Once the issuing bank receives such a presentation, it must examine the documents in accordance with sub-article 14 (a), using only the documents themselves as the basis for determining compliance. Provided the presentation is compliant and received within the credit’s expiry and presentation dates, the issuing bank must honour, even if the documents arrive in multiple batches. However, this direct approach carries a significant operational risk: under article 35, the presenter bears responsibility for loss or delay of documents sent to the issuing bank, whereas a complying presentation made to a nominated bank shifts this risk to the issuing bank.
Although UCP 600 is silent on whether the issuing bank must inform the nominated bank of a direct presentation, sound banking practice suggests that the issuing bank should notify the nominated bank if it receives documents directly. This not only allows the nominated bank to update its internal records, but also ensures that any potential duplicate presentations can be ruled out. It is particularly prudent where the credit is restricted to a specific nominated bank. As ICC Opinion R518 explains, the issuing bank is entitled to seek assurances, such as confirmation that no prior drawing has occurred, before effecting payment. While the issuing bank’s obligation to honour is not suspended, settlement may reasonably be delayed until such clarifications are obtained.
This notification becomes impractical when a credit is available with any bank. In these cases, the issuing bank cannot feasibly check with all potential presenting banks. Nominated banks operating under such credits must therefore be mindful that any other bank may present documents and that the issuing bank is obligated only to honour one presentation that meets the credit’s terms. In cases where multiple nominated banks are involved, this places greater emphasis on internal controls and communication.
The question of bank charges also comes into play. Sub-article 37 (c) provides that a bank instructing another to perform services (such as advising or confirming a credit) is liable for the associated fees unless the credit specifies that charges are for the beneficiary’s account and those charges can be collected. Where a presenter bypasses the nominated or confirming bank, and charges remain unpaid, the issuing bank is still responsible. Thus, avoiding the nominated bank does not absolve the issuing bank of financial obligations incurred in the credit’s setup.
Some issuing banks, in an attempt to manage this risk, include clauses in the credit stating that documents must not be presented directly to them. While this may seem a reasonable precaution, it creates potential conflict with UCP 600, which permits direct presentation to the issuing bank unless expressly excluded. If such a clause is included, presenters must consider the consequences of bypassing the nominated bank, as the issuing bank could refuse to accept the documents based on the credit’s own restrictive wording.
In summary, UCP 600 accommodates the direct presentation of documents to the issuing bank, even where a nominated bank is named. The issuing bank’s obligation to honour a complying presentation remains intact, but operational best practice dictates that where a nominated bank has been bypassed, the issuing bank should notify the nominated bank to confirm whether any other presentation has occurred. While this communication is not mandatory under the UCP, it serves to protect all parties from confusion or dispute.
Presenters must weigh the benefits of bypassing the nominated bank against the increased risks, including the potential for document loss, payment delay, or breach of specific terms added by the issuing bank. Sound judgment and open communication remain essential to ensure the smooth handling of such cases within the flexible, yet carefully structured, framework of UCP 600.
