Letters of Credit in Bitumen Trade: How They Work and How They Fail

A documentary credit — letter of credit, L/C, DC, and in bank message traffic simply "the credit" — is an undertaking given by a bank at the request of a buyer to pay a seller a stated amount, provided the seller presents a stated set of documents within a stated time and those documents comply with the terms of the credit. The bank’s promise runs to the seller directly. It does not depend on the buyer’s willingness to pay, on the buyer’s solvency, or on the buyer’s opinion of the cargo.

What it also does not depend on is the cargo. UCP 600 article 5 states the position in one sentence: banks deal with documents and not with goods, services or performance to which the documents may relate. The bank does not see the bitumen, cannot test it, does not want to, and has no duty to. It reads paper. If the paper complies, the bank must pay even where the goods are worthless. If the paper does not comply, the bank need not pay even where the goods are exactly what was ordered, loaded on time, and already discharged into the buyer’s tanks.

Article 34 reinforces it from the other direction and is worth reading in full at least once. A bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document, nor for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any document. That is the bank telling you, in advance and in writing, that it is not standing behind your cargo. It is standing behind a document check.

Autonomy: the credit is a separate transaction from your contract

Article 4 establishes what practitioners call the autonomy principle. A credit by its nature is a separate transaction from the sale or other contract on which it may be based, and banks are in no way concerned with or bound by that contract even if any reference to it is included in the credit. A beneficiary cannot avail itself of the contractual relationships existing between banks or between the applicant and the issuing bank.

The practical consequences are sharper than the wording suggests:

• Your sales contract does not govern the payment. The credit does. If the contract says one thing and the credit says another, the bank follows the credit, and it will not read your contract to resolve the difference. This is why a credit that has been checked against the contract before shipment is worth more than any amount of argument afterwards.
• A buyer’s complaint about the cargo does not suspend the bank’s obligation. If the documents comply, the issuing bank must honour. The buyer’s remedy for a bad cargo lies against the seller under the sale contract, not against the bank, and not by instructing the bank to hold payment.
• A seller’s grievance about the buyer does not create a payment right. If the documents do not comply, the bank is not obliged to pay however clearly the seller performed the contract. The seller’s remedy is against the buyer, which is exactly the position the credit was bought to avoid.
• Do not staple the contract to the credit. Sub-article 4(b) says an issuing bank should discourage any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like. Credits that incorporate a contract by reference create conditions nobody can check and disputes nobody can settle.

UCP 600 is the rulebook, and only when the credit says so

The Uniform Customs and Practice for Documentary Credits, 2007 revision, ICC Publication No. 600 — UCP 600 — is a set of 39 articles published by the International Chamber of Commerce and in force since 1 July 2007. It is not law. It is a body of rules that the parties adopt by contract, and article 1 is precise about how that happens: the rules apply to any documentary credit when the text of the credit expressly indicates that it is subject to them. They are binding on all parties unless expressly modified or excluded by the credit.

Two things follow. First, a credit that does not state its governing rules is not a UCP 600 credit, and the mass of settled practice and ICC opinion that makes documentary credits workable does not automatically apply to it. In bank message traffic the applicable rules are stated in a dedicated field, normally as UCP LATEST VERSION. Check that the field is populated. Second, because the rules can be modified or excluded by the credit itself, an individual credit can override an article you were relying on. Additional conditions in a credit routinely do exactly that, and they are frequently drafted by someone who has not thought through the effect. Read them.

Several companion ICC texts sit alongside UCP 600 and are worth knowing by name:

• ISBP, the International Standard Banking Practice for the Examination of Documents under UCP 600, published as ICC Publication No. 745 in the 2013 edition, which is the edition current at the time of review. UCP 600 article 2 makes international standard banking practice part of the definition of a complying presentation, and ISBP is where that practice is written down. It is the document that settles arguments about abbreviations, misspellings, dates, signatures and correction stamps.
• eUCP, the supplement to UCP 600 for electronic presentation, version 2.0 having taken effect on 1 July 2019 and subsequently updated. It applies only where the credit says it does.
• URR 725, the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, which govern reimbursement arrangements between banks and are invisible to the seller until they delay a payment.
• URC 522, the Uniform Rules for Collections, which govern documentary collections — a different instrument entirely, discussed at the end of this page.
• ISP98, the International Standby Practices, ICC Publication No. 590, which govern standby letters of credit where the credit adopts them, and URDG 758, the Uniform Rules for Demand Guarantees.

Why this instrument exists at all

Strip away the terminology and a documentary credit solves one problem: neither side of a cross-border sale wants to go first. The seller will not release cargo to a buyer it cannot enforce against in a foreign court. The buyer will not pay in advance for material it has not seen, shipped by a company it cannot inspect. A credit inserts a bank between them and converts a commercial trust problem into a documentary one. The seller is no longer relying on the buyer; it is relying on a bank’s undertaking. The buyer is no longer relying on the seller’s honesty; it is relying on a defined set of documents, which it has itself specified, being produced before any money moves.

That trade is genuinely valuable, and for cross-border bitumen it is usually the right instrument. But notice precisely what has been exchanged. The buyer has not obtained an assurance that the bitumen is on specification. It has obtained an assurance that a certificate saying so will exist. Those are different things, and the distance between them is where the fraud cases live. That distance is covered on the bitumen fraud prevention page, and it is the reason independent inspection is not optional.

The five things that follow immediately

• The credit is a document specification, so treat it as one. Every line of it is a condition you must satisfy on paper. Drafting it is a technical exercise, not a formality delegated to whoever handles the bank relationship.
• Whoever writes the goods description controls your risk. The description in the credit must be reproduced in the commercial invoice. A long, elaborate description is a long list of chances to differ.
• A document you cannot produce is a discrepancy you cannot avoid. If the credit calls for a certificate that only the buyer’s own agent can sign, you have handed the buyer a veto over your payment. Refuse it at the draft stage.
• Time is a document condition too. Presentation periods and expiry dates are checked as strictly as the wording, and they cannot be argued around after the fact.
• Nobody checks your documents for you. The advising bank does not, the inspector does not, and the buyer certainly does not. The last person to catch an error before the bank does is you.

Irrevocable is the default, and revocable credits have effectively gone

Article 3 settles the point without ambiguity: a credit is irrevocable even if there is no indication to that effect. UCP 600 removed the revocable credit from the rules altogether, and a revocable instrument is not really a payment undertaking at all. In modern practice every documentary credit you will meet in bitumen trade is irrevocable, and the form field in the bank message will say so.

Irrevocable means the credit cannot be amended or cancelled without agreement. Sub-article 10(a) requires the agreement of the issuing bank, the confirming bank if there is one, and the beneficiary. The beneficiary’s consent is the part applicants forget. Two related rules matter to a seller:

• You are not bound by an amendment until you accept it. Under sub-article 10(c) the terms of the original credit remain in force for the beneficiary until it communicates acceptance of the amendment, and presenting documents that comply with an amendment is treated as notification of acceptance.
• Silence-equals-acceptance clauses are void. Sub-article 10(f) provides that a provision in an amendment to the effect that it will enter into force unless rejected by the beneficiary within a certain time shall be disregarded. Applicants and issuing banks still insert them. They have no effect.
• Partial acceptance is not available. Under sub-article 10(e), partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection. If an amendment contains one useful change and one damaging one, you take both or neither.

How the credit is available: sight, deferred payment, acceptance, negotiation

Every credit states where it is available and by what means. Article 2 defines honour in three forms, and adds negotiation as a fourth route to funds:

• Sight payment. The bank pays when it determines the presentation complies. This is the ordinary case in bitumen trade and the one a seller should ask for unless it has a specific reason not to.
• Deferred payment. The bank incurs a deferred payment undertaking and pays at maturity. No bill of exchange is involved.
• Acceptance. The bank accepts a bill of exchange drawn by the beneficiary and pays at maturity. The accepted draft is a negotiable instrument in its own right, which is why acceptance credits are easier to discount than deferred payment credits in some markets.
• Negotiation. Defined in article 2 as the purchase by the nominated bank of drafts and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. Note the definition carefully: examining documents and forwarding them is not negotiation. Only advancing funds is.

Where the credit is available matters as much as how. A credit available at the counters of the issuing bank abroad means your documents must physically reach that bank before expiry, and the expiry date is the date at those counters. A credit available with a bank in your own country, expiring in your own country, gives you the presentation deadline where you can actually control it. Ask for availability and expiry at a bank in the beneficiary’s country as a matter of routine. It is one of the highest-value amendments a seller can request, and it takes nothing away from the applicant’s commercial position.

Usance: understand who is financing whom

A sight credit pays on a complying presentation. A usance credit — also called a term or time credit — pays at a maturity date calculated from a defined event, commonly a number of days after the bill of lading date or after sight. Credits in this trade are written at 30, 60, 90, 120 or 180 days depending on what the parties agreed; the tenor is a commercial negotiation and no figure is standard.

The economics are simple and are worth stating plainly. Under a usance credit the seller is financing the buyer for the tenor. The seller ships, presents, gets a bank’s undertaking to pay later, and waits. Three practical points follow:

• The undertaking is what you get, not the money. On a complying presentation under a usance credit the issuing or confirming bank incurs an obligation maturing on a future date. That obligation is normally discountable, but discount is a separate transaction on separate terms with a separate bank, arranged in advance or not at all.
• Confirmation matters more, not less, on usance. The longer the tenor, the longer your exposure to the issuing bank and its country, and the more a second undertaking is worth.
• Usance payable at sight (UPAS) structures exist, where the beneficiary is paid at sight and the applicant pays at maturity, with a bank bridging the period. The mechanics vary by bank and market and belong in a conversation with your own bank before the credit is issued, not after.
• Check the maturity trigger wording. "90 days from bill of lading date" and "90 days from sight" and "90 days from date of acceptance" produce three different maturity dates from the same shipment. Fix which one applies in the sales contract.

What confirmation actually adds

This is the most misunderstood item in the whole subject, and getting it right changes what you ask for.

Under article 8, a confirming bank adds its own irrevocable undertaking to honour or negotiate a complying presentation, and it is bound as of the time it adds its confirmation to the credit. It must honour or negotiate whether or not the issuing bank does, and it takes on the task of obtaining reimbursement from the issuing bank as its own problem rather than yours. Confirmation is normally added by a bank in the beneficiary’s country or in a major financial centre, at the issuing bank’s request, and sub-article 8(d) allows a bank asked to confirm to decline — in which case it must tell the issuing bank without delay and may advise the credit without confirmation.

What that buys you:

• Issuing bank credit risk. If the issuing bank becomes insolvent, or simply refuses to pay against documents that in fact comply, the confirming bank’s undertaking stands on its own feet.
• Country and transfer risk. Exchange controls, a payment moratorium, a sudden inability to move currency out of the buyer’s jurisdiction — these stop an unconfirmed credit dead while leaving the issuing bank blameless. A confirmation from a bank outside that jurisdiction moves your payment source outside the problem.
• A deadline you can meet. Confirmation is normally coupled with availability and expiry at the confirming bank’s counters, so the presentation deadline stops being a courier race to a foreign counter.
• A second document check that has money behind it. A confirming bank examines the presentation itself and must decide within its own five banking days. It has a real incentive to find discrepancies before the issuing bank does, which is uncomfortable but useful.

What it does not buy you, and this is the point of the section:

• Nothing about the applicant. Confirmation is protection against the bank and the country, not against the counterparty. A confirmed credit issued for a buyer who never intended to perform is still a fully effective payment mechanism; it simply means the money is safe once your documents comply.
• Nothing about the goods. Article 5 applies to the confirming bank exactly as it applies to the issuing bank.
• No protection against your own discrepancies. If the presentation is discrepant, the confirming bank’s undertaking is not engaged at all. Under article 15 the obligation to honour arises only on a complying presentation. Confirmation raises the quality of the promise; it does not lower the standard of the documents.
• Not complete immunity from force majeure. Article 36 provides that a bank assumes no liability for the consequences of an interruption of its business by acts of God, riots, civil commotions, insurrections, wars, acts of terrorism, or by any strikes or lockouts or any other causes beyond its control, and that on resumption it will not honour or negotiate under a credit that expired during the interruption. That article applies to confirming banks too.

Silent confirmation is a different product

Where an issuing bank does not authorise confirmation, a bank in the seller’s country may still be willing to take the risk under a separate bilateral arrangement, usually called silent confirmation or a risk participation. This is not confirmation under UCP 600. The bank giving it is not a confirming bank within article 8, it has no standing in the credit, and its obligation to you arises only under whatever separate contract you signed with it. It can be a perfectly sound arrangement. It is not the same instrument, and it should never be described in a sales contract as a confirmed credit.

When to ask for confirmation

Confirmation is a commercial decision made on the identity of the issuing bank and the jurisdiction it sits in, and it must be settled before the credit is issued, because an issuing bank has to authorise it. Asking for confirmation after receiving an unconfirmed credit means an amendment, and amendments need the applicant’s agreement. The practical rule is that the sales contract should name the acceptable issuing banks, or at least the acceptable class of issuing bank, and state whether the credit is to be confirmed and by whom. Leaving that to be discovered when the credit arrives is how sellers end up shipping against an undertaking they would not have accepted.

Transferable and back-to-back structures, briefly

A trader who is buying and reselling may need to make the credit available to its own supplier. Article 38 governs transferable credits, and a credit is transferable only if it expressly says so. Under sub-article 38(g) the transferred credit must reflect the original terms with a closed list of exceptions: the amount, any unit price, the expiry date, the period for presentation and the latest shipment date may each be reduced or curtailed, and the percentage for insurance cover may be increased to reach the cover required by the original credit. Sub-article 38(c) puts the charges of transfer on the first beneficiary unless otherwise agreed. A back-to-back credit, by contrast, is not a UCP concept at all: it is a second, independent credit issued on the security of the first, and banks are far more cautious about it because the two sets of documents must be reconciled by the trader in the middle. Neither structure changes anything in this page about documents or discrepancies. It doubles the number of presentations that have to be right.

Hot bitumen: the burn is deeper than the splash looks

Paving bitumen is loaded and discharged hot, and a splash does not behave like hot water. It adheres to skin and keeps transferring heat after contact, so the injury continues developing after the incident. The response is to cool the area immediately with clean cool running water and to keep cooling it. Do not attempt to peel or solvent off the adhered bitumen — removal is a decision for a burns unit, and pulling it away takes skin with it. For any work at loading, drumming or discharge where hot product can be released, the protection is a face shield over safety glasses, heat-resistant gauntlets, and clothing that covers the forearms, worn before the connection is opened rather than fetched after a leak starts.

Water and hot bitumen: the boil-over

Water flashing to steam inside hot bitumen is the mechanism behind most terminal incidents in this trade. Rain into an open kettle, condensate in a transfer line, a wet drum interior, moisture at a tank bottom — each flashes instantly and throws hot material across the working area. Two consequences: check that receiving vessels, lines and drums are dry before product goes into them, and never direct a water jet into burning bitumen or cutback. The jet drives water below the burning surface and ejects burning liquid outwards in every direction. Fog applied from a distance to cool the outside of adjacent shells and drums is legitimate; water into the burning liquid never is. The media that work on a bitumen or cutback fire are foam and dry powder rated for flammable liquids.

Cutback grades: it is the vapour that burns

Where the shipment is a cutback rather than a paving grade, the hazard changes character. The diluent sets the flash point and the vapour above the liquid is the flammable phase. Never heat cutback bitumen with a direct flame, a burner tube, a torch or an exposed electric element, and never assume a crew practised on paving grades will treat a cutback drum differently unless told to. Bond and earth the tank, the drum, the distributor and the transfer equipment, and verify the bonding rather than assuming it. Fill by bottom entry or a submerged dip pipe, held slow until the inlet is covered, because free-fall filling generates static in exactly the vapour space that is already flammable. And an emptied cutback drum is not a safe drum: the liquid has gone and the vapour has not, so no hot work touches it until it has been cleaned, gas-freed and then gas-tested, with a positive test result authorising the tool.

Tanks and confined spaces

Treat any heated bitumen tank, tank container or vessel compartment as a confined space with a potential hydrogen sulphide atmosphere. H2S accumulates in the vapour space even where the product itself carries very little, and it is the reason a tank that has been standing is not entered on the strength of it looking empty. Entry is a permit activity with gas testing before and during, continuous attendance and a rehearsed rescue arrangement, never a task someone does quickly while the surveyor waits. Temperature ceilings, coil and burner interlocks and tank practice are set out on the bitumen heating and temperature guide and the bitumen storage tanks page.

Where this meets the credit

Two documentary points follow from the hazards above, and both cut the same way. The dangerous goods declaration must describe the cargo actually shipped, on the current edition of the applicable code, with the packing group taken from the measured flash point of the batch. A declaration that understates the hazard is a safety failure before it is ever a documentary one, and it is not something to be adjusted so that a presentation matches a credit. And a credit must not create pressure to move a cargo that is not ready to move. A latest shipment date that can only be met by loading in the dark with an incomplete crew, or by heating a parcel faster than the tank allows, is a badly negotiated credit, and the answer is an amendment requested early rather than a shortcut taken at the terminal. Nothing in a payment instrument outranks the loading procedure.

The commercial invoice: the one document that must match word for word

Article 18 requires the commercial invoice to appear to have been issued by the beneficiary, to be made out in the name of the applicant, to be in the same currency as the credit, and it need not be signed. Then comes the sentence that causes more refusals than any other in the rules: sub-article 18(c) — the description of the goods in a commercial invoice must correspond with that appearing in the credit.

Correspond is a stricter test than the general one. For every other document, sub-article 14(e) allows the goods description to be in general terms not conflicting with the description in the credit. Only the invoice has to correspond. Practice under ISBP does not demand a mirror-image transcription in every particular, but the safe working rule for a seller is simple: reproduce the credit’s goods description exactly, in the same order, with the same spelling and the same punctuation, and add nothing that contradicts it.

This has a direct drafting consequence for bitumen. A credit description reading Bitumen 60/70 penetration grade in new steel drums, ASTM D946, CFR named port is short, checkable and reproducible. A description that recites the full grade table — penetration by ASTM D5, softening point by ASTM D36, flash point by ASTM D92, solubility by ASTM D2042, ductility by ASTM D113 — is five more lines to copy without error and five more places for the invoice, the certificate of analysis and the credit to fall out of agreement. Specifications belong in the sales contract and on the certificate of analysis. They do not belong in the credit’s goods description field unless the buyer insists, and if the buyer insists, the exact text has to be agreed and locked before issuance.

Sub-article 18(b) gives banks a discretion worth knowing about: a nominated, confirming or issuing bank may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and its decision binds all parties, provided that bank has not honoured or negotiated for an amount exceeding the credit. It is a discretion, not a right you can rely on. Invoice within the credit.

The transport document: which article applies depends on how the cargo moves

UCP 600 has a separate article for each transport situation, and using the wrong one is a discrepancy created before the cargo even moves.

• Article 20 — bill of lading, the port-to-port marine document. It must indicate the name of the carrier and be signed by the carrier, master or a named agent signing for one of them; indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit; indicate shipment from the port of loading to the port of discharge stated in the credit; be the sole original or, if issued in more than one original, the full set as indicated on the bill of lading; and contain no indication that it is subject to a charter party.
• Article 19 — multimodal or combined transport document, covering at least two different modes. This is the correct article where drummed bitumen in containers moves inland before or after the sea leg, and where the credit calls for a bill of lading but the carrier issues a multimodal document, the mismatch is a refusal waiting to happen.
• Article 21 — non-negotiable sea waybill, which is not a document of title and does not control the goods. Do not accept a credit calling for a sea waybill unless you are content that the buyer can take delivery without presenting anything to you.
• Article 22 — charter party bill of lading. This matters for bulk bitumen. Bulk cargoes lifted on chartered tonnage frequently produce a bill of lading that is expressly subject to a charter party, and article 20 excludes such a document. A credit that calls for a marine bill of lading without permitting a charter party bill will reject it. Where a charter is possible, the credit must permit a charter party bill of lading, and the loading arrangements should be settled with the buyer before issuance. Bulk and chartered movement is covered on the bitumen logistics and shipping page.
• Article 24 — road, rail or inland waterway documents, which is the correct article for regional overland deliveries where no sea leg exists.

Three further articles apply across all of them:

• Article 26: a transport document must not indicate that the goods are or will be loaded on deck, although a clause stating that they may be loaded on deck is acceptable. It also confirms that "shipper’s load and count" and "said by shipper to contain" notations are acceptable — which matters, because container bills for drummed bitumen carry them as standard and inexperienced applicants sometimes try to prohibit them.
• Article 27: a bank will only accept a clean transport document, being one bearing no clause or notation expressly declaring a defective condition of the goods or their packaging. The word "clean" need not appear even where the credit asks for a clean on board document. This is the article behind the single most avoidable transport discrepancy in drummed trade: a mate’s receipt or bill of lading claused for dented, leaking, rusted or previously used drums. The remedy is not commercial pressure on the master at the quayside. It is drums that do not attract a clause, and the packing standards behind that are on the new steel drums page.
• Article 35 contains a protection sellers rarely know they have: where a nominated bank determines that a presentation is complying and forwards the documents, the issuing or confirming bank must honour, negotiate or reimburse even if the documents have been lost in transit between banks.

Two consistency points close out the transport document. Freight prepaid or freight collect must match the Incoterm. A CFR or CIF shipment produces a freight prepaid document; an FOB shipment produces freight collect. A credit written on CFR terms that receives a freight collect bill of lading is discrepant on its face, and the mismatch usually means the sale terms and the booking were arranged by two people who never spoke. Which term puts freight and insurance on which party is set out on the Incoterms and export terms page. And consignment and notify party must be exactly as the credit states — to order and blank endorsed, or to the order of the issuing bank, or to a named consignee. Note the trap in sub-article 14(j): while the addresses of applicant and beneficiary need not be identical to those in the credit provided they are in the same country, when the applicant’s address and contact details appear as part of the consignee or notify party details on a transport document, they must be as stated in the credit.

Packing list and weights: where documents contradict each other

Weight is the classic internal inconsistency, and sub-article 14(d) is the article that catches it: data in a document, read in context with the credit, the document itself and international standard banking practice, need not be identical to but must not conflict with data in that document, any other stipulated document, or the credit.

A bitumen shipment generates weight figures in at least five places: the invoice, the packing list, the weight certificate, the transport document, and the verified gross mass declared to the carrier under SOLAS chapter VI, regulation 2, mandatory since 1 July 2016. These are not all measuring the same thing, and that is exactly why they conflict:

• Net weight is the bitumen. Gross weight is the bitumen plus the drums or bags. Verified gross mass is the entire packed container including the tare of the container itself. A packing list showing gross weight and a VGM declaration are numerically different by design, and a document checker who does not understand the difference may still raise it.
• Invoices are frequently raised on net weight while the transport document shows gross. If the credit prices the cargo per tonne, state clearly on the invoice which weight the price applies to, and make the arithmetic on the face of the document work.
• Bulk quantities determined by draft survey and quantities determined by shore tank measurement will differ. Decide in the contract which figure is the invoicing figure, and make sure the credit’s tolerance can absorb the other. Conversion between volume and mass for bitumen, and the temperature correction that makes them differ, is covered on the tonnage and volume conversions page.

Which brings up the tolerance rules in article 30, and a trap specific to drummed cargo:

• Sub-article 30(a): the words "about" or "approximately" used in relation to the credit amount, the quantity or a unit price allow a tolerance not to exceed 10 percent more or 10 percent less.
• Sub-article 30(b): a tolerance not to exceed 5 percent more or 5 percent less than the quantity of the goods is allowed — but only where the credit does not state the quantity in terms of a stipulated number of packing units or individual items, and the total drawings do not exceed the credit amount.
• The consequence for drums. A credit reading "1,000 new steel drums" states the quantity in packing units, so the 5 percent tolerance is not available. 1,000 drums means 1,000 drums. A credit reading "180 metric tonnes of bitumen 60/70 packed in new steel drums" states a weight, and the 5 percent tolerance applies. This is one of the most useful things a seller of packed bitumen can know before the credit is drafted, because at that stage it is settled by a wording change and afterwards it needs an amendment. Packing options and how they are described are on the bitumen packaging page.
• Sub-article 30(c) allows a tolerance of up to 5 percent less than the credit amount even when partial shipment is not allowed, provided the quantity is shipped in full and any unit price is not reduced.

Certificate of origin

Issued by a chamber of commerce or by whatever authority the credit names, and examined under sub-article 14(f): where the credit requires a document other than a transport, insurance or commercial document without stipulating by whom it is to be issued or its data content, banks accept it as presented if its content appears to fulfil the function of the required document. Where the credit does name the issuer, the named issuer must issue it.

Two cautions. First, non-preferential and preferential certificates are different instruments serving different purposes, and a preferential certificate under a trade agreement has its own eligibility rules that the chamber cannot waive. Second, the origin stated must be consistent across the certificate, the invoice and the credit, and it must be accurate. Vagueness in a commercial description is survivable; a false statement of origin on a certificate is not a documentary problem, it is a customs and criminal one.

Certificate of analysis

The COA is the document a buyer believes protects it on quality, and it is worth being precise about what it does. It reports measured results for a defined batch or tank against a named specification, with the test method for each line. For paving grade bitumen those methods are the ordinary ones: penetration at 25 °C, 100 g, 5 s by ASTM D5 or EN 1426; softening point, ring and ball, by ASTM D36 or EN 1427; flash point, Cleveland open cup, by ASTM D92; solubility in trichloroethylene by ASTM D2042; ductility by ASTM D113; density or specific gravity by ASTM D70; and ageing residue by ASTM D2872 (RTFOT) or ASTM D1754 (TFOT). The specification the results are judged against will be ASTM D946 for penetration grades — which for grade 60/70 sets penetration at 60 to 70 tenths of a millimetre, a minimum flash point of 232 °C by D92, and a minimum solubility of 99.0 percent by D2042 — or EN 12591 for European paving grades, ASTM D3381 for viscosity grades, or AASHTO M 320 for performance grades. Full grade tables are on the bitumen specifications page.

From the credit’s point of view, though, three things matter and none of them is the quality itself. The certificate must be issued by whoever the credit names. Every reported line must be inside the specification the credit names, because a bank comparing a COA line against a specification quoted in the credit will raise a conflict under sub-article 14(d) whether or not it understands the property. And the batch or tank reference must tie to the shipment. A certificate that cannot be linked to the cargo on the bill of lading is a certificate about nothing.

The uncomfortable corollary is that a compliant COA proves a document exists, not that the cargo matches it. That is the gap independent inspection is there to close.

Inspection certificate

An independent inspector attending loading, drawing samples to ASTM D140, witnessing the drum count or the draft survey, and sealing containers is the only element of the document set that connects the paper to the actual cargo. Detail on sampling is on the bitumen sampling procedure page.

Three drafting points for the credit. Name the scope, not just the inspector — quantity only, quality only, or both, and at loading or at discharge. Do not accept a certificate that requires the applicant’s countersignature or approval, which turns an independent check into a payment veto held by the buyer. A credit may name the issuer it requires, and a buyer entitled to nominate the inspector is normal, but a certificate the buyer must personally sign is not. Note also what article 3 does with vague issuer descriptions: terms such as first class, well known, qualified, independent, official, competent or local, used to describe the issuer of a document, allow any issuer except the beneficiary to issue it — so a credit calling merely for an independent inspection certificate has named nobody. And settle who pays and who appoints in the sales contract, not in the credit.

Insurance document

Required only where the trade term places the cover on the seller, which under Incoterms 2020 means CIF and CIP and no other term. Article 28 then governs:

• It must appear to be issued and signed by an insurance company, an underwriter, or their agents or proxies (28(a)).
• If it indicates it was issued in more than one original, all originals must be presented (28(b)).
• Cover notes will not be accepted (28(c)). A broker’s cover note is not an insurance document under the rules.
• The date must be no later than the date of shipment, unless it appears from the document that cover is effective from a date not later than shipment (28(e)). Insurance arranged the day after loading is a discrepancy no correction can cure.
• It must be in the same currency as the credit, and the minimum amount of cover is 110 percent of the CIF or CIP value (28(f)).
• Cover must run at least from the place of taking in charge or shipment to the place of discharge or final destination stated in the credit (28(g)).

Note that Incoterms 2020 and UCP 600 address different things here. UCP fixes the amount at 110 percent; the Incoterm fixes the level of cover, with CIF requiring at minimum Institute Cargo Clauses (C) or similar and CIP requiring at minimum Institute Cargo Clauses (A). A credit can and often does require a higher level than the Incoterm default, and where it does, the credit wins.

Destination conformity documents

Many importing countries operate pre-shipment conformity or registration programmes, and where they do, the importer cannot clear the cargo without the document. Saudi Arabia operates SASO’s SABER platform under the SALEEM programme; the United Arab Emirates operates the Emirates Conformity Assessment Scheme; Egypt operates exporter registration through GOEIC; Kuwait, Qatar, Iraq, Nigeria, Kenya and others each run their own pre-shipment verification or conformity schemes. These programmes are revised frequently, product scopes change, and the lead time belongs to the assessment body rather than to you.

Two rules of self-defence follow. Establish before the credit is issued whether the destination requires such a document, who applies for it and who pays. And never let the credit make a conformity certificate a condition of payment on a timetable you do not control. If the credit requires the certificate at presentation and the assessment body has not issued it, you hold a discrepant presentation for a reason that has nothing to do with your performance. Where the buyer needs the document for clearance, the cleanest arrangement is usually that the buyer obtains it and the credit does not call for it at all.

The examination period: five banking days, no more

Sub-article 14(b) gives each of a nominated bank acting on its nomination, a confirming bank if any, and the issuing bank a maximum of five banking days following the day of presentation to determine whether a presentation is complying. That period is not extended by the expiry date or the last day for presentation falling within it.

Three details matter in practice. It is five banking days at the place of presentation, so weekends and local holidays are outside the count. It runs from the day following presentation. And it is a maximum, not an entitlement to take five days: banks routinely determine within one or two, and a bank sitting silent to day five on a clean presentation is worth chasing.

Note also article 33: a bank has no obligation to accept a presentation outside its banking hours. A pack that arrives at 17:30 is presented the next banking day, and on a deadline that difference is total.

The refusal notice, and what it must contain

If a bank decides to refuse, sub-article 16(c) requires a single notice to the presenter, given by telecommunication or, if that is not possible, by other expeditious means, no later than the close of the fifth banking day following the day of presentation. The notice must state three things:

• that the bank is refusing to honour or negotiate;
• each discrepancy in respect of which the bank refuses; and
• the disposal of the documents — that the bank is holding them pending further instructions from the presenter, or holding them until it receives a waiver from the applicant and agrees to accept it, or returning them, or acting in accordance with instructions previously received from the presenter.

"Each discrepancy" means all of them, in one notice. A bank cannot refuse on one ground, then produce a second ground a week later when the first is answered. If you receive a notice listing three discrepancies, those three are the entire case against your presentation.

Preclusion: the seller’s strongest single protection

Sub-article 16(f) is short and severe: if an issuing bank or a confirming bank fails to act in accordance with the provisions of article 16, it shall be precluded from claiming that the documents do not constitute a complying presentation. A notice that is late, that omits a discrepancy, that fails to state the disposal of the documents, or that is not given at all, costs the bank the right to refuse. The presentation must then be honoured whatever its actual defects.

This is why the timing of a refusal notice is worth checking on every refused presentation. Record the date and time of presentation, the local banking calendar, and the date and time the notice was received. Preclusion arguments are won on those facts and lost on missing ones.

The four ways out, in order of preference

1. Correct and re-present. If the discrepancy is in a document you issue and there is time before both the presentation deadline and the expiry date, this is the clean answer and it restores you to a full bank undertaking. Note that re-presentation restarts the examination period, so the arithmetic has to work.
2. Waiver by the applicant. Under sub-article 16(b) the issuing bank may in its sole judgement approach the applicant for a waiver of the discrepancies, but doing so does not extend the five banking day period. Waiver is common and usually granted where the buyer wants the cargo. Understand what it means: you are now relying on the buyer’s willingness, which is the exposure the credit was bought to eliminate. Discrepant documents plus a cooperative buyer looks identical to payment and is a completely different risk.
3. Documents sent on approval or on a collection basis. The presenting bank forwards the documents to the issuing bank without engaging any bank undertaking, and payment happens if the buyer decides to pay. This is a documentary collection in all but name, and the bank undertaking is gone.
4. Payment under reserve or against indemnity. A nominated bank may pay against the beneficiary’s indemnity, recovering from the beneficiary if the issuing bank refuses. It is a financing accommodation between you and your own bank, not a payment under the credit, and it leaves the credit risk with you.

What a refusal actually does to your position, and why speed matters

The commercial position after a refusal is worse than it looks on paper. The cargo is afloat or already at the discharge port. The buyer knows the documents are discrepant, which changes the negotiation. Storage, demurrage and detention accrue against someone while the position is resolved, and bitumen is not a cargo that waits comfortably: packed drums exposed on a quay deteriorate, and any parcel that must be kept liquid consumes heating for as long as it is held. Storage and shelf life behaviour are covered on the bitumen shelf life and storage page.

Two behaviours follow. Respond to a refusal notice the day it arrives, with instructions on disposal and a decision on whether to correct or seek a waiver. Silence leaves your documents sitting in a bank’s file. And never let documents be released to the buyer against a refusal you have not answered. Once the buyer holds an original bill of lading it can take delivery, and your remaining leverage is a lawsuit in the buyer’s jurisdiction.

Disputes about whether a discrepancy is real

Banks are not always right. A discrepancy that turns on interpretation — whether a description corresponds, whether data conflicts, whether a notation is a clausing — can be argued, and there is machinery for it. The ICC Banking Commission issues formal opinions on UCP questions, and those opinions are the reference practitioners cite. ICC also operates DOCDEX, a documentary instruments dispute resolution service that produces an expert decision on a documentary credit dispute far faster than litigation. Neither is a court and neither binds a bank that refuses to participate, but both carry real weight, and the existence of a written ICC position on the point is often enough to settle an argument.

The one thing that prevents most of this

Pre-check the presentation against the credit before it leaves your office, line by line, using the credit itself as the checklist — not the previous shipment’s pack, and not the sales contract. Have it done by someone who did not prepare the documents. This is a task of perhaps an hour that removes most of the failure modes in the table above, and it is the highest-return hour in the whole export process.