The Korea Export Insurance Corporation (Law Firm Square, Attorneys Yoon Yong-seok et al., Counsel for the defendant-appellant)

China Bank Co., Ltd. (Attorneys Kim Jong-chul et al., Counsel for the plaintiff-appellant)

May 14, 2009

Seoul Central District Court Decision 2008Gahap48693 Decided September 26, 2008

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant shall pay to the plaintiff 875,870.02 US dollars and 6% interest per annum from February 22, 2008 to the delivery date of a copy of the complaint of this case, and 20% interest per annum from the next day to the day of complete payment.

1. Basic facts

The reasoning for this Court’s explanation is that it is identical to the second written judgment of the court of first instance (hereinafter “1. Basic Facts”), and thus, it is acceptable to accept this part in accordance with the main text of Article 420 of the Civil Procedure Act.

2. The parties' assertion

A. The plaintiff's assertion

The defendant rejected the second demand for payment on the letter of credit of the foreign exchange bank on the ground that the contents of the analysis of the size of the goods in the commercial invoice and the packing invoice are different from the contents of the letter of credit. ① According to the letter of credit of this case, the goods description stated that the payment may be refused if it goes beyond a certain standard level by prescribing the scope of rejection regarding the total quantity of the goods, but the size of the goods stated in the commercial invoice and the packing invoice does not stipulate the scope of rejection. Thus, even if the size of the goods in the commercial invoice and the packing invoice are not completely different from the contents of the letter of credit, the defendant cannot refuse to pay on the letter of credit for this reason. ② Even if it is not a domestic document, the letter of credit is stated that the size of the goods among the shipping documents presented by the foreign exchange bank to the defendant at the first demand for payment was stated as 0 to 50m:75.21%, the defendant did not claim any defect on the size of the goods at the time of the first refusal to pay.

The plaintiff paid insurance money to the non-party 1 corporation in accordance with the export insurance contract of this case and received the claim for the letter of credit of this case from the non-party 1 corporation, and the defendant, the issuing bank of the letter of credit, is obligated to pay US$875,870.02 to the plaintiff.

B. Defendant’s assertion

① The discrepancy between the description of the goods stated in the commercial invoice and packing note of this case and that of the letter of credit is apparent on its face. ② Since such inconsistency is a new defect that did not exist at the time of the first refusal of payment, the Defendant may refuse to pay the letter of credit on its ground.

3. Determination

A. Uniform Customs and Practice for Documentary Credits applicable to the instant case

First, we examine the applicable law to the legal relations of the credit of this case, and the credit of this case stated that "the most recent Uniform Customs and Practice for Documentary Credits (CPTSVVON) shall apply." Thus, the legal relations with the credit of this case shall be governed by the UCP 6th Amendment of the Uniform Customs and Practice for Documentary Credits (UCP 600), which came into force at the time when the credit of this case was issued.

B. Determination as to whether the text of the commercial invoice and the letter of credit of this case coincide with each other

(1) Article 18(c) of the Uniform Customs and Practice for Documentary Credits provides that “The particulars of goods, services, or obligations on commercial invoices shall be consistent with those on the credit” (Article 18(c) provides that “The particulars of the goods, services, or obligations on commercial invoices shall be consistent with those on the credit.”

Article 14(e) of the same Act provides that “The description of goods, services or performance may, if written, be written in any document other than the commercial invoice, be written in general terms that do not conflict with the description of the credit.” This provision provides that “The other part other than the non-commercial invoice refers to 200 Do 2000 Do 2000 200 Do 2000 200 200 200 200 200 200 200 200 200 200 200 20 200 20

Article 14 (a) of the same Act provides that a designated bank acting in accordance with the designation, a confirming bank, if any, and the issuing bank shall examine documents only on the basis of documents whether or not there is a presentation consistent with the face to the documents (the "Anomed Bank", the "Seoul Special Metropolitan City Mayor/Do Governor", the "Seoul Special Metropolitan City Mayor/Do Governor", the "Special Metropolitan City Mayor/Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do Governor Do governor Do governor Do governor Do Governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor Do governor 100 Do governor Do governor Do governor 100 Do governor 10

(2) The product description of the letter of credit of this case is written in size 0-10 M: 0%. The product description in the commercial invoice and packing list presented at the second demand for payment is written in size 0-50m: 75.21m: 75.21m: The facts described above are either as seen in the above, or as described in Gap evidence 1-2, 3, and 3-1 through 4.

In addition to the above facts, commercial invoice is a major material to determine whether the beneficiary, who is the seller, is identical to the commercial invoice and the forwarding manual of the goods to be supplied by the requester for the issuance of the credit, and whether the goods conform to the purchasing conditions as presented by the purchaser. Thus, considering the fact that the specifications of the goods indicated in the commercial invoice are strictly consistent with the specifications of the goods required by the L/C, each of the above commercial invoice and packing note and those of the L/C are judged to be clearly inconsistent with the face value of the L/C. Therefore, the defendant may refuse to pay the L/C amount on the ground of the above defects.

(3) On this basis, the Plaintiff asserts that the contents of the goods description are so the same as the contents of the agreement between the exporter and the importer, and that it is not possible to refuse payment on the ground that it does not coincide with the face of the goods description. In particular, the letter of credit of this case only stipulates the allowable scope for the size of the goods, and does not state any particular scope for the refusal scope. In relation to the size of the goods, even though the ratio of the goods equivalent to 100 meters from 00 meters to 100 meters to 100 meters is not 100%, it does not constitute the grounds for fine or storm, as well as the grounds for refusal of payment on the letter of credit of this case. Thus, the Defendant asserts that payment on the letter of credit of this case cannot be refused on the ground of such defect.

However, since a transaction by a credit is a transaction by document and is not a direct transaction of a product, the credit transaction is treated as a separate transaction unrelated to the sales contract of a product which serves as the basis of the transaction. Thus, the execution of the transaction is requested to strictly comply with the conditions and form stated in the credit, and if the required documents do not strictly comply with the conditions of the credit, the issuing bank may refuse payment for the reason of the inconsistency.

In the case of this case, it is reasonable to interpret the meaning of refusing payment of goods exceeding 0 to 100 meters of the above permissible scope without stating the scope of refusal, in light of the detailed contents of the letter of credit, even if it is based on the detailed contents of the letter of credit, it is reasonable to interpret the meaning of refusing payment of goods exceeding 0 to 100 meters of the above allowed scope, and otherwise, it is difficult to view that it would make payment of the letter of credit regardless of the size.

However, at the time of the second claim, the contents of the goods stated in the commercial invoice and the packing invoice constitute 75.21%, and there is no mentioning the remaining 24.79% of the size of the goods. Thus, it is clearly inconsistent even if it does not conflict with the description of the goods stated in the letter of credit of this case. Accordingly, the plaintiff's assertion is without merit.

C. Determination on the assertion of breach of duty of notification en bloc

(1) Article 16(c) of the Uniform Customs and Practice for Documentary Credits provides that “When a designated bank acting in accordance with the designation, a confirming bank, if any, or an issuing bank decides to refuse to make a payment or purchase, it shall notify the presenter of the purport thereof at once.” (Article 16(c) of the Uniform Customs and Practice for Documentary Credits that “The purpose of this decision is to contribute to the extension of the period to which the applicant would be able to make a payment or purchase.” (Article 16(c) of the Uniform Customs and Practice for Documentary Credits, Afrring Bank, Pacific, or Maritime Affairs and Fisheries that the applicant would be able to make a payment or purchase.”

같은 조 f항은 ’개설은행 또는 확인은행이 이 조항의 규정에 따라 행동하지 못하면, 그 은행은 서류에 대한 일치하는 제시가 아니라는 주장을 할 수 없다‘고 규정하고 있다(If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, if shall be precluded from claiming that the documents do not constitute a complying presentation).

Therefore, in principle, if the defendant, as the issuing bank, refuses to pay the amount of the letter of credit on the ground of a defect such as a disagreement between the letter of credit and the shipping documents, he cannot refuse to pay the amount of the letter of credit on the ground of another defect.

However, the notification obligation of the issuing bank, however, will only apply to the defects that existed at the time of notification, and will not apply to the new defects that are newly incurred thereafter.

(2) According to the above facts, in this case, the defendant refused to pay the letter of credit on the ground that the shipping documents presented at the time of the first demand for payment were not stated in the commercial invoice itself, and the foreign exchange bank demanded the second payment by supplementing the description of goods in the commercial invoice and the packing invoice. At the same time, as a result of the examination of the documents regarding the supplementary specifications of the commercial invoice and the packing invoice, it is found that the description of the goods in the specifications is inconsistent with the contents of the letter of credit and thus refused to pay the two-lane letter of credit.

As to the second demand by the foreign exchange bank, such inconsistencys pointed out by the Defendant constitute a new defect that had not existed at the time of the first refusal of payment, the Defendant may refuse to pay the L/C amount on this ground. This does not change on the ground that a certificate of goods analysis presented at the time of the first demand for payment contains the same description as that of the goods description in the commercial invoice supplemented at the time of the second demand for payment inconsistent with the goods description of the L/C.

(3) As to this, the Plaintiff asserts that even if the description of goods not included in the first commercial invoice is included in the second commercial invoice, they are the same as included in the second commercial invoice, which was presented in the first commercial invoice, and the Defendant accepts the contents contained in the first commercial invoice by not stating the above as defects at the time of the first refusal of payment. Thus, foreign exchange banks, when presenting the second commercial invoice, have to present the commercial invoice stating the contents consistent with the above description of goods on the analysis certificate accepted by the Defendant, on the ground that the reason for the Defendant’s second refusal of payment, is not a new defect not at the time of the first refusal of payment, but a new defect that was not at the time of the first refusal of payment, despite the existence of the first refusal of payment, it constitutes a defect cured by the Defendant without asserting it as a defect.

However, even based on the statement No. 3-4 of the evidence No. 3-4, the analysis certificate submitted by the plaintiff at the time of the first demand for payment is not limited to the whole goods, but merely indicates the result of sampling investigation according to the standard. Thus, the defendant did not assert that the contents on the size of the goods of the first demand for payment are inconsistent with the contents of the letter of credit. Thus, it cannot be deemed that the above part of the defect was cured or that the plaintiff was trusted in relation thereto. The foreign exchange bank cannot state the same description as the analysis certificate in the commercial invoice and packing statement, and it cannot state them arbitrarily in conformity with the contents of the letter of credit. Therefore, the plaintiff's above assertion is without merit.

D. Sub-committee

Therefore, the defendant's refusal to pay a letter of credit on the second demand by the foreign exchange bank is justifiable. Therefore, the plaintiff's assertion on a different premise is without merit.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is justified as it is in conclusion, and it is so decided as per Disposition.

Judges Cho Young-hee (Presiding Judge)