006b PowerPoint - Applying the Principles of UCP 600 - Session I GC

7/28/2019 006b PowerPoint - Applying the Principles of UCP 600 - Session I GC

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Applying the principles of UCP 600

in todays turbulent environment

Session I

International Chamber of Commerce

Paris

June 18 & 19, 2009

Gary Collyer & Vincent OBrien

2

Applying UCP 600

Introduction:- review of the key results in the recent ICC Survey

Rethinking Trade Finance 2009: an ICC Global

Survey;

- the current issues and environment; and

- understanding the concerns and issues of theparticipants.

3

First Experiences with UCP 600 toJuly 2008

Corporate view of UCP 600:

Easier to read, follow and apply;

Clearer rules that leave little room for banks to manipulate or interpret to

their liking;

Widespread adoption by banks together with application of the ISBPpublication;

Need for applicants to grasp that the UCP 600 does not only benefit thebeneficiary;

The content and structure of UCP 600 should encourage more usage of thedocumentary credit as a means of payment ;

An opportune time to review current practices and look for betterdocumentary credit structures;

Use the impetus of UCP 600 to seek out new buyers and suppliers; and

A reduction in discrepancy rates has been seen in many countries.


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First Experiences with UCP 600 toJuly 2008

Bank view of UCP 600:

Easier to read, follow and apply;

Clearer rules that leave little room for issuing banks to manipulate or

interpret to their liking;

Widespread adoption by banks together with application of the ISBP

publication;

Increased usage of documentary credits already seen in markets such asAsia and Middle East. For example, China is now number 1 issuer of

documentary credits globally and the Middle East is projecting increases inusage of around 15-20% per annum;

Banks are now promoting documentary credits as an offering whereas inthe past it was not a priority product;

An opportune time to review current practices and look for betterdocumentary credit structures and guidelines;

A reduction in discrepancy rates has been seen in many countries.

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Applying UCP 600

Corporate views now:

The fees are too high and impossible to anticipate

It takes weeks to get paid when it should only take days

The banks are too picky when checking my documents

The banks are inconsistent in what they consider discrepancies

I cant get my L/Cs routed through my preferred bank

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Applying UCP 600

Corporate views now:

I cant get my L/Cs confirmed by a bank acceptable to me

Getting answers to my questions is like pulling teeth

The information that I receive is awful

The bankers and I do not understand one another

There are just too many banks involved and I cant keep track


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Current experiences with the handling

of LCs

Applying UCP 600

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Applying UCP 600

Examples of reported spurious and doubtful discrepancies:

Grade of steel mentioned in Mills Test Certificate is not as perclause No. 4 of field 46A of the L/C. Field 46A of the LC statedMills Test Certificate. (USD8.8m)

Short quantity supplied in the size 2.00x1230mm which is less

than 10 percent which is not as per clause 45A of the LC terms.Field 45A gave a quantity of goods (5 different sizes) all subjectto 10% +/-. Quantity of size shown was less than -10% but LCallowed partial shipments. (USD6.4m)

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Applying UCP 600


Certificate of Origin does not show name of the consignee. Thecondition in the LC was Certificate of Origin and there was norequirement for the consignee to be shown. (USD3.6m)

B/L shows goods shipped on deck. BL was a charter party BLwhich had pre-printed text (of which .. on deck atshippers risk, carrier not responsible .). The gap was notcompleted with any quantity. (USD1.7m)


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Applying UCP 600


Clean on board date not indicated on BL, wrong beneficiaryaddress on documents and documents not presented by expressmail. Standby LC required presentation of draft, copy invoice,

copy clean on board BL and various certificates. Documents tobe sent by express mail and beneficiary address in SBLC wasstated to be Zu, Switzerland.

The copy BL showed an on board date and no notations or

clauses regarding the goods or their packaging. The documentswere sent by courier service. The beneficiary address was Zug(in Switzerland). (USD6.7m)

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Applying UCP 600


Non-negotiable copies of BL not signed. These are not signedand LC did not request their presentation! (USD2.5m)

Certificate of Origin shows as consignee a party other than thebeneficiary. LC was silent as regards content of Certificate of

Origin. (USD3.4m)

Mills Test Certificate is issued by a party other than thebeneficiary. LC did not indicate t he issuer. (USD3.4m)

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Applying UCP 600


Commercial Invoice and Packing List show name of the buyer asviz. ABC Co Ltd whereas buyers name is ABC Co Ltd. LCstated documents in the name of buyer viz. ABC Co Ltd.(USD380k)

Beneficiary declaration as per clause 5 of the LC is notpresented. Beneficiary presented the required document underthe title Beneficiary Certificate. (USD8.7m)


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Applying UCP 600

Examples of reported spurious and doubtful discrepancies

latest occurrence:

LC provides a goods description (field 45A) that includes partialshipment to be allowed and goods will be carried under deck.

Commercial Invoice presented showing the goods description asper field 45A but without the two statements in quotation marksas above. Issuing bank refuses for absence of data. (USD5.1m)

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Applying UCP 600

Issuance:- it all starts with the documentary credit application

form; and

- understanding the various structures, settlementtypes and variations of documentary credits.

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Applying UCP 600

UCP 600 article 14 - Standard for Examination of Documents

Sub-article 14 (a):

A nominated bank acting on its nomination, a confirming bank, if any,

and the issuing bank must examine a presentation to determine, on

the basis of the documents alone, whether or not the documents

appear on their face to constitute a complying presentation.

check on the basis of the documents alone


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Applying UCP 600

UCP 600 article 14 - Standard for Examination of Docu ments

Sub-article 14 (f):

If a credit requires presentation of a document other than a transport

document, insurance document or commercial invoice, without stipulating by

whom the document is to be issued or its data content, banks will accept the

document as presented if its content appears to fulfil the function of the

required document and otherwise complies with sub-article 14 (d).

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Applying UCP 600

UCP 600 article 14 Standard for Examination of Documents

Sub-article 14 (h)

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.

1. Understanding the impact on the applicant

2. Ability of the issuing bank to enhance the wording in the LC

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Applying UCP 600

UCP 600 article 1 - Application of UCP

Concept of Modify or Exclude;

No reference to unless otherwise stipulated in the credit throughoutUCP 600;

UCP applicable when the LC expressly indicates that it is subject to

these rules; and

Retention of Standby Letters of Credit.

There is a need to understand the concept of modification and

exclusion and when it is appropriate or not.


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Applying UCP 600

UCP 600 article 2 - Definitions

Negotiation:

the purchase by the nominated bank ofdrafts (drawn on a bank other than thenominated bank) and/or documents under a complying

presentation, by advancing or agreeing to advance funds to thebeneficiary on or before the banking day on which reimbursement isdue to the nominated bank.

Understand the 3 components of the definition

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Applying UCP 600

ICC Opinion R. 666 and UCP 600 Commentary refers to:

A letter of credit that is stated to be available with a nominated bank,

by [sight] negotiation, should not include any reference to claiming

reimbursement from a reimbursing bank or, indeed, any reference to

the debiting of the issuing banks account held with the nominated

bank. This form of structure is a payment letter of credit. A

negotiation letter of credit should specify that the nominated bank isto send the documents to the issuing bank and upon the issuing

bank ascertaining that they comply with the terms and conditions of

the credit, the issuing bank will reimburse in accordance with the

instructions of the negotiating bank.

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Applying UCP 600

UCP 600 article 12 - Nomination

Sub-article 12 (b):

By nominating a bank to accept a draft or incur a deferred payment

undertaking, an issuing bank authorizes that nominated bank to prepay or

purchase a draft accepted or a deferred payment undertaking incurred by

that nominated bank.

Explicit authorization to prepay or purchase.

Potential for loss lies with the applicant rathe r than the bank.

Need for applicants to adopt know your customer principles.


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Applying UCP

UCP 600 article 6 - Availability, Expiry Date and Place for PresentationSub-article 6 (a):

A credit must state the bank with which it is available or whether it

is available with any bank. A credit available with a nominated bank

is also available with the issuing bank.

Q. Why allow any form of LC to be available with any bank?

Q. Is it really possible under each type of availability for a LC to be

available with any bank?

Q. What is the value to a beneficiary of a LC available with any bank?

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Applying UCP

Understanding the correct form of availability

with an issuing bank;

with a confirming bank;

with a nominated bank;

with an issuing bank and confirming/nominated bank;

with issuing/confirming bank for expiry and nominated bank forhonour or negotiation;

for presentation only.

Banks need to understand availability and what it means in each transaction.

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Applying UCP 600

Sub-article 7 (c) ICC Opinion TA. 674 approved March 2009

The conclusion to this opinion (as to the effect of extending a maturity date

of a draft or deferred payment undertaking) includes:

Whether a replacement draft or new deferred payment undertaking is

required will be determined by local law at the place of acceptance or where

the deferred payment undertaking is incurred. if not required then

the draft must be re-accepted to mature on the new agreed maturity date

(where the credit is available by acceptance with the confirming bank); or

a new or amended deferred payment undertaking must be incurred to reflect

the new agreed maturity date (where the credit is available by deferred

payment with the confirming bank). continued


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Applying UCP 600

Sub-article 7 (c) ICC Opinion TA. 674 approved March 2009

The conclusion to this opinion (as to the effect of extending a maturity date

of a draft or deferred payment undertaking) concludes by saying:

By complying with the above, and in line with the definition of honour in

article 2, i.e.,

b. to incur a deferred payment undertaking and pay at maturity if the credit

is available by deferred payment; and

c. to accept a bill of exchange (draft) drawn by the beneficiary and pay at

maturity if the credit is available by acceptance,

the obligation of the issuing bank to reimburse the nominated (confirming)

bank, according to sub-article 7 (c), extends to the new agreed maturity

date.

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Establishing Best Practices

Issuance:

Clear and precise terms and conditions

Terms and conditions that match the form of shipment

Documentary requirements that outline the issuer (if required) and thedata content for each document (do not rely on the effect of sub-article14 (f))

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Applying UCP 600

Alternative forms of Documentary

Credits


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Alternative forms of Documentary Credits

Advance Payment;

Red / Green Clause;

Revolving / Reinstatement;

Instalment; and

Assignment of Proceeds.

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Advance Payment (Red Clause)

This is often referred to as a red clause credit due to the fact that thewording regarding the advance payment was typed in red ink so as to

highlight this condition.Today, advance payments under credits are fa irly rare and generally limitedto around 80% of the credit value. The advance is often paid against a

receipt from the beneficiary indicating that they will ship the goods asrequired by the credit and in the event that they fail to do so will return theadvance or percentage thereof in respect of goods not shipped. Where

there are doubts as to the beneficiarys ability to return the funds, theapplicant may insist that the advance is made against the issuing of a bank

guarantee covering the value of the advance.When the beneficiary presents their documents for the goods shipped, theinvoice will be issued for 100% of the value less the amount of the advance

relative to those goods.

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Red Clause LCs

Where a bank guarantee is to be issued to cover any advance payment,consideration should be given to include wording as below (or similar):

This guarantee will automatically reduce by xx% of the value of any invoicepresented under letter of credit number xxxxxxx as part of a complying

presentation made by the beneficiary to XXX Bank [name of nominatedbank]. By the inclusion of this wording, the liability under the guarantee willreduce as shipments are made under the respective letter of credit.

Issuing banks (and applicants) that allow the advance to be made againstan undertaking of the beneficiary must appreciate that the nominated bank

will have no further involvement in recovering the funds in the event offailure to ship. The ultimate risk lies with the applicant.


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Green Clause LCs

A letter of credit which contains a clause authorising the nominatedbank to make advances to the seller against security (such as a

payment guarantee from a third party or the pre-shipment storage ofthe goods in the name of the nominated bank or the issuing bank)before shipment /presentation of documents. If the seller fails to

present the documents, the issuing banks or buyers reimbursementobligations can be recovered through enforcement of the security.

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Revolving and Reinstatement LCs

Revolving: A revolving credit has three features that need to beaddressed in a credit:-

1. whether it is automatic or not;2. whether the revolvement amount is cumulative or non-cumulative;and3. the basis under which the revolvement will occur.

Reinstatement: A reinstatement credit has three features that needto be addressed in a credit:-1. the initial amount of the credit;2. the basis under which the reinstatement will occur; and3. the maximum amount to which the reinstatement will be made.

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Revolving LC basics

Beneficiaries prefer a cumulative, automatic revolving credit as they

have a bank undertaking for the full amount of the value of theirgoods.

Banks prefer a non-cumulative or cumulative, but non-automaticrevolving credit as it limits the banks exposure to the value of onerevolvement.

A non-cumulative revolving credit allows the bank to reduce theirliability by any undrawn balance within any revolvement period.

A cumulative automatic revolving credit could, possibly, allow the

Beneficiary to draw the full value in the final segment of the credit.


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Reinstatement LC basics

A reinstatement credit allows the applicant to limit the value of any oneshipment by setting the value of the credit to that level. For example, the

total contract price is USD100,000 but the maximum that would be drawn inany one presentation is USD15,000

The credit will be issued for an initial amount of USD15,000 and state thatthe amount will be reinstated after each drawing to the amount of

USD15,000 subject to a maximum of USD100,000

If the beneficiary makes an initial drawing of USD12,500 the amount willreinstate to USD15,000 but the remaining total amount reduces toUSD87,500 and so on until the full credit amount is drawn.

The banks liability is for the full USD100,000

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UCP 600 article 32 - Instalment Drawings or Shipments

An instalment credit is covered by UCP 600 article 32. Care must be takenwhen drafting an instalment credit to ensure that the right structure is used.

For example, DC issued on 9 February stating:-1000 Pens to be shipped by 28 February

1000 Pens to be shipped by 15 March1000 Pens to be shipped by 31 March

is not an instalment credit unless the first shipment is not made. All the

goods could be shipped before 28 February.An instalment credit should have specific goods to be shipped within givenperiods that do not overlap. For example: 1000 Pens between 9 and 28

February, 1000 Pens between 1 and 15 March, 1000 Pens between 16 and31 March.

Article 32 is to be excluded under a Standby DC where instalments occur.

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UCP 600 article 39 - Assignment of Proceeds

The fact that a credit is not stated to be transferable shall not affect the rightof the beneficiary to assign any proceeds to which it may be or may becomeentitled under the credit, in accordance with the provisions of applicable law.This article relates to the assignment of proceeds and not to the assignmentof the right to perform under the credit.

Points to note:- assignment of the proceeds not the right to perform under the credit;- payment security to assignee exists only if compliant documents

presented;

- bank should limit their payment obligation to documents beingpresented at their counters;

- copy of assignment notice should be sent to all parties; and- clear instructions where more than one assignee or partial shipments.


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Applying UCP 600

Advising and Confirmation:- roles and responsibilities of an advising bank and a

confirming bank; and

- form and scope of confirmation of a documentarycredit.

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Applying UCP 600

UCP 600 article 9 - Advising of Credits and Amendments

Concept of 2nd Advising Bank;

Bank now satisfies itself as to the apparent authenticity; and

Advice of LC or amendment accurately reflects the terms and

conditions of the LC or amendment received.

Are instructions to confirm addressed to the advising bank and/or the

second advising bank that is stated in the LC?

What is satisfying itself as to the apparent authenticity?

What are the risks of not passing to the beneficiary what was received?

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Advising:

Are you willing to accept your nomination?

Do you examine the credit for workability?


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Applying UCP 600

Adding confirmation what is possible and what needs to be observed

considerations to add confirmation;

reduced expiry;

reduced amount;

determining confirmation of 100% where a split schedule is included inthe LC;

more than one confirming bank.

The basic rule for a bank requested to confirm is do I understand what I am

confirming and the risks that I am undertaking

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Applying UCP 600

Understanding recourse

Having confirmed a LC, the confirming bank has no right of recourse tothe beneficiary in the event of default by the issuing bank, or theissuing bank subsequently identifying discrepancies that were notdetermined by the confirming bank.

But what form of recourse is available where the documentary credit is notconfirmed?

Recourse when the issuing bank fails to provide reimbursement

according to the terms of the credit citing bankruptcy, lack of foreignexchange, Government intervention etc.

and (?)

When the issuing bank identifies discrepancies in documents that thenominated bank failed to determine.

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Applying UCP 600

Understanding recourse LC available by Honourwith a nominated bank

(not confirmed)

Honour is to:

Pay, if the LC is available by sight payment;

Accept a draft drawn on the bank, if the LC is available by acceptance;or

Incur a deferred payment undertaking, if the LC is available by deferredpayment.

To pay, accept or incur a deferred payment undertaking is a commitment onthe part of the nominated bank and is considered without recourse to theBeneficiary. For payment LCs a separate recourse agreement may,however, be made with the beneficiary


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Confirmation:

Do you understand what you are confirming?

What is the wording of your confirmation and what does it mean?

Do beneficiaries understand the effect of confirmation?

Cancelling, removing or opting out of confirmation.

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Applying UCP 600

Amendments:- drafting and structuring of amendments; and

- acceptance or refusal of amendments.

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Applying UCP 600

UCP 600 article 10 Amendments

Sub-article 10 (c):

The terms and conditions of the original credit (or a credit incorporating

previously accepted amendments will remain in force for the beneficiary

until the beneficiary communicates its acceptance of the amendment to the

bank that advised such amendment. The beneficiary should give

notification of acceptance or rejection of an amendment. If the beneficiary

fails to give such notification, a presentation that complies with the credit

and to any not yet accepted amendment will be deemed to be notification of

acceptance by the beneficiary of such amendment. As of that moment the

credit will be amended.

Q. Effect of banks requesting a beneficiary certificate certifying as to whichamendments have been accepted or rejected.


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Applying UCP 600

UCP 600 article 10 - Amendments

Let us review the circumstances of a LC:

LC issued for USD25,000 covering shipment of nuts and bolts.

Partial shipment allowed.

Amendment received reducing amount to USD15,000

Beneficiary subsequently presents documents for USD15,000 and the LC is

valid for another 5 weeks.

Has the amendment been accepted or has a partial shipment been effected?

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Applying UCP 600

UCP 600 article 10 - Amendments

LC is issued for USD3.5M and is available with the confirming bank by

acceptance at 180 days after BL date.

LC states that discount charges are for account of the applicant.

Amendment issued stating discount charges now for beneficiary account.

Documents are then presented for full value of the LC and discount is

requested by the beneficiary.

Has the amendment been accepted or rejected?

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Amendments:

Does the amendment cater for all the terms and conditions of the LC?

What effect does the amendment have on the remaining terms and

conditions?


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Example of an amendment not catering for all the terms and conditions ofthe LC and leaving an element of ambiguity.

LC requires shipment from Singapore to Rotterdam and requirespresentation of bills of lading. Incoterm CFR.

Beneficiary and applicant determine that bills of lading are the wrongform of document and agree on a forwarders certificate of receipt. Anamendment is issued stating delete bills of lading and insert freightforwarders certificate of receipt issued by Acme Forwarding CompanyLtd. Incoterm is unchanged.

Is the FCR to indicate shipment from/to o r just delivery at Singapore?What about the other BL conditions consignee, notify party andfreight paid or payable?

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Applying UCP 600

Transferable Credits and Back-to-

Back Credits:- application of UCP 600 and the transfer application

form; and

- correct form and structure;

- what is possible in a transferred credit?; and

- what documents can be substituted?

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Transferable Documentary Credits

UCP 600 article 38 - Transferable Credits

(a) states that no bank is under an obligation to transfer;

(b) provides definitions of

Transferable credit means a credit that specifically states it istransferable. A transferable credit may be made available in whole orin part to another beneficiary (second beneficiary) at the request of thebeneficiary (first beneficiary);

Transferring bank means a nominated bank that transfers the creditor, in a credit available with any bank, a bank that is specificallyauthorized by the issuing bank to transfer and that transfers the credit.An issuing bank may be a transferring bank; and

Transferred credit means a credit that has been made available by thetransferring bank to a second beneficiary.


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UCP 600 article 38 - Transferable Credits (e) No longer a requirement for irrevocable instructions regarding

amendments; (f) If transferred more than once, each transferred credit stands as an

individual credit;

(g) No change to items that can be reduced or curtailed but if originalcredit is confirmed, so must the transferred credit;

(i) If first beneficiary fails to substitute or fails to correct substituteddocuments (where the 2nd beneficiary documents complied), 2ndbeneficiary documents may be utilised; and

(k) documents must be routed through transferring bank.

Issues:Changing additional terms and conditionsSubstituting more than the draft and/or invoiceExamination and handling of second beneficiary documents

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Sub-article 38 (k) ICC Opinion TA. 632 approved October 2007

The conclusion to this opinion includes the following:

When there is a 100% transfer of the credit amount and no substitution is

to occur, the necessity to present the documents of the second beneficiary

to the transferring bank is negated. This position prevails to the extent that

the transferring bank has not added their confirmation to the transferred

credit and, thereby, necessitating that documents are presented to that bank

in order for the undertaking of the confirming bank to be fulfilled.

In the advice of transfer, where there is a 100% transfer, the transferring

bank may make a modification of the rule to state that the documents are to

be sent direct to the issuing bank. In such circumstances, the transferring

bank should inform the issuing bank of this action.

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Back-to-Back Documentary Credits

Back-to-Back Credits

Used where the beneficiary of a credit (middle man) cannot obtain atransferable credit or cannot arrange for their bank to issue a credit in theirown name. Beneficiary of the original credit seeks to use that credit assecurity for a bank to issue another credit in favour of the supplier of thegoods.

In a back to back credit there are two separate and independent creditsissued whereas under a transferable credit the transaction happens under

the umbrella of the original credit.

Most banks are willing to handle transferable credits as there is protectionunder UCP in the event of failure on the part of the 1st beneficiary. Under a

back to back credit each credit is independent and failure of the 1st beneficiarymay put the bank at risk of receiving proceeds to cover their payment to thesupplier.


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Back-to-Back Documentary Credits

Back-to-Back Credits

Issues with Back-to-Back LCs:

matching terms and conditions between credits; aligning the settlement under both credits; substitution by the original beneficiary and failure on their part to do

so;

banks that link the settlement of one LC to settlement under theother;

safeguards?

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Applying UCP 600

International Standard Banking

Practice:- applying the principles of paragraphs 1-42.

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Why the need for ISBP?

Lack of a clear International Standard (possibly even Bank or Country).

To explain what is meant by the reference in the definition of ComplyingPresentation.

Lack of full document coverage within the UCP.

Poorly issued credits leading to increased rejections and multiple

interpretations.

To put meaning to imprecise terms and incorporate positions taken in ICCOpinions, Decisions and DOCDEX cases.


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Who is the ISBP intended for?

ALL parties to a Letter of Credit NOT just the banks

Including

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Is the ISBP binding in the same manneras the UCP?

ISBP publication 681 was approved by the Banking Commission of

the ICC, as was the UCP 600.

ISBP publication 681 is an Official Publication of the Banking

Commission.

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Applying ISBP Publication 681

Article 2 of UCP 600 provides a definition of Complying Presentation as a

presentation that is in accordance with the terms and conditions of the credit,the applicable provisions of these rules [UCP 600] and international standardbanking practice.

Reference to international standard banking practice is not confined to thecontent of the ICC publication 681. International standard banking practice alsoincludes the opinions and DOCDEX decisions that are not in the publication plus

other functions and acts performed by banks on a daily basis.


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Application and Issuance of the Credit

Paragraph 2

The applicant bears the risk of any ambiguity in its instructions to issue oramend a credit. Unless expressly stated otherwise, a request to issue oramend a credit authorizes an issuing bank to supplement or develop the

terms in a manner necessary or desirable to permit the use of the credit.

Paragraph 5

Many of the problems that arise at the examination stage could be avoidedor resolved by careful attention to detail in the underlying transaction, thecredit application, and issuance of the credit as discussed.

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Paragraph 8

A certification, declaration or the like may either be a separate

document or contained within another document as required bythe credit. If the certification or declaration appears in anotherdocument which is signed and dated, any certification ordeclaration appearing on that document does not require a

separate signature or date if the certification or declarationappears to have been given by the same entity that issued and

signed the document.

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Paragraph 9

Corrections and alterations of information or data in documents,other than documents created by the beneficiary, must appear tobe authenticated by the party who issued the document or by aparty authorized by the issuer to do so. Corrections andalterations in documents which have been legalized, visaed,certified or similar, must appear to be authenticated by the party

who legalized, visaed, certified etc., the document. Theauthentication must show by whom the authentication has beenmade and include the signature or initials of that party. If theauthentication appears to have been made by a party other thanthe issuer of the document, the authentication must clearly showin which capacity that party has authenticated the correction oralteration.


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Corrections and Alterations

Paragraph 11

The use of multiple type styles or font sizes or handwriting in the samedocument does not, by itself, signify a correction or alteration.

An example of the application of this rule is in ICC Opinion TA.657 where the

date of issuance and receipt of goods shown on a CMR were completed by

pen where the document was completed except for the date which was

shown as __-11-2007. The completion of the date, in pen, was acceptable

under this practice.

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Paragraph 13

Drafts, transport documents and insurance documents must be

dated even if a credit does not expressly so require. Arequirement that a document, other than those mentioned above,be dated, may be satisfied by reference in the document to thedate of another document forming part of the same presentation

(e.g., where a shipping certificate is issued which states date asper bill of lading number xxx or similar terms). Although it is

expected that a required certificate or declaration in a separatedocument be dated, its compliance will depend on the type ofcertification or declaration that has been requested, its requiredwording and the wording that appears within it. Whether otherdocuments require dating will depend on the nature and contentof the document in question.

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Documents for which the UCP 600 transport articles do not apply

Paragraph 19

Some documents commonly used in relation to the transportation ofgoods, e.g., Delivery Order, Forwarders Certificate of Receipt,Forwarders Certificate of Shipment, Forwarders Certificate of

Transport, Forwarders Cargo Receipt and Mates Receipt do not reflecta contract of carriage and are not transport documents as defined inUCP 600 articles 19 - 25. As such, UCP 600 sub-article 14(c) would not

apply to these documents. Therefore, these documents will beexamined in the same manner as other documents for which there are

no specific provisions in UCP 600, i.e., under sub-article 14(f). In anyevent, documents must be presented not later than the expiry date forpresentation as stated in the credit.


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Documents for which the UCP 600 transport articles do not apply

Paragraph 20

Copies of transport documents are not transport documents for thepurpose of UCP 600 articles 19-25 and sub-article 14(c). The UCP 600transport articles apply where there are original transport documents

presented. Where a credit allows for the presentation of a copy transportdocument rather than an original, the credit must explicitly state thedetails to be shown. Where copies (non-negotiable) are presented, theyneed not evidence signature, dates, etc.

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Issuer of documents and signatures

Paragraphs 22, 37 and 40

If a credit indicates that a document is to be issued by a named person

or entity, this condition is satisfied if the document appears to be issuedby the named person or entity. It may appear to be issued by a namedperson or entity by use of its letterhead, or, if there is no letterhead, the

document appears to have been completed or signed by, or on behalfof, the named person or entity.

Even if not stated in the credit, drafts, certificates and declarations bytheir nature require a signature. Transport documents and insurancedocuments must be signed in accordance with the provisions of UCP600.

A signature on a company letterhead paper will be taken to be thesignature of that company, unless otherwise stated. The company nameneed not be repeated next to the signature.

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Paragraph 31

Where an original would not be accepted in lieu of a copy, thecredit must prohibit an original, e.g. photocopy of invoice original document not acceptable in lieu of photocopy, or thelike. Where a credit calls for a copy of a transport document andindicates the disposal instructions for the original of that transportdocument, an original transport document will not be acceptable.

Paragraph 32

Copies of documents need not be signed.


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Title of Documents and Combined Documents

Paragraph 41

Documents may be titled as called for in the credit, bear a similar title, or

be untitled. For example, a credit requirement for a Packing List mayalso be satisfied by a document containing packing details whether titledPacking Note, Packing and Weight List, etc., or an untitled document.

The content of a document must appear to fulfil the function of therequired document.

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Documents listed in a credit should be presented as separate

documents. If a credit requires a packing list and a weight list, suchrequirement will be satisfied by presentation of two separate documents,or by presentation of two original copies of a combined packing and

weight list, provided such document states both packing and weightdetails.

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Documents should be examined in accordance with international standardbanking practice, as stated in the UCP 600 and as articulated in the ISBP.

Any rejection of documents should state discrepancies in accordance withUCP 600 article 16.

You reject documents because they are discrepant under UCP 600.

There is no harm in explaining to another party which ICC Opinion, DOCDEXDecision or paragraph of the ISBP was used to understand how the practices

of the UCP were applied.

006b PowerPoint - Applying the Principles of UCP 600 - Session I GC

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Transcript of 006b PowerPoint - Applying the Principles of UCP 600 - Session I GC