The UCP 600

Developments In Documentary Credit Law

The Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules governing credits
drafted by the International Chamber of Commerce (ICC). The UCP is periodically reviewed and updated
by the ICC Banking Commission. Since 1993, the UCP 500 has applied, which governed all documentary
credits that incorporated the UCP into their terms. As of 1 July 2007, however, the new revision came into
force; the UCP 600.

The Banking Commission was authorised to begin a revision of the UCP back in May 2003. This revision
was in reaction to several pressures. First, there was concern over the prevalence of rejection of the
documents presented in order to claim under a credit. When the revision began, global surveys showed
that approximately 70% of documents presented were being rejected on first presentation because of
discrepancies. This was considered by the Commission to constitute a serious threat to maintaining and
increasing the use of documentary credits as a means of payment in international trade.[1]

There was also a perceived need to address developments in the industries that are affected by the terms
of the UCP, namely the banking, transport and insurance industries.[2]Further, there was a need to
consider a revision of the language and style of the UCP in order to remove wording that could lead to
inconsistent application and interpretation.[3]

After more than 3 years of review, debate and analysis the drafting group released the UCP 600. The UCP
600 is shorter than its predecessor, coming in at 39, rather than 49, articles. The new UCP also looks
different; it is not arranged into sub-parts as is the UCP 500, although it can be broken up in much the
same way.

The new rules do not substantially change all of the terms of the UCP, in fact many of the Articles have
remained materially unaltered. They have, however, effected changes in certain areas. This article will
highlight the main changes made by the Banking Commission to the UCP and the effects that these
changes will have upon the use and effect of documentary credits.

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Main Amendments
Application

The first noticeable change to the UCP is in the very first article, which governs application. In the UCP
500, the application was "to all documentary credits...where they are incorporated into the text of the
Credit." Thus for the UCP to apply, it must be stated to apply in the Credit itself. The overwhelming
majority of credits do incorporate the UCP. Courts in both the United States[4] and England,[5] however,
have held that because the UCP is so well entrenched into the law of documentary credits, it will apply
even if the credit does not expressly set it out.[6]

This jurisprudence may be excluded entirely from application to the UCP 600 as the application in article
1 has been amended to read that it will apply "when the text of the credit expressly indicates that it is
subject to these rules." The inclusion of the word 'expressly' limits the over-application of the UCP and it
will be interesting to see whether this line of jurisprudence is developed or reversed. It is not clear what
rules will be applied if the UCP 600 is not incorporated; it may be possible that the courts elect to
continue to apply the UCP 500 to such credits. This somewhat undermines the intention to create certainty
into letter of credit law.
Definitions and Interpretations

Articles 2 and 3 of UCP 600 create new definition and interpretation sections. These are designed to make
the UCP 600 more accessible and easier to read. Article 2 contains definitions of advising bank',
applicant', banking day', beneficiary', complying presentation', confirmation', confirming bank',
credit', honour', issuing bank', negotiation', nominated bank', presentation' and presenter'. Setting out
these definitions prevents repetition of the meaning of the terms used throughout the subsequent articles.
The aim of the interpretations in article 3 is remove or limit the ambiguity of vague language that may be
used in letters of credit. It also clarifies other characteristics of the UCP and of credits.
Revocable Credits

Another important amendment is the removal of revocable credits. Under the UCP 500, article 6
distinguished between revocable and irrevocable credits and article 8 further provided for the revocation
of a credit. There was a preference for irrevocable credits in UCP 500, as it there was a presumption that a
credit would be irrevocable if it did not expressly set out whether it was revocable or not. The UCP 600
by contrast does not expressly deal with revocable credits.

This firm move away from revocable credits is demonstrated in articles 2, 3 and 10. Article 2 defines a
credit as "any arrangement, howsoever named or described, that is irrevocable and thereby constitutes a
definite undertaking of the issuing bank to honour a complying presentation." Article 3 adds to this that a
credit is irrevocable even if there is no indication to that effect. Further, article 10(a) makes it apparent
that without the consent of the beneficiary, a credit cannot be revoked. This default position, that credits

are irrevocable, favours the interests of the seller/beneficiary who has the benefit of a binding obligation
from the bank that payment will be made on presentation of conforming documents.

It is important to note however, that the UCP 600 does not completely remove the ability to use revocable
credits. This is because article 1 makes it possible for traders to expressly exclude any of the terms. Thus
a trader may choose to open a revocable credit and exclude those parts of the UCP that prevent
revocation. It is therefore sensible for sellers to stipulate in their sales contracts that they require an
irrevocable credit that is subject to the UCP 600.
Standard of Examination

The rules governing the examination of the documents have moved from article 13 in the UCP 500 to
Article 14 in the UCP 600. The thrust of these rules have remained the same, but some significant
modifications have been effected. First, the basic duty of examination in article 14(a) has been reworded.
Specifically, the words "with reasonable care" have been omitted. This omission is unlikely to have any
effect as banks are under a duty to use care in examination of the documents in any case. The insertion of
the phrase "on the basis of the documents alone" however, is likely to be more significant. This essentially
reiterates the statement in Article 5 that banks deal with the documents only, and it strengthens the
principle of autonomy.[7] This new wording signals that banks are not to look to extraneous material
when determining compliance.[8] This ensures that credits are not rejected due to extraneous evidence
that suggests there may be a reason not to honour them, even where the presentation is compliant. By
rejecting this possibility the UCP 600 ensures that credits remain a dependable means of settlement for
traders.

Another change in article 14 relates to the amount of time that a bank has in order to accept or reject the
documents. Under the UCP 500 a bank had "a reasonable time, not to exceed seven banking days"; this
formulation led to disputes over interpretation. Now, a bank has a maximum of 5 banking days following
the day of presentation in which to accept or reject the documents. Article 2 defines "banking day" as "a
day on which a bank is regularly open at the place at which an act subject to these rules is to be
performed." This means that whether or not a particular day is a banking day will depend upon the place
in which the act is being performed (for example where the documents are presented). The new 5 banking
day rule has the benefit of certainty over the previous uncertainty. Prudent applicants and beneficiaries
ought, however, to familiarise themselves with the regular banking days of the place of the issuing,
confirming and negotiating banks.

Another more minor change in article 14, but particularly interesting to those interpreting the new rules, is
the omission of the requirement that a bank examine the documents to determine compliance in
accordance with "international standard banking practice as reflected in these articles". This formulation
was set out in article 13(a) of the previous UCP. Article 14(d) of UCP 600 does require a bank to refer to

international standard banking practice in examining the data in a document, but omits the phrase "as
reflected in these articles". The significance of this is yet to be seen, but may be very limited as the UCP
is itself designed to define and reflect standard banking practice.
Original Documents

Under the UCP 500, there was controversy surrounding article 20(b) which governed what could be
accepted by banks as 'original' documents. That article allowed banks to accept as original documents that
had been produced by automated or computerised systems, provided they were marked as original and (if
necessary) signed. This led to conflicting interpretation. The first case to deal with this Article was
Glencore International AG v Bank of China.[9] In that case, it was held that in order to be considered
original, a document produced by the means listed must be both marked as original and signed. Signature
alone was not sufficient to establish the originality of a document.

The following year however, the case of Kredietbank Antwerp v Midland Bank Plc,[10] arose. That case
took a different interpretation of article 14(b), which was that it was intended to add to the pool of
documents that could be accepted as original. Therefore the section was read as only applying to copies
produced by the means listed and not to originals. It was held that documents that appeared on their face
to be original, should still be accepted as original regardless of the means by which they were produced.

A third case CrditIndustriel et Commercial v China Merchants[11] attempted to reconcile these two
judgments. It was held that documents which are not obviously original must be marked in accordance
with Article 20(b) if they were, or appear to have been, produced by one of the methods listed in that
Article. But documents which are obviously original, or which would have been accepted as original prior
to the UCP must be accepted, even if they are produced by one of the Article 20(b) methods and not
marked "original".[12]

The UCP 600 has dealt with this conflict in Article 17. This Article sets out that "(b) A bank shall treat as
original any document bearing an apparently original signature, mark, stamp, or label of the issuer of the
document, unless the document itself indicates that it is not original." The Article goes on to state that a
bank will also accept as original a document that: "appears to be written, typed, perforated or stamped by
the document issuer's hand; or appears to be on the document issuer's original stationary; or states that it
is original, unless the statement appears not apply to the document presented." By setting out exactly what
can be accepted as original by a bank, the UCP creates greater certainty for both banks and users of
credits. This will speed up the honour process and ensure that credits are still regarded as an efficient
means of financial settlement.
Other Changes

In addition to the amendments set out above, the UCP 600 has also introduced various other changes.
These cannot all be set out here, but include a new rule regarding when the addresses of the applicant and
beneficiary in the documents must match those in the credit,[13] a new rule specifying the detail that the
issuer must set out in a notice of honour,[14] redrafted transport articles which remove the confusion over
the meaning of carrier' and agent'[15] and new rules governing issuer-proposed amendments. Overall,
these changes create greater clarity and make the UCP 600 more accessible to all users of credits.

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Conclusion

The new rules of the UCP 600 signal a move towards more certainty in letter of credit law. It clarifies the
positions of each of the parties involved in the use of credits; that is the bank, the applicant and the
beneficiary. This is achieved through the new articles 2 and 3, the disappearance of revocable credits and
the clarification of both the standard of examination of the documents and the documents that can be
accepted as original.

These measures are movements in the right direction to ensure that the documentary credit procedure
remains as expedient as possible. There are some issues that are not dealt with by the UCP 600, however,
which continue to cause controversy and confusion in the law of documentary credits. One such issue is
the ambit of the fraud exception to the autonomy principle, which is not even mentioned in the UCP.
Instead each jurisdiction takes a different approach to fraud resulting in uncertainty in this area of the law.

Another issue is the conflict of laws. The UCP 600 (and its predecessors) does not contain any governing
law or jurisdiction clauses. This is because the credit law found in the UCP is based upon lexmercatoria.
However, although there are some internationally accepted banking standards and practice there is no
separate body of lexmercatoria. Thus although the majority of credit problems can be dealt with by
reference to the articles there will inevitably remain some issues that will fall outside the UCP and be
governed by domestic legal systems.[17] In failing to regulate the governing law and jurisdiction that is to
govern documentary credit disputes, the UCP ignores the situation whereby plaintiffs will bring their
claims in a forum most likely to grant a favourable remedy rather than the forum with the closest
relationship to the credit transaction.[18] This decreases certainty in commercial relationships and allows
a plaintiff to dictate where a dispute will be resolved to the detriment of the defendant.

All in all the UCP 600 makes positive strides towards greater certainty in letter of credit law, despite the
fact that some key opportunities were missed. It is hoped that these issues will come to the fore in future
revisions.

Article 38 is on Transferable Credit. Some confusion is there such as

As per 38D : A transferred credit cannot be transferred at the request of a second beneficiary
subsequent beneficiary.
As we know there are some big Buying Houses in Hongkong. They transfer L/C to local buying
houses in Bangladesh, India, China etc. Now the buying houses are not able to transfer the L/C to
garments as per article 38D. But how could we know that the applicant is opening the L/C is a
transferred L/C, because they lien the master L/C and open another L/C (where the price is
different only). What we are getting here is looked a fresh L/C. So monitoring of the L/Cs may
not possible.
As per Article 38G: There are no scope to mention the charges or commission in the transfer
L/C. So, how they will be able to get their earnings.
As per Article 38K: Documents should be present through Transferring Bank. Now how would I
know that the payment has been arrived i.e. it also can possible that for the negligence of the
transferring bank the payment can be late. (The transferring bank can hold the payment for
several days as it is his cost free deposit). Again my party has to bear the extra charges that the
transferring bank charges. So, a lot of confusion there.
What will happen if this is a full value transfer?

I think I can clarify some points for you in this respect. I work in a small, but quite international
local Bank in Germany and open some five hundred transferable L/Cs a year, many of them for
textiles in favour of Asian beneficiaries (Hongkong, Taiwan, Korea, China etc. ), covering
garments from all parts of Asia.
To my surprise, I often find problems that the Asian beneficiaries and their bankers do not
understand "transferable" at all. So it seems to be a general problem, that the UCPs have been
stipulated in an European Style which is not easy to understand from an Asian point of view. So I
start to explain the matter in my own words, maybe I will have to clarify some questions you
might have afterwards. Please do not hesitate to call on me.
Transferable means that not only the proceeds (i.e. the money, funds, cash ...) are assigned to
someone else, but that the whole L/C is restructured and redirected to a new beneficiary, who is
a full beneficiary being able to claim the payment under the letter of credit from the transferring
bank.
In the act of transferring the L/C, the transferring bank, which should be named in the original
credit, issues a letter of transfer(ance) to the same conditions as stipulated in the original credit,
except for

- the
amount of the credit,
- any
unit price stated therein,
- the
expiry date,
- the
period for presentation, or
- the
latest shipment date or given period for shipment,
which may be and most possibly will be smaller/shorter than in the original credit.
The percentage of the insurance-cover - if required under the credit - will be most likely
increased (see article 38 g) - in order to use this insurance document as a document under the
original credit.
It is very important to understand that the letter of transfer and the original credit form a
common unit and do not exist solely. The documents presented under the transferred credit will
be also used under the original credit except for the invoice and eventual drafts, which should be
replaced by the first beneficiary (as you called him the "big Buying House in Hong Kong").
This is the most important advantage of a transferred credit in comparison to a back-to-backcredit:
The documents of the second-beneficiaries can be
used by the transferring bank under the original
credit. Even if the first beneficiary should file for
insolvency/bankruptcy the documents of the second
beneficiary can be used and the transferring bank has
no real risk.
In a back-to-back-credit, this would not be possible.
The otherwise-transferring bank would be obliged to
pay the import-L(C and might not receive a payment
under the original credit.

Strangely, many Asian Banks in Hong Kong seem to prefer to open back-to-back-L/Cs rather
than transferring the transferable credits of the Euroopean and American banks.
Article 38 j will in most cases be excluded in the credit or not utilized by the transferring bank
resp. the first beneficiary as the clauses are not in their interest and in many ways also
endangering their interests.
Now, I'ldlike to answer your question a bit more precisely:
Article 38 D says "A transferred credit cannot be
transferred at the request of a second beneficiary to any subsequent
beneficiary. The first beneficiary is not considered to be a subsequent
beneficiary."
The misunderstanding in Hong Kong is that the "Big Buying Houses" are no such "second
beneficiaries", but "first beneficiaries". As I understood from my partner banks in Hong Kong,
some banks consider themselves to be such "first beneficiaries" - but they are no beneficiaries at
all!
The sense of this article 38 D) is to prohibit a second transfer of a credit or its transferred part
to a third beneficiary.
For example: Hong Kong Garments Co., Ltd. is the first beneficiary. They have requested their
Hong Kong Bankers to transfer the credit in favour of Dhacca Mills in Bangladesh. Dhacca
Mills is not allowed to request a further transfer to their supplier (Art. 31 D), which would be the
third beneficiary. In case this should have to be made possible, Art. 31 d must be excluded.
Within the credit, Hong Kong Garments could also request partial transfers to various suppliers
in different countries - if the original credit allows for partial shipments and different places of
shipment.
If iI understand you correctly you ar mainly interested in the righty of the second beneficiary:
Don't bother about the original L/C. The letter of transfer contains all necessary stipulations for
your business. Even if it was a back-to-back-L/C your rights are the same. If you fulfil the
conditions of the transfer or of the Back-to-back-L/C your are entitled to receive the money for
them without any delay. Whether your documents fit to the original L/C (in case of a back-toback-L/C) is not your problem. I hope I understood your problem correctly.
Concerning Article 38 g), I understand that you are uncertain about the charges of the
transferring bank and who shall pay for them. If no mention about such charges is contained in
the transfer or the Back-to-back-L/C they are for "first beneficiaries' account". Otherwise you

will find a mention in the credit. Usually the costs at the transferring bank (in the example in
Hong Kong) are for account of the first benefiaciary.
38 k) means that your documents have to be presented to the transferring bank. Usually all
banks opening transferable L/Cs will make them available/negotiable at the transferring bank.
For you as a representative of the second beneficiary or their bankers, it makes no real
difference. You have to take care that the documents reach the transferring bank in due time and
their neglects are for their account and not yours, provided that your docs fully comply with the
credit terms of the transfer or the Back-to-back-L/C.
In case your docs contain discrepancies for example shipment is one week late, you send the
docs to the transferring bank, they should find the discrep. or you can also openly mention the
discrepancy. Then they will have to ask the applicant for a waiver. The easiest way would be you
mention the discrep. and ask them to arrange for a waiver. The transferring bank should send the
discrepant docs to applicants bank a.s.a.p. because they will wish to effect payment only after
they have received and checked the docs by themselves.
In this connection, I can only state that at least the German banks are much more generous when
checking their import L/Cs than the Hong Kong Bankers when checking export docs. So don't
worry too muchg about the checking at applicants' bank. Everything going well with discrepant
docs, you will have to pay discrepancy fee twice (appl. bank's and transferring bank's) but by
omitting a telex-waiver you save a lot of charges and interest.
I hope that my comments are helpful to you.
- Each long journey starts with a small step -

As trade between nations rapidly increased in the early part of the 20th
Century, a major barrier to expansion were conflicting laws governing letters
of credit among countries. In 1933, members of the International Chamber of
Commerce (ICC) created the first Uniform Customs and Practice for
Documentary Credits (UCP), a set of rules that brought uniformity to letters
of credit.
Since its inception, the UCP has become the most successful private set of
rules for trade ever developed. Now firmly established, the UCP continues to
remain an essential component in international trade. It establishes the
conditions under which the majority of banks operate in documentary
commercial credit transactions in more than 160 countries.

To remain current with trade and banking changes over the years, there have
been five revisions of UCP conventions. The last, UCP 500, was completed in
1993. In May 2003, the International Chamber of Commerce authorized the
ICC Commission on Banking Technique and Practice to begin a revision of
UCP 500. The new UCP 600 becomes effective July 1, 2007.
As with other revisions, the general objective of the UCP 600 is to address
important and relevant developments in the banking, transport and insurance
industries. Additionally, the language and style in UCP 500 were reviewed in
order to remove wording that may lead to inconsistent application and
interpretation. When work on the revision began, global surveys indicated
that, because of discrepancies, approximately 70 percent of documents under
letters of credit were being rejected on first presentation.
Negative Effects
According to Gary Collyer, corporate director of ABN AMRO Bank N.V., and
technical advisor to the ICC Commission on Banking Technique and Practice,
This obviously had, and continues to have, a negative effect on the letter of
credit being seen as a means of payment; and if unchecked, it could have
serious implications for maintaining or increasing its market share as a
recognized means of settlement in international trade.
Resolving contentious issues and keeping up with market developments were
key to updating UCP 500. According to PradeepTaneja, a member of the ICC
Banking Commission and UCP 600 Consulting Group, there has been a
decline in letters of credit over the past couple of years. One obvious reason:
letters of credit have become more complex and expensive thanks to added
charges, commissions and fees.
Banks in the early 1990s began charging discrepancy fees. Depending on the
bank, the charges generally ranged from $50 to $125, or even higher per set of
discrepant documents presented. And, most importantly, says Mr. Taneja,
There are alternative means and modes of trade financing that have emerged
during the last few years, including factoring, forfaiting, invoice discounting
and others.
Compounding the problem was the thorny issue relating to the discounting of
deferred payments that arose out of the Banco Santander vsBanque Paribas
case tried in England. The court ruled that if a confirming bank discounted its
own deferred payment undertaking, it did so at its own risk, and if fraud were

established prior to the maturity date, the issuing bank was not obliged to
reimburse the confirming bank. This ruling shocked many banks, and their
actions to protect against fraud adversely affected the cash flows of many
major exporters.
Three and Half Years
The process to revise the UCP began in May 2003. It included 15 drafts by a
group of 10 world renowned professionals; a consulting group consisting of 41
global experts drawn from the banking, transport, insurance and legal sectors
spanning 26 countries; a review of almost 600 Banking Commission opinions;
relevant court cases; and more than 5,000 comments from more than 40 ICC
national committees around the globe.
As a result of the tremendous amount of input, some UCP revisions were
decided by votes from national committee members. For example:
On whether to retain or remove the term on its face, 67 percent voted
to remove, 33 percent voted to retain. "On its face" will be used only in
one place because of court precedents.
On whether to delete or retain the term reasonable time, 97 percent
voted to delete, 3 percent voted to retain. The phrase was removed from
the final text.
On removing the term reasonable time, the question was posed: How
many days should the maximum period for acceptance or refusal of
documents be? Forty-one percent voted for five days, 25 percent for six
days, 28 percent voted for seven days, and 6 percent provided no
comments. The five-day period was used in the final text.
On deferred payment credits, the question of whether to allow for
discounting was raised. Seventy-three percent voted to allow, while 27
percent voted not to allow. Three sub-articles on discounting were
included in the final text (in Articles 7, 8 and 12).
UCP 600 was formally approved by ICC members in October 2006 and will
become effective July 1, 2007. "Language that was difficult to understand in
the UCP 500 has been replaced with simple, precise and concise language in
UCP 600," says Richard M. Chip Thomas, a noted training expert on letters

of credit. Other UCP 600 updates include the elimination of phrases such as
reasonable care, reasonable time and on its face (except in one article)
from the rules. This is anticipated to reduce costly court cases involving
ambiguous terms.
UCP 600 Highlights
The following are among the highlights that clarify, simplify and speed the
payment process in UCP 600.
The number of Articles was reduced from 39 to 29.
Repetitive, redundant and ambiguous language was eliminated.
A new Article on Definition of Terms and Interpretations was
added for clarity.
The document examination period was reduced from 7 to 5 days.
Numerous discrepancy issues were eliminated.
A new provision on applicant/beneficiary addresses was added.
Transport document shipment dates and their impact on presentation
time were clarified.
Easier-to-understand transportation articles were created.
Major Changes in UCP 600
Significant changes, additions and substitutions made in UCP 600 are
summarized below.
Article 2 "Definitions" creates a section of all key letter of credit terminology.
It introduces the term honour and clarifies the terms Negotiation and
Nominated Bank. Article 2 also defines the following terms: Advising Bank,
Applicant, Banking Day, Beneficiary, Complying Presentation, Confirmation,
Confirming Bank, Credit, Honour, Issuing Bank, Negotiation, Nominated
Bank, Presentation and Presenter.

Article 3 "Interpretations" creates a section designed to clarify or eliminate

the use of specific terms used in the UCP 500, and eliminates the term
revocable." This section combines many concepts that were dispersed in
various sections of the UCP 500 in order to simplify and eliminate
redundancy.
Article 6 "Availability, Expiry Date and Place for Presentation" clarifies the
meaning of these terms and explains how they must be used in a letter of
credit. This section also states that if a draft exists, it must not be drawn on
the applicant.
Article 7 "Issuing Bank Undertaking" defines the responsibilities of the
Issuing Bank. It emphasizes that the issuing bank must honour all
payments in a letter of credit if the stipulated documents are in compliance
with its terms.
Article 8 "Confirming Bank Undertaking" means the responsibility to
reimburse another nominated bank that has honored or negotiated a
complying presentation and forwarded documents to the confirming bank.
Reimbursement for the amount of a complying presentation under a credit
available by acceptance or deferred payment is due at maturity, whether or
not another nominated bank prepaid or purchased before maturity. A
confirming banks undertaking to reimburse another nominated bank is
independent of the issuing banks undertaking to the beneficiary.
Article 9 "Advising of Credits and Amendments" brings together concepts
that are scattered throughout the UCP 500. It also adds that banks must
accurately advise the letter of credit. This article emphasizes that if a credit is
advised through a particular bank, all amendments must be advised through
that same bank.
Article 10 "Amendments" simplifies and clarifies the amendment process.
Importantly, 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. A provision in an

amendment to the effect that the amendment shall enter into force unless
rejected by the beneficiary within a certain time shall be disregarded.
Article 12 "Nomination" clarifies the relationship between the beneficiary,
confirming, nominating and issuing bank regarding the honour or
negotiation of payments under a credit. It is important for beneficiaries
communicating with the advising, negotiating or confirming banks to
understand the precise actions of these banks in the payment process.
Importers must accept the nominated banks actions while exporters must
note that the nominated bank can take actions on its behalf.
Article 14 "Standard for Examination of Documentation" has replaced article
13 under the UCP 500. In addition, it has been expanded and covers concepts
found in various UCP 500 articles. The following are key discussion points: 1)
the 21 day presentation period, 2) the description of goods, services or the
performance between the commercial invoice and all other documents and 3)
the treatment of non-required documents when presented.
Additionally, it states that 4) a document may be dated prior to the issuance of
a credit but not later than its presentation, 5) data in documents does not have
to exactly match the wording in the credit or other documents as long as it
does not conflict with the other data and 6) the addresses of the beneficiary
and applicant on documents can differ from those stated in the credit as long
as those addresses are in the same country as those stipulated in the credit.
Article 16 "Discrepant Documents, Waiver and Notice" relates to the
responsibilities of the nominated, confirming and issuing banks with regard to
the treatment of non-complying documents. These banks must give a single
notice to the presenter of the documents detailing specifically the actions they
are taking. This notice must be given within five days after the presentation of
documents.
Specifically, Article 16 provides that when a nominated bank acting on its
nomination, a confirming bank, if any, or the issuing bank decides to refuse to
honor or negotiate, it must give a single notice to that effect to the presenter.
The notice must state that the bank is refusing to honor or negotiate, state
each discrepancy in respect of which the bank refuses to honor or negotiate,
and explain that the bank is holding the documents pending further
instructions from the presenter, or the issuing bank is holding the documents

until it receives a waiver from the applicant and agrees to accept it, or receives
further instructions from the presenter prior to agreeing to accept a waiver
(new option) or that the bank is returning the documents, or that the bank is
acting in accordance with instructions previously received from the presenter
(new option).
Article 17 Original Documents and Copies consolidates all the issues
regarding the differences between original documents and copies. It clarifies
the requirement that in every credit at least one original of each document
stipulated in the credit must be presented. In addition, if a credit requires
presentation of copies of documents, presentation of either originals or copies
is permitted.
Article 18 "Commercial Invoice" is reflective of article 37 in the UCP 500. A
key new feature states it is now permissible to submit an invoice for a higher
amount of credit, and this greater amount will not be considered a
discrepancy.
Articles 19 through 25 include new transport Articles and are anticipated to
reduce discrepancies related to shipping documents. Consequently, they 1)
clarify the appropriate signature on the transport document especially for
agents, 2) explain shipment date to mean the date of issuance of the transport
document unless there is a stamp or notation on the transport document
indicating a different date, otherwise that date applies and 3) clarify that a
transport document indicating that transshipment may or will take place is
acceptable, even if the credit prohibits transshipment.
Article 27 "Clean Transport Document" emphasizes that the word clean
need not appear on a transport document even if a credit has a requirement
for that transport document to be clean on board.
Article 28 "Insurance Document and Coverage" incorporates UCP 500
articles 34, 35 and 36. It adds several important elements and indicates that
cover notes will not be accepted, that an insurance document must indicate
that risks are covered at least between the place of taking in charge or
shipment and the place of discharge or final destination as stated in the credit.
An insurance document may contain reference to any exclusion clause.
Article 31 "Partial Drawings or Shipments" is an important concept carried
over from the UCP 500 that is expected to be well received by exporters. It
states that, A presentation consisting of more than one set of transport

documents evidencing shipment commencing on the same means of

conveyance and for the same journey, provided they indicate the same
destination, will not be regarded as covering a partial shipment, even if they
indicate different dates of shipment or different ports of loading, places of
taking in charge or dispatch.
Article 35 "Disclaimer on Transmission and Translation" indicates that if a
nominated bank determines that a presentation is complying and forwards the
documents to the issuing bank or confirming bank, whether or not the
nominated bank has honored or negotiated, an issuing bank or confirming
bank must honor or negotiate, or reimburse that nominated bank, even when
the documents have been lost in transit between the nominated bank and the
issuing bank or confirming bank, or between the confirming bank and the
issuing bank.
Article 36 "Force Majeure" states that a bank assumes no liability or
responsibility for the consequences arising out of the interruption of its
business by acts or God, riots, civil commotions, insurrections, wars, acts of
terrorism or by any strikes or lockouts, or any other causes beyond its control.
Note that an exclusion for acts of terrorism has been added. A bank will not,
upon resumption of its business, honor or negotiate under a credit that
expired during such interruption of its business.
Article 37 "Disclaimer for Acts of an Instructed Party" states that a credit or
an amendment should never state that the advising to a beneficiary is
conditional upon the receipt by the advising bank or second advising bank of
its charges.
UCP 500 Articles that were not incorporated into UCP 600 text include
Articles 5, 6, 8, 12 and 38. The content of Articles 2, 6, 9, 10, 20, 21,22, 30, 31,
33, 35, 36, 46 and 47 were merged or incorporated differently within the text
of the new UCP 600.
Weighing the Costs and Benefits
For some, the implementation of UCP 600 could be difficult and create
uncertainty. However, once understood and implemented, the UCP 600 will
restore the respect, credibility and rightful place of letters of credit in
international commerce," contends the consulting groups Mr. Taneja.

Importantly, the new UCP 600 is likely to increase the use of letters of credit
and, in turn, better facilitate international trade as new global markets and
suppliers emerge.