UCP 600 and Its Legal Aspects

UCP 600
and Its Legal Aspects
Dr. Ramlan Ginting

2013
Letter of Credit
bank obligation to pay
agency contract
Correspondent
Issuing Bank
Bank
L/C
contract to
L/C advice
issue L/C
sales contract
Buyer Seller
shipment
UCP 600 and Its Legal Aspects, Dr. Ramlan 2

Ginting, 2007
Status of the UCP 600
A set of contractual rules

Universal acceptance by practitioners (uniformity in
practice)
The most successful set of private rules for trade
The sixth revision

Ginting, 2007
Application of UCP
under UCP 600, Article 1
The Uniform Customs and Practice for

Documentary Credits, 2007 Revision, ICC
Publication No. 600 (UCP) are rules that apply to
any documentary credit (credit) (including, to the
extent to which they may be applicable, any
standby letter of credit) when the text of the credit
expressly indicates that it is subject to these rules.
They are binding on all parties thereto unless
expressly modified or excluded by the credit
Credit = L/C
Ginting, 2007
Meaning of Honour
To pay at sight
To incur a deferred payment undertaking and pay at
maturity
To accept a bill of exchange drawn by the
beneficiary and pay at maturity
Payment on deferred payment undertaking could be

based on the Law on Promissory Note
Payment by acceptance is in compliance with the
Law on Bill of Exchange, not the UCP
Ginting, 2007
Meaning of Negotiation
under UCP 600, Article 2, cont
The purchase by the nominated bank of draft

(drawn on a bank other than the nominated bank)
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
The purchase of a draft is in compliance with the

Law on Bill of Exchange, not the UCP

Ginting, 2007
Independent Contracts Rule
L/C is a separate transaction from the sale or other

contract
The undertaking of a bank to honour, to negotiate

or to fulfill any other obligation under the L/C is not
subject to claims or defenses by the applicant
resulting from its relationships with the issuing bank
or the beneficiary

Ginting, 2007
Independent Contracts Rule
A beneficiary can in no case avail itself of the

contractual relationships existing between banks or
between the applicant and the issuing bank
The Independent Contracts Rule is also in

compliance with the Law on Letter of Credit

Ginting, 2007
Document Compliance Rule
Banks deal with documents and not with goods,

services or performance to which the documents
may relate
Doctrine of Not In Contradiction

(the UCP 600)
Doctrine of In Compliance
(the UCP 500)
Doctrine of Strict Compliance
(the Law on Letter of Credit)
Ginting, 2007
Availability of L/C
L/C must state the bank with which it is available, or

L/C may be available with any bank
L/C available with a nominated bank is also

available with the issuing bank

Ginting, 2007
Expiry Date for Presentation
L/C must state an expiry date for presentation
An expiry date stated for honour or negotiation will

be deemed to be an expiry date for presentation

Ginting, 2007
Place for Presentation
The place of the bank with which the L/C is

available is the place for presentation
The place for presentation under L/C available with

any bank is that of any bank
The place of presentation is also the place of the

issuing bank

Ginting, 2007
Issuing Bank Undertaking
The issuing bank must honour a complying

presentation if the credit is available by sight
payment, deferred payment or acceptance with the
issuing bank
The issuing bank must honour if the credit is
available by sight payment, deferred payment,
acceptance or negotiation with a nominated bank
and that nominated bank does not perform its
nomination

Ginting, 2007
Issuing bank is irrevocably bound to honour as of

the time it issues the L/C
Issuing bank undertakes to reimburse a nominated

bank that has honoured or negotiated a complying
presentation and forwarded the documents to the
issuing bank

Ginting, 2007
Reimbursement under the L/C available by

acceptance or deferred payment is due at maturity,
whether or not the nominated bank prepaid or
purchased before maturity
Issuing banks undertaking to reimburse a

nominated bank is independent of the issuing
banks undertaking to the beneficiary

Ginting, 2007
Confirming Bank Undertaking
Confirming bank must honour a complying

presentation if L/C is available by sight payment,
deferred payment or acceptance with the confirming
bank
Confirming bank must honour a complying
presentation if L/C is available by sight payment,
deferred payment, acceptance or negotiation with
another nominated bank and that nominated bank
does not perform its nomination
Ginting, 2007
Confirming bank must negotiate a complying

presentation, without recourse, if the L/C is
available by negotiation with the confirming bank
Confirming bank is irrevocably bound to honour or

negotiate as of the time it adds its confirmation to
the L/C
Confirming bank undertakes to reimburse another

nominated bank that has honoured or negotiated a
complying presentation and forwarded the
documents to the confirming bank

Ginting, 2007
Reimbursement under the L/C available by

acceptance or deferred payment is due at maturity,
whether or not another nominated bank prepaid or
purchased before maturity
Confirming banks undertaking to reimburse another

nominated bank is independent of the confirming
banks undertaking to the beneficiary

Ginting, 2007
Advising of L/C and Amendment
L/C and its amendment may be advised to a

beneficiary through an advising bank
Advising bank advises the L/C and its amendment
without any undertaking to honour or negotiate
Advising bank could be as confirming bank
Advising bank signifies that it has satisfied itself as
to the apparent authenticity of the L/C or
amendment and that the advice accurately reflects
the terms and conditions of the L/C or amendment

Ginting, 2007
Advising bank may utilize the services of second

advising bank to advise the L/C and any
amendment to the beneficiary
The second advising bank signifies that it has

satisfied itself as to the apparent authenticity of the
advice it has received and that the advice
accurately reflects the terms and conditions of the
L/C or amendment

Ginting, 2007
The advising bank that cannot satisfy itself as to the

apparent authenticity of the L/C, the amendment or
the advice, must so inform, without delay, the bank
from which the instructions appear to have been
received. If the advising bank elects to advise the
L/C or amendment, it must inform the beneficiary
(or second advising bank) that it has not been able
to satisfy itself.
Amendments
L/C can neither be amended nor cancelled without

the agreement of the issuing bank, the confirming
bank, and the beneficiary
A confirming bank may extend its confirmation to an
amendment
The beneficiary is required to communicate its
acceptance of the amendment to the bank that
advised such amendment by notification of
acceptance or rejection
A bank that advises an amendment should inform
the bank from which it received the amendment of
any notification of acceptance or rejection
Ginting, 2007
Teletransmitted and Pre-Advised Credits and
Amendments
An authenticated teletransmission of L/C or

amendment will be deemed to be the operative L/C
or amendment, except the teletransmission states
others
A pre-advice of L/C or amendment shall only be

sent if the issuing bank is prepared to issue the
operative L/C or amendment

Ginting, 2007
Nomination
Nominated bank may honour or negotiate a

complying presentation, but confirming bank as a
nominated bank must honour or negotiate
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
Banco Santander SA vs Banque Paribas

is the basis of rule for discounting the deferred
payment undertaking

Ginting, 2007
Bank-to-Bank Reimbursement
L/C may state that reimbursement is to be obtained by

a nominated bank claiming on reimbursing bank. In
this regard, the L/C must state if the reimbursement is
subject to the ICC Rules for Bank-to-Bank
Reimbursements in effect on the date of issuance of
the L/C
If the L/C does not state that reimbursement is subject

to the ICC Rules for Bank-to-Bank Reimbursements,
then Article 13b of the UCP 600 that stipulates
reimbursement shall apply

Ginting, 2007
Bank-to-Bank Reimbursement
Issuing bank is not relieved of any of its obligations

to provide reimbursement if reimbursement is not
made by a reimbursing bank on first demand
Standard for Examination of Documents
Nominated bank, confirming bank, and issuing bank

must examine a presentation to determine a
complying presentation under on their face rule.
Nominated bank, confirming bank, and issuing bank

shall each have a maximum of five banking days
following the day of presentation to determine a
complying presentation.
This period is not curtailed or otherwise affected by
the occurrence on or after the date of presentation
of any expiry date or last day for presentation.

Ginting, 2007
Presentation must be made by or on behalf of the

beneficiary not later than 21 calendar days after the
date of shipment, but not later than the expiry date
of the L/C

Ginting, 2007
Data in a document, when read in context with the

L/C, 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 L/C
In documents other than the commercial invoice,

the description of the goods, services or
performance may be in general terms not conflicting
with their description in the L/C

Ginting, 2007
A document may be dated prior to the issuance

date of the L/C, but must not be dated later than its
presentation date

Ginting, 2007
The addresses of the beneficiary and the applicant

in any document need not be the same as those in
the L/C or other document, but must be within the
same country as the respective addresses in the
L/C
The shipper or consignor of the goods need not be

the beneficiary

Ginting, 2007
Complying Presentation
Issuing bank must honour a complying presentation
Confirming bank must honour or negotiate a

complying presentation and forward the documents
to the issuing bank
Nominated bank that honours or negotiates a

complying presentation must forward the
documents to the confirming bank or issuing bank

Ginting, 2007
Discrepant Documents, Waiver and Notice
Nominated bank, confirming bank, or issuing bank

may refuse to honour or negotiate a non-complying
presentation
Issuing bank may, in its sole judgment, approach

the applicant for a waiver of discrepancy

Ginting, 2007
Nominated bank, confirming bank or issuing bank

that decides to refuse to honour or negotiate a
non-complying presentation must give a single
notice to that effect to the presenter no later than
the close of the fifth banking day following the day
of presentation

Ginting, 2007
Single notice, must state:
a. a bank is refusing to honour or negotiate, and

b. discrepancy as the basis of the refusal of the
bank, and

Ginting, 2007
c. a bank is holding the documents pending

further instructions from the presenter; or the
issuing bank is holding the documents untill
receiving a waiver from the applicant and
agreeing to accept it, or receiving further
instructions from the presenter prior to agreeing
to accept a waiver; or the bank is returning the
documents; or the bank is acting in accordance
with instructions previously received from the
presenter
Ginting, 2007
Issuing bank or confirming bank that fails to act in

accordance with the provisions of Article 16 of the
UCP 600, shall be precluded from claiming that the
documents do not constitute a complying
presentation

Ginting, 2007
Issuing bank that refuses to honour or confirming

bank that refuses to honour or negotiate and has
given notice to that effect in accordance with the
provision of Article 16 of the UCP 600, shall be
entitled to claim a refund, with interest, of any
reimbursement made

Ginting, 2007
Original Documents and Copies
At least one original of each document must be

presented
Requirement of the copy of documents is fulfilled by

presentation of either originals or copies
Requirement of multiple documents (in duplicate, in

two fold, in two copies) is fulfilled by the
presentation of at least one original and the
remaining number in copies, except when the
document itself indicates otherwise.
Ginting, 2007
Commercial Invoice
Commercial invoice must appear to have been

issued by the beneficiary (except in case of
transferable L/C), must be made out in the name of
the applicant (except in case of transferable L/C),
must be made out in the same currency as the L/C,
and need not be signed

Ginting, 2007
Commercial Invoice
Nominated bank, confirming bank, or issuing bank

may accept a commercial invoice issued for an
amount in excess of the amount permitted by the
L/C, provided the bank in question has not
honoured or negotiated for an amount in excess of
that permitted by the L/C
Description of the goods, services or performance

in a commercial invoice must correspond with that
appearing in the L/C

Ginting, 2007
Transport Document
under UCP 600, Articles 19, 20, and 21
Indication of the name of the carrier

Be signed by the carrier, master, or agent
Signature must be identified
No name of master needed when the agent signed
Sole original transport document, or full set
No indication subject to a charter party
Indication of transhipment

Ginting, 2007
Transport Document
under UCP 600, Articles 22
Indication of a charter party

Be signed by the master, owner, charterer, or agent
Indication of the name of the owner or charterer
needed when the agent signed
Sole original charter party bill of lading, or full set

Ginting, 2007
Transport Document

Be signed by the carrier or agent
The original for consignor or shipper

Ginting, 2007
Transport Document

Be signed by the carrier or agent

Ginting, 2007
Transport Document
Courier receipt
Indication of the name of the courier service
Be stamped or signed by the named courier service
Post receipt or certificate of posting

Be stamped or signed

Ginting, 2007
On Deck, Shippers Load and Count, Said by
Shipper to Contain and Charges Additional to Freight
A transport document must not indicate that the

goods are or will be loaded on deck
A transport document bearing a clause such as

shippers load and count and said by shipper to
contain is acceptable
A transport document may bear a reference, by

stamp or otherwise, to charges additional to the
freight
Ginting, 2007
Insurance Document and Coverage
Insurance document, such as an insurance policy,

an insurance certificate or a declaration under open
cover, must appear to be issued and signed by an
insurance company, an underwriter or their agents
or their proxies
When the insurance document indicates that it has

been issued in more than one original, all originals
must be presented

Ginting, 2007
Cover note will not be accepted
The date of the insurance document must be no

later than the date of shipment

Ginting, 2007
The insurance document must indicate the amount

of insurance coverage and be in the same currency
as the L/C
If there is no indication in the L/C of the insurance

coverage, the amount of insurance coverage must
be at least 110% of the CIF or CIP value of the
goods

Ginting, 2007
The 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 L/C
Extention of Expiry Date or Last Day for Presentation
The expiry date of L/C or the last day for

presentation that falls on a day when the bank to
which presentation is to be made is closed, the
expiry date or the last day for presentation will be
extended to the first following banking day.
However, the latest date for shipment will not be
extended

Ginting, 2007
Tolerance in Credit Amount, Quantity and Unit Prices
The words about or approximately used in

connection with the amount or the quantity or the
unit price in the L/C are to be construed as allowing
a tolerance not to exceed 10% more or less to
which they refer
A tolerance not to exceed 5% more or less than the
quantity allowed, provided the total amount of the
drawings does not exceed the amount of the L/C
and the L/C does not state a stipulated number of
packing units or individual items

Ginting, 2007
Tolerance in Credit Amount, Quantity and Unit Prices
Even when partial shipments are not allowed, a

tolerance not to exceed 5% less than the amount of
the L/C is allowed, provided the full quantity of the
goods is shipped and a unit price is not reduced.
However, this tolerance does not apply when the
L/C stipulates a specific tolerance.

Ginting, 2007
Partial Drawings or Shipments
Partial drawings or shipments are allowed

Partial shipments versus non-partial shipments

Ginting, 2007
Instalment Drawings or Shipments
If a drawing or shipment by instalments within given

periods is stipulated in the L/C and any instalment
is not drawn or shipped within the period allowed for
that instalment, the L/C ceases to be available for
that and any subsequent instalment

Ginting, 2007
Hours of Presentation
A bank has no obligation to accept a presentation

outside of its banking hours

Ginting, 2007
Disclaimer on Effectiveness of Documents
Under UCP 600, Article 34
A bank assume no liability or responsibility for the

form, sufficiency, accuracy, genuineness,
falsification or legal effect of any document, or for
the general or particular conditions stipulated in a
document or superimposed thereon;

Ginting, 2007
Disclaimer on Effectiveness of Documents
Under UCP 600, Article 34, cont
nor does it assume any liability or responsibility for

the description, quantity, weight, quality, condition,
packing, delivery, value or existence of the goods,
services or other performance represented by any
document, or for the good faith or acts or
omissions, solvency, performance or standing of
the consignor, the carrier, the forwarder, the
consignee or the insurer of the goods or any other
person
Fraud or Injunction is settled under the Law on

Letter of Credit

Ginting, 2007
Disclaimer on Transmission and Translation
A bank assumes no liability or responsibility for the

consequences arising out of delay, loss in transit,
mutilation or other errors arising in the transmission
of any messages or delivery of letters or
documents, when such messages, letters or
documents are transmitted or sent according to the
requirements stated in the L/C, or when the bank
may have taken the initiative in the choice of
delivery service in the absence of such instructions
in the L/C
Ginting, 2007
Disclaimer on Transmission and Translation
If a nominated bank determines that a presentation

is complying and forwards the documents to the
issuing bank or confirming bank, the issuing bank or
confirming bank must honour or negotiate, or
reimburse that nominated bank, even when the
documents have been lost in transit
A bank assumes no liability or responsibility for
errors in translation or interpretation of technical
terms and may transmit L/C terms without
translating them

Ginting, 2007
Force Majeure
A bank assumes no liability or responsibility for the

consequences arising out of the 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
A bank will not, upon resumption of its business,
honour or negotiate under L/C that expired during
such interruption of its business

Ginting, 2007
Disclaimer for Acts of an Instructed Party
A bank utilizing the services of another bank for the

purposes of giving effect to the instructions of the
appllicant does so for the account and at the risk of
the applicant
An issuing bank or advising bank assumes no

liability or responsibility should the instructions it
transmits to another bank not be carried out, even if
it has taken the initiative in the choice of that other
bank

Ginting, 2007
Disclaimer for Acts of an Instructed Party
A bank instructing another bank to perform services

is liable for charges that are commissions, fees,
costs or expenses incurred by that bank in
connection with its instructions
The applicant shall be bound by and liable to

indemnify a bank against all obligations and
responsibilities imposed by foreign laws and usages

Ginting, 2007
Transferable L/C
L/C is transferred upon approval of the transferring

bank, and an issuing bank may be a transferring
bank
Transferable L/C means L/C that specifically states

it is transferable
Transferable L/C may be made available in whole

or in part

Ginting, 2007
Transferable L/C
Transferred L/C means L/C that has been made

available by the transferring bank to a second
beneficiary at the request of the first beneficiary
L/C may be transferred in part to more than one

second beneficiary provided partial drawings or
shipments are allowed
Transferred L/C cannot be transferred at the

request of a second beneficiary to any subsequent
beneficiary
Ginting, 2007
Transferable L/C
The transferred L/C must accurately reflect the

terms and conditions of the L/C, including
confirmation, if any, with the exception of :
the amount
the unit price
the expiry date
the period for presentation, or
the latest shipment date or given period for

shipment,
any or all of which may be reduced or curtailed

Ginting, 2007
Transferable L/C
The percentage of insurance cover may be

increased to provide the amount of cover stipulated
in the L/C or UCP 600

Ginting, 2007
Transferable L/C
The name of the first beneficiary may be substituted

for that of the applicant in the L/C
If the name of the applicant is specifically required

by the L/C to appear in any document other than
the invoice, such requirement must be reflected in
the transferred L/C

Ginting, 2007
Transferable L/C
Presentation of documents by or on behalf of a

second beneficiary must be made to the
transferring bank

Ginting, 2007
Assignment of Proceeds
A beneficiary has a right to assign any proceeds to

which it may be or may become entitled under the
L/C, in accordance with the provisions of applicable
law

Ginting, 2007
THANK YOU

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UCP 600

and Its Legal Aspects

Dr. Ramlan Ginting

bank obligation to pay

UCP 600 and Its Legal Aspects, Dr. Ramlan 2

A set of contractual rules

UCP 600 and Its Legal Aspects, Dr. Ramlan 3

The Uniform Customs and Practice for

Payment on deferred payment undertaking could be

The purchase by the nominated bank of draft

The purchase of a draft is in compliance with the

UCP 600 and Its Legal Aspects, Dr. Ramlan 6

L/C is a separate transaction from the sale or other

The undertaking of a bank to honour, to negotiate

UCP 600 and Its Legal Aspects, Dr. Ramlan 7

A beneficiary can in no case avail itself of the

The Independent Contracts Rule is also in

UCP 600 and Its Legal Aspects, Dr. Ramlan 8

Banks deal with documents and not with goods,

Doctrine of Not In Contradiction

L/C must state the bank with which it is available, or

L/C available with a nominated bank is also

UCP 600 and Its Legal Aspects, Dr. Ramlan 10

L/C must state an expiry date for presentation

An expiry date stated for honour or negotiation will

UCP 600 and Its Legal Aspects, Dr. Ramlan 11

The place of the bank with which the L/C is

The place for presentation under L/C available with

The place of presentation is also the place of the

UCP 600 and Its Legal Aspects, Dr. Ramlan 12

The issuing bank must honour a complying

UCP 600 and Its Legal Aspects, Dr. Ramlan 13

Issuing bank is irrevocably bound to honour as of

Issuing bank undertakes to reimburse a nominated

UCP 600 and Its Legal Aspects, Dr. Ramlan 14

Reimbursement under the L/C available by

Issuing banks undertaking to reimburse a

UCP 600 and Its Legal Aspects, Dr. Ramlan 15

Confirming bank must honour a complying

Confirming bank must negotiate a complying

Confirming bank is irrevocably bound to honour or

Confirming bank undertakes to reimburse another

UCP 600 and Its Legal Aspects, Dr. Ramlan 17

Reimbursement under the L/C available by

Confirming banks undertaking to reimburse another

UCP 600 and Its Legal Aspects, Dr. Ramlan 18

L/C and its amendment may be advised to a

UCP 600 and Its Legal Aspects, Dr. Ramlan 19

Advising bank may utilize the services of second

The second advising bank signifies that it has

UCP 600 and Its Legal Aspects, Dr. Ramlan 20

The advising bank that cannot satisfy itself as to the

L/C can neither be amended nor cancelled without

An authenticated teletransmission of L/C or

A pre-advice of L/C or amendment shall only be

UCP 600 and Its Legal Aspects, Dr. Ramlan 23

Nominated bank may honour or negotiate a

Banco Santander SA vs Banque Paribas

UCP 600 and Its Legal Aspects, Dr. Ramlan 24

L/C may state that reimbursement is to be obtained by

If the L/C does not state that reimbursement is subject

UCP 600 and Its Legal Aspects, Dr. Ramlan 25