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Introduction to UCP 600 for Importers
Victor Pena Vice President Americas Regional Trade Advisor
“These materials are provided for educational and illustrative purposes only and not as a solicitation by Citigroup for any particular product or service. Furthermore, although the information contained herein is believed to be reliable, the following does not constitute legal advice, and Citigroup makes no representation or warranty as to the accuracy or completeness of any information contained herein or otherwise provided by it.”
UCP 600 Understanding & Application
Review History & Process
Comparison with UCP 500
Overview of UCP 600 Articles
Review History & Process
The UCP is the work of the ICC, a private international organization founded in 1919.
Remains, to date, the most successful set of private rules for trade ever developed.
UCP 600 – Sixth (6th) revision since it’s inception by the International Chamber of Commerce in 1933
Included review - ICC Opinions, Decisions, DOCDEX cases, legal decisions, URR525, ISP98 and eUCP
Article 13 .Article 23 .Article 14 .Article 48 Liability of Issuing and Confirming Banks Standard for Examination of Documents Discrepant Documents and Notice Unspecified Issuers of Contents of Documents Marine/Ocean Bills of Lading Commercial Invoices Transferable Credits Page 5 5 .Article 9 .Review History & Process *Seven Articles that have lead to nearly 60% of ICC Opinions are: .Article 21 .Article 37 .
Discounting of deferred payment undertakings” Degree of review for “inconsistency” or “non conflicting” ICC unanimously approved 2007 Revision on 25th October 2006 Effective July 1. “Reasonable time”.leave out or retain Introduction of new articles. “Negotiation” . 2007 Page 5 6 . splitting of others. “parties” or “banks”.Review History & Process ICC National Committees were requested to vote on issues such as: – – – – “On its face”.
Comparison with UCP 500 New terminology. yet created new ambiguity What’s not changed … Irrevocable Irrevocable Documentary Documentary Independent Independent 7 . concepts & wording introduced Re-organization of the rules Substantive & cosmetic changes Improved clarity.
47 content merged or amalgamated 8 .184.108.40.206.220.127.116.11.Comparison with UCP 500 UCP 600 (39 Articles) UCP 500 (49 Articles) New: – Article 2 – Article 3 – Article 9 Definitions Interpretations Advising of Credits & Amendments – Article 12 Nomination – Article 15 Complying Presentation – Article 17 Original Documents & Copies Not included in new Revision: – Article 5 Instructions to Issue/Amend Credits – Article 6 (part) Revocable – Article 8 Revocation – Article 12 Incomplete or Unclear Instructions – Article 38 Other Documents – Articles 2.46. 30.21.33.
not by operation of the law Rules may be overridden by express terms in the L/C Rules are subject to interpretation by national courts 9 .Comparison with UCP 500 No Change from UCP 500 legal status Rules apply to LC by incorporation into the LC .
UCP 500 10 .37 38 .13 14 .17 18 .39 49 v.Overview of UCP 600 Articles General Provisions and Definitions Liabilities and Responsibilities Examination of Documents Documents Miscellaneous Provisions Disclaimers Transferable Credit & Assignment UCP 600 39 1-5 6 .28 29 .33 34 .
600.(SWIFT changes have been made to bring in line). This credit is subject to UCP 600 11 . 2007 Revision. ICC Publication No.Overview of UCP 600 Article 1 Applicable when the credit expressly indicates that is subject to these “rules” . Use of SWIFT: 40E: Applicable Rules UCP LATEST VERSION Use of telex or letter: This credit is subject to the Uniform Customs and Practice for Documentary Credits.
Documents must not be dated earlier than the date of the issuance of this credit. Sub-Article 28(c) does not apply.” Contrary to article 32 of the UCP. this credit remains valid for subsequent installments despite any shipment or drawing not made within the period allowed.Overview of UCP 600 Article 1 “Binding on all parties unless modified or excluded by the terms of the L/C. 12 .
9. 7.Part of Art. & 10) Certain terms are defined. so that they provide references when such terms are used in the articles A Advising bank Applicant B Banking day Beneficiary C Complying presentation Confirmation Confirming bank Credit 13 H I N Honour Issuing bank Negotiation Nominated bank P Presentation Presenter . 2.Overview of UCP 600 Article 2 NEW Article 2 – Definitions (UCP 500 .
Overview of UCP 600 Article 2 Honour For credit available by … Sight payment Deferred payment Acceptance Pay at sight Incur deferred payment undertaking Pay at maturity Accept bill of exchange Pay at maturity Negotiation – Purchase by the nominated bank of drafts (drawn on another bank) and/or documents under a complying presentation. – By advancing or agreeing to advance funds to beneficiary. on or before the banking day on which reimbursement is due to the nominated bank. 14 .
Overview of UCP 600 Article 2 Nominated Bank The bank with which the credit is available. or any bank in the case of a freely available credit Issuing Bank Issuing Advising Bank Advising Beneficiary Nominated Bank Nominated Bank Nominated Bank L/C available with any bank Any bank is a nominated bank Restricted L/C Bank named in the L/C 15 .
20. 47 & part of Art. For determining maturity date. 2. 46) NEW A credit is irrevocable even if no indication to that effect.Overview of UCP 600 Article 3 NEW Article 3 – Interpretations (UCP 500 .Art. the words “from” and “after” exclude the date mentioned (ISBP – 45.d) NEW 30 days from shipment date Shipment date: 1 AUG 2007 = 30 days after shipment date Maturity date: 31 AUG 2007 16 .
Overview of UCP 600 Article 3 For determining a period of shipment. the words “from” and “after” have different meanings – “From” includes the date mentioned – “After” excludes the date mentioned Shipment to be effected from August 10th = = Earliest shipment date is August 10th Shipment to be effected after August 10th Earliest shipment date is August 11th 17 .
L/C is a separate transaction from the underlying contract NEW Banks should discourage any attempt to include contract as integral part of L/C L/C Discouraged ?? Contract No. which is appended and forms an integral part of the credit. 18 . Contracts (UCP 500 .123 Details as per Contract No.123.Overview of UCP 600 Article 4 Article 4 .Credits v.Art. 3) Independence Principle .
4) Banks deal with documents and not with goods.Art.Overview of UCP 600 Article 5 Article 5 . services and/or other performances to which the documents may relate. Goods/Services/Performance (UCP 500 . In Credit operations all parties concerned deal with documents. services or performances to which the documents may relate. and not with goods. (UCP 500 Article 4) 19 .Documents v.
and – Issuing bank L/C available with any bank L/C available with Bank XYZ Place for presentation 1. if the L/C is available with any bank. Bank XYZ Issuing bank 20 . or – Any bank. Any bank Issuing bank 1. 2. 2.Overview of UCP 600 Article 6 Expiry date Last day for presentation of documents Place for presentation – Bank with which the L/C is available.
b) By advising an L/C.7.Overview of UCP 600 Article 9 Article 9 .Art. 11. the advising bank signifies: – Its without any undertaking to honour or negotiate – It has satisfied itself as to the apparent authenticity of the L/C or amendment – The advice accurately reflects the L/C’s terms and conditions NEW 21 .Advising of Credits and Amendments (UCP500 .
Overview of UCP 600 Article 10 Article 10 – Amendments (UCP500 .d) Confirming bank must inform issuing bank of election not to extend confirmation to an amendment and may advise beneficiary of amendment without it’s confirmation Partial acceptance = Notice of rejection Disregard any provision that the amendment shall be in force unless NEW rejected by beneficiary within certain time Presentation that complies with the credit and not yet accepted amendment – deemed to be beneficiary’s acceptance of the amendment 22 . 9.Art.
and 2.c) Nomination does not obligate nominated bank to honour NEW By nominating a bank to accept a draft or incur a deferred payment undertaking. by deferred payment at 90 days after date of shipment Citibank N.Overview of UCP 600 Article 12 Article 12 – Nomination (UCP500 .A. an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank L/C Available with Citibank N.Art. “Prepay” its DPU (ie early payment before maturity) 23 .A. 10. is authorized to : 1. Incur a Deferred Payment Undertaking (“DPU”).
but not later than date of presentation 24 . 22) Must examine documents on their face to determine compliance Other than the commercial invoice. 13. description of goods. 21. services or performance.Standard for Examination of Documents (UCP 500 .Overview of UCP 600 Article 14 Article 14 . may be stated in general terms Disregard documents not required by L/C and may be returned Disregard non-documentary condition Documents may be dated prior to issuance date of LC.Art.
M UCP 600 UCP 500 0 0 Tu 1 1 W 2 2 Th 3 3 F 4 4 Sa X X S X X M 5 5 6 7 Tu W What is reasonable ? 25 . not to exceed SEVEN banking days following the day of receipt of documents UCP 600: Max. Not curtailed or affected by other events. of FIVE banking days following day of presentation.Overview of UCP 600 Article 14 UCP 500: Reasonable time.
Subject to Articles 19-25 Data Not Conflicting Data in a document must not conflict with data in that document. other stipulated documents or the L/C 26 .Overview of UCP 600 Article 14 Presentation Period Presentation including an original transport document must be made not later than 21 calendar days after date of shipment Transport document .
banks will accept the document if (1) its content appears to fulfill the function. Signed Dated 1 AUG 2007 Goods have been inspected and are certified to be in order.Overview of UCP 600 Article 14 Unspecified Issuer or Content Other than invoice. Signed Dated 1 AUG 2007 27 . transport document or insurance document. Signed Dated 1 AUG 2007 Inspection Certificate Goods are certified to be of Singapore origin. and (2) it complies with 14(d) Example: L/C calls for Inspection Certificate Inspection Certificate Goods have been inspected and are certified to be in order.
but Must be within the same country as in the credit Disregard contact details of beneficiary and applicant (fax. applicant’s contact details must be as stated in the credit 28 . email) stated in the credit (ISBP 61) However. if they form part of consignee and notify party details in transport document. phone.Overview of UCP 600 Article 14 Addresses of Beneficiary & Applicant NEW Need not be the same between stipulated documents & the credit.
21. 20. 22. Transport Document Issuer Shipper or consignor of goods indicated on any documents need not be the L/C beneficiary. 23 or 24 29 .Overview of UCP 600 Article 14 Shipper. Consignor. but must be consistent among all documents NEW Transport document may be issued by party other than carrier/ owner/ master/ charterer. provided it meets the requirements of articles 19.
e) Nominated/Confirming/Issuing bank may refuse to honour or negotiate discrepant documents Issuing bank.c. in its sole judgment approach applicant for waiver Notice of refusal must be given no later than close of the fifth banking day following day of presentation After providing notice of refusal NEW – The bank may return documents to presenter at any time 30 .b.d.Overview of UCP 600 Article 16 Article 16 – Discrepant Documents. Waiver and Notice (UCP 500 – Art. 14.
and – one of the following: The bank is holding documents pending presenter’s further instructions NEW The issuing bank is holding documents until it receives waiver from applicant and agrees to accept it. or receives further instructions from presenter prior to agreeing to accept the waiver The bank is returning the documents NEW The bank is acting in accordance with instructions previously received from the presenter 31 . – each discrepancy in respect of the refusal.Overview of UCP 600 Article 16 Single Notice of Refusal must state: – the bank is refusing to honour or negotiate.
typed.c. mark. stamp or label of issuer of the document Also an Original = written. 32 (UCP 500 . perforated or stamped by the document issuer’s hand.ii) . “in two fold” or “in two copies”.Overview of UCP 600 Article 17 Article 17 – Original Documents and Copies At least one original must be presented Original Document = apparent original signature. 20. presentation of at least one original and remaining number in copies is acceptable. either originals or copies is acceptable Documents “in duplicate”.Art. or on original stationery. or states that it is original L/C requires copies of documents.
and need not be signed (except as provided in article 38 – Transferable L/C) Description of goods.Art. 37) Invoice amount in excess of L/C – May be accepted by the nominated bank. but must not be honoured or negotiated in excess of L/C amount Issued by beneficiary. services or performance must correspond with L/C description Must be in the same currency as L/C NEW 33 . made out in the name of applicant.Overview of UCP 600 Article 18 Article 18 – Commercial Invoice (UCP 500 .
Rail or Inland Waterway Transport Documents Courier Receipt.Overview of UCP 600 – Transport Articles UCP 600 19 Transport Document Covering At Least Two Different Modes of Transport Bill of Lading Non-Negotiable Sea Waybill Charter Party Bill of Lading Air Transport Document Road. Rail or Inland Waterway Transport Documents Courier and Post Receipts 34 . Post Receipt or Certificate of Posting UCP 500 26 Multimodal Transport Document 20 21 22 23 24 25 23 24 25 27 28 29 Marine/Ocean Bill of Lading Non-Negotiable Sea Waybill Charter Party Bill of Lading Air Transport Document Road.
Overview of UCP 600 – Transport Articles New SWIFT 700 fields for transport details: 44A 44E 44F 44B Place of Taking in Charge/ Dispatch from …/ Place of Receipt Port of Loading/ Airport of Departure Port of Discharge/ Airport of Destination Place of Final Destination/ For Transportation to …/ Place of Delivery 35 .
master or named agent If signed by agent. Takashi Yanagawa 36 . 26) Must appear to indicate name of carrier Signed by carrier.carrier or master .Overview of UCP 600 Article 19 Article 19 – Transport Documents Covering at Least Two Different Modes of Transport (UCP500 . need to specify for whom .it is signed ABC Forwarders As Agent ABC Forwarders As Agent 600 500 600 500 For Master For Master.Art.
it is signed ABC Forwarders 600 As Agent 500 For Master ABC Forwarders 600 As Agent 500 For Master. 24) Must appear to indicate name of carrier Signed by carrier. carrier or master . need to specify for whom. 23) Article 21 – Non-Negotiable Sea Waybill (UCP500 – Art.Overview of UCP 600 Article 20 & 21 Article 20 – Bill of Lading (UCP500 – Art. name of master is not necessary Master 600 500 If signed by agent. master or named agent – If signed by master. John Doe 37 .
25) B/L containing indication that it is subject to a charter party Signed by master. owner or charterer .Overview of UCP 600 Article 22 Charter Party Bill of Lading (UCP500 – Art. charterer or named agent – If signed by master. or owner.it is signed 38 . need to specify for whom –master. or charterer. owner. Owner or Charterer 600 If signed by agent. their names are not necessary Master.
25) Agent signing for owner or charterer must indicate name of owner or charterer ABC Forwarders 600 As Agent For Owner. John Doe As Agent For Charterer. John Doe ABC Forwarders 600 ABC Forwarders 600 As Agent For Master 39 .Overview of UCP 600 Article 22 Charter Party Bill of Lading (UCP500 – Art.
L/C calls for shipment to Asian ports NEW 40 .Overview of UCP 600 Article 22 Charter Party Bill of Lading (UCP500 – Art.g. or geographical area. as stated in L/C (ISBP 106) – e. 25) Port of discharge may be shown as a range of ports.
NEW Specific notation of actual date of shipment.Overview of UCP 600 Article 23 Article 23 – Air Transport Document (UCP500 – Art. unless………. need to indicate that agent has signed for or on behalf of carrier Must indicate date of issuance. 27) Must appear to indicate name of carrier Signed by carrier or named agent If signed by agent. which will be deemed to be the date of shipment. even not called for in the credit. will be deemed to be the date of shipment 41 .
any signature or stamp of railway company is accepted as being signed by the carrier (ISBP – 172) Transport document marked “duplicate” is accepted as an original Transport document will be accepted as original whether marked as an original or not (also applicable to inland waterway transport) Road transport document marked for consignor or shipper or bear no marking for whom the document has been prepared – is the original 42 NEW . 28) For rail transport document: NEW If it does not identify the carrier. Rail or Inland WaterwayTransport Documents (UCP500 – Art.Overview of UCP 600 Article 24 Road.
Ltd. Ltd. 34-36) Insurance document – Insurance policy. insurance certificate or declaration under open cover Issued and signed by insurance company. By proxy for ABC Insurance Co. underwriter or their agents or their proxies Signature by agent or proxy indicated as being for or on behalf of insurance company or underwriter ABC Insurance Co. 43 . Agent for ABC Insurance Co.Overview of UCP 600 Article 28 Article 28 – Insurance Document and Coverage (UCP500 – Art. Ltd.
Overview of UCP 600 Article 28 Article 28 – Insurance Document and Coverage (UCP500 – Art. 34-36) All originals must be presented. if the document indicates that more than one original has been issued Cover Note not acceptable Insurance policy is acceptable in lieu of insurance certificate or declaration under open cover Issued no later than shipment date. or it appears from the document that cover is effective from a date no later than shipment date Insurance Policy Insurance Policy Effective Date Effective Date 1 AUG2007 1 AUG 2007 Issued on 88 AUG 2007 Issued on AUG 2007 Bill of Lading Bill of Lading Shipped On Board Shipped On Board 1 AUG2007 1 AUG 2007 Issued on 11 AUG 2007 Issued on AUG 2007 44 .
or – Gross invoice value of the goods NEW Risks covered at least : Place of taking in charge or shipment … as stated in the L/C Place of discharge or final destination 45 .Overview of UCP 600 Article 28 Article 28 – Insurance Document and Coverage (UCP500 – Art. 110% of CIF or CIP value. 34-36) Min. if L/C does not indicate insurance coverage required If CIF or CIP value cannot be determined from documents – take the greater of the following: – Amount for which honour or negotiation is requested.
Overview of UCP 600 Article 28 Article 28 – Insurance Document and Coverage (UCP500 – Art. bank will accept insurance document without regard to any risks not covered If L/C requires insurance against “all risks”. 34-36) L/C should state type of insurance required and additional risks to be covered If L/C uses imprecise terms such as “usual risks” or “customary risks”. without regard to any risks stated to be excluded NEW Insurance document may : – Contain reference to any exclusion clause – Indicate that cover is subject to franchise or excess (deductible) 46 . bank will accept insurance document containing any “all risks” notation or clause.
g. aircraft) from different ports/places on different dates and for the same journey to the same destination – not partial shipment Port A Port B B/L “A” AUG 1 AUG 1 AUG 7 AUG 7 • Same vessel and voyage • Same destination Port D B/L “B” B/L “C” Port C AUG 9 AUG 9 A BB C = L/C quantity A C Take latest of the shipment dates as date of shipment (Aug 9 in the above example) (ISBP 89) 47 .Overview of UCP 600 Article 31 Article 31 – Partial Drawings or Shipments (UCP 500 – Art. 40) Partial drawings or shipments are allowed Presentation of multiple sets of transport docs evidencing shipment on the same means of conveyance (e. vessel.
Overview of UCP 600 Article 31 NEW Presentation of multiple sets of transport docs evidencing shipment on more than one means of conveyance within the same mode of transport (e. shipment by truck) will be regarded as partial shipment. even if shipped on the same day for the same destination (ISBP 89) Partial Shipment Truck A Truck B Truck C AUG 1 AUG 1 AUG 1 AUG 1 AUG 1 AUG 1 Destination D A BB C = L/C quantity C A 48 .g.
18) Bank instructing another bank to perform services is liable for that bank’s charges Issuing bank is liable for charges that cannot be collected or deducted from the proceeds 49 .Overview of UCP 600 Article 37 Article 37 – Disclaimer for Acts of an Instructed Party (UCP 500 – Art.
2. 48) NEW Transferable credit – An L/C may be made available by the transferring bank to a second beneficiary Applicant Applicant 1 First First Beneficiary Beneficiary 2 3 Second Second Beneficiary Beneficiary 4 Issuing Bank 1.Overview of UCP 600 Article 38 Article 38 – Transferable Credits (UCP 500 .Art. 4. L/C application Transferable credit 3. Transferring Bank (May be the Issuing Bank) Request for transfer Transferred credit – (Credit has been made available to a second beneficiary) 50 .
if any). to: – Present its invoice (and draft. or – Rectify discrepancies in its invoice (where such discrepancies did not exist in second bene’s invoice) NEW 51 . on first demand.Art. 48) Transferred credit must accurately reflect the terms and conditions of the credit.Overview of UCP 600 Article 38 Article 38 – Transferable Credits (UCP 500 . including confirmation … Second beneficiary’s documents may be sent to issuing bank if first beneficiary fails.
Overview of UCP 600 Article 38 Article 38 – Transferable Credits (UCP 500 .Art. 48) 38 (k): Second beneficiary’s documents must be presented to transferring bank NEW B C A Second beneficiary’s documents First beneficiary’s draft & invoice Documents after substitution 52 .
period for presentation .Overview of UCP 600 Article 38 Bank not obligated to effect transfer All charges relating to the transfer are for the account of first beneficiary If L/C allows partial drawings or shipments.expiry date .credit amount .unit price .latest shipment date . it can be transferred in part to more than one second beneficiary Transferred L/C cannot be transferred to any subsequent beneficiary Must determine the handling of subsequent amendments Rejection of an amendment by one or more second beneficiary does not invalidate the acceptance by any other second beneficiary Allowable changes: .percentage of insurance coverage First beneficiary’s name may be substituted for that of the applicant Honour or negotiation of transferred L/C may be in the second beneficiary’s country 53 .
11. 9. “Shipper’s Load and Count”.Overview of UCP 600 Articles Article 7 – Issuing Bank Undertaking (UCP500 – part of Art.c and part of Art.a) (UCP500 .ii and Art.b) Article 8 – Confirming Bank Undertaking Article11 – Teletransmitted and Pre-Advised Credits and Amendments (UCP 500 . Post Receipt or Certificate of Posting (UCP 500 – Article 29) Article 26 – “On Deck”. “Said by Shipper to Contain” and Charges Additional to Freight (UCP 500 – Art.d) 54 . 33.9. 31.a.c) Article 13 – Bank to Bank Reimbursement Agreements (UCP500 .Art.19) Article 15 – Complying Presentation NEW Article 25 – Courier Receipt.9.i.Art.
Quantity and Unit Prices (UCP500 . 45) Article 34 – Disclaimer on Effectiveness of Documents (UCP 500 . 15) Article 35 – Disclaimer on Transmission and Translation (UCP 500 .Art.Art. 39) Article 32 – Installment Drawings or Shipments Article 33 – Hours of Presentation (UCP 500 . 41) (UCP 500 .Art. 16) Article 36 – Force Majeure (UCP 500 .Art.Overview of UCP 600 Articles Article 27 – Clean Transport Document (UCP 500 – Art. 44) Article 30 – Tolerance in Credit Amount.Art.Art. 17) 55 . 32) Article 29 – Extension of Expiry Date or Last Day for Presentation (UCP 500 – Art.
Please mention that you attended our Introduction to UCP 600 for Importers Webinar! Barbara Fernandez in Tampa.com 56 . and our global network. USA Phone: 1-213-239-1749 E-Mail: phyllis. Please contact: Phyllis Kai-Kee in New York.com Victor Pena in Tampa.fernandez@citigroup.Any Questions? Our Technical Trade Specialists are happy to answer your technical LC questions.a. FL Phone: 1-813-604-7042 E-Mail: victor.com Our Trade Bankers are available to provide additional information about our trade email@example.com@citigroup.e. FL Phone: 1-813-604-7088 E-Mail: barbara. our trade finance capabilities.
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