Professional Documents
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UCP 600
17/0
9/12
What's that UCP all about ????
The UCP is the work of the ICC
(International Chamber of Commerce),
a private international organization
founded in 1919 and is formulated
entirely by experts in the private
sector.
To date, it remains the most successful
set of private rules for trade ever
developed.
• On June 1, 2007 the new Uniform Customs and
Practices for Documentary Credits, published as
International Chamber of Commerce publication No
600, will take effect. The first version of the UCP was
drafted at the ICC congress in Vienna in 1933 (ICC-
Publication No. 82). After the first revision in 1951,
the UCP were again revised in 1962, latter revision
being of particular significance, since for the first
time Great Britain and the Commonwealth accepted
the UCP. The UCP were again revised in 1974 and
1993; the 1993 revision obtained the blessing of the
UNCITRAL (United Nations Commission on
International Trade Law) which recommended that
the UCP be applied to all documentary credits
The stated goal of the current revision has been
identical to previous ones, i.e. - take into account
developments in banking, transportation and
insurance - review the wording of the UCP to avoid
differing interpretations and applications [2]. In a
note to its members and the national committees
the ICC itself labeled the new revision as "the most
comprehensive in the entire history of the rules."
Comprehensiveness however did not lead to
substantive changes.
The ICC has shortened the number of articles from 49
to 38(39)!!. This change is mostly cosmetic however,
since substantive changes are barely noticeable. An
exception to the foregoing is the shortening of the
time to examine documents from seven to five
working days.
Previous publications
Issuing Buyer /
Bank Applicant
UCP 500
Uniform Customs and Procedures
for Documentary Letters of Credit.
Advising Seller /
Bank Beneficiary
13
UCP 500
Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 500.
14
UCP 500
UCP 500
Article 4: Documents vs. Goods / Services / Performance
In Credit operations all parties concerned deal with documents, and not with
goods, services and/or other performances to which the documents may relate.
Article 5: Instructions to Issue / Amend Credits
• Instructions for the issuance of a Credit must be complete and precise.
• In order to avoid confusion, Credit should not include excessive detail,
• The Credit must state precisely the documents that are to be presented.
Article 6: Revocable v. Irrevocable Credits
A Credit may be either (i) revocable or (ii) irrevocable.
Article 7: Advising Bank’s Liability
A Credit may be advised to a beneficiary through another bank (the Advising
Bank) without engagement on the part of the Advising Bank…
15
UCP 500
18
UCP 500
20
UCP 500
21
UCP 500
Article 28: Road, Rail or Inland Waterway Transport Documents
Frequently letters of credit issued for the purpose of accommodating shipments within
North America will call for some type of “domestic” transport document.
Article 29: Courier and Postal Receipts
Small or lightweight shipments are frequently sent via courier such as Airborne, Federal
Express, DHL, etc.
Article 30: Transport Document Issued by Freight Forwarders
Sometime a freight forwarder receives cargo from several different shippers and
consolidates them into a single container shipment.
Article 31: On deck,” “Shipper’s Load and Count,” Name of Consignor
Transport documents which do indicate that the goods may be carried “on deck”; bear a
clause such as “shippers load and count”; or indicate a consignor other than the
beneficiary.
22
UCP 500
27
UCP 500
"... must be made out in the same currency as the credit; ...”
Articles 19-25 represent the new Transport Articles of the UCP (main
changes):First transport article is "Transport Document Covering at Least Two
Different Modes of Transport" and replaces UCP500 Article 26 "Multimodal Transport
Document".
Further alignment of the signing and identification of capacity;> Refined 'on board'
notation requirements;
Re-definition of transshipment i.e., "unloading from one vessel and reloading to
another vessel during the carriage from the port of loading to the port of discharge
stated in the credit".
For air transport, the flight stamp shown on the air waybill will now be considered the
date of shipment whether requested in the credit or not.
Article 27 Clean Transport Document (includes):
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 (includes):
• Three parties:
• –Issuer: the issuing bank
• –Account party (importer)
• –Beneficiary (exporter)
• •Three agreements
• –Trade contract between importer and exporter
• –Documentary credit between bank and exporter
• –Reimbursement agreement between bank and importer
Documentary Letter of credit
Revocable/Irrevocable
• –A revocable letter of credit can be cancelled or amended by the issuing
bank; the bank does not need the exporter/beneficiary’s consent.
Confirmed/Unconfirmed
• –Issuing bank forwards letter of credit to exporter’s bank
• –Exporter’s bank promises to pay exporter (confirms l/c)
• –In an unconfirmed transaction, the advising bank acts as the issuing
bank’s agent and bears no obligation to exporter
Back-to-back
• –Typically used by brokers, the letter of credit allows the beneficiary to
assign its rights in one letter of credit to the issuer of a second letter of
credit
• –Both letters of credit must require identical documents
Transferable
• –The original beneficiary can transfer the letter of credit to third parties
Documentary Letter of credit
• Revolving
• –Typically used in construction contracts
• –Allows beneficiary to draw on the letter of credit, up to a certain
amount, usually without presentation of documents
• –The account party replenishes the account
“Red clause” letter of credit
• –Exporter can use to obtain pre-shipment finance by providing either (i)
a statement of purpose or (ii) an undertaking to provide specified
documents.
• –Issuing bank provides exporter with a percentage of the L/C amount
• –Advising bank guarantees reimbursement
“Green clause” letter of credit
• –Similar to “red clause” letters of credit, but pre-shipment finance is
contingent upon the production of warehouse receipts…
Letter of credit Settlement
Sight payment (sight draft)
• –Exporter presents documents and receives payment
Deferred payment (dated draft)
• –Exporter presents documents and receives payment at some
specified future time
Acceptance (time draft)
• –Exporter (i) presents documents and (ii) draws a usance draft
• –Bank accepts bill of exchange for payment on a future date
Negotiation
• –Exporter may choose a bank and negotiate the payment of a
sight or usance draft
• –Bank will either:
• »Advance payment with recourse to the exporter
• »Advance payment less a fee (discount)
• »Pay exporter when issuing bank provides payment
Post shipment Finance
• Provides credit facility from the date
shipment of the goods to the time
export payment is realized
( expenses between period of
shipment dispatch and payment
realisation…
Export Finance –Post-Export