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Dc ucp 600 for lc Presentation Transcript

  • 1. Documentary Credits – UCP 600 The Institute of Bankers, Pakistan February 20-21, 2008 Nemat Ali, SEVP, Soneri Bank Ltd Abid Aziz Merchant, GM Pakistan, Mashreqbank 1
  • 2. A Quote by Bernard Wheble, CBE Hon. Chairman, ICC Commission on Banking Technique It still has to be appreciated, however, that UCP are not – and cannot be – intended to give a precise answer to each and every problem arising in practice. Those concerned with international trade, whether in banking, commerce and industry, transport or insurance, should not act like robots. Whilst taking full advantage of the overall guidance given by UCP, they should still apply their own intelligence and experience for the solution of the occasional essentially individual problem. Better still if they can avoid the problem ever arising, by the early use of common-sense – unfortunately the least common of senses. Bankers, for example, as experts in this method of payment, could help their customers – and themselves – by timely advice to the applicant so that he gives instructions which produce a workable credit at the outset and to the beneficiary so that he knows precisely what he has to do to get payment under the credit. In fact, UCP needs to be supplemented by what can be described as a form of education, with a constant readiness on the part of those who have the knowledge to impart it, and a matching willingness on the part of all concerned to receive it – and act on it. 2
  • 3. UCP 500 Articles Not Covered in UCP 600 During the course of the revision of UCP 500 it was decided that the content of a number of articles and sub-articles would not be included in UCP 600. We will examine the rationale behind those decisions. Article 5 – Instructions to Issue/Amend Credits Sub-article 6 (b) – Revocable v Irrevocable Credits Article 8 – Revocation of a Credit Article 12 – Incomplete or Unclear Instructions Article 38 – Other Documents Sub-article 14 (f) – Discrepant Documents and Notice Sub-article 33 (a), (b-part), (c) and (d-part) – Freight Payable/Prepaid Transport Documents Sub-article 42 (c) – Expiry Date and Place for Presentation of Documents Sub-article 46 (a) – General Expressions as to Dates for Shipment 3
  • 4. Issue/Amend Credits – UCP 500 Article 5 – Instructions to Issue/Amend Credits Article 5 of UCP 500 which related to instructions to issue and amend credits was seen as an article that stated the obvious. For example sub-article 5 (a) referred to the need for a credit and any amendment to be complete and precise. UCP 500 sub-article 5 (a) Instructions for the issuance of a Credit, the Credit itself, instructions for an amendment thereto, and the amendment itself, must be complete and precise. Similarly, sub-article 5 (b) referred to the need for a credit and any relevant amendment to state precisely the documents against which payment, acceptance or negotiation was to be made. UCP 500 sub-article 5 (b) All instructions for the issuance of a Credit and the Credit itself and, where applicable, all instructions for an amendment thereto and the amendment itself, must state precisely the document(s) against which payment, acceptance or negotiation is to be made. 4
  • 5. Issue/Amend Credits – UCP 500 Article 5 – Instructions to Issue/Amend Credits (cont’d) Outside of obvious errors or omissions, an advising bank would find it almost impossible to determine whether a credit was complete. Where an issuing bank omitted to list a document or a condition, it may not be apparent that such an omission had occurred. The need for sub-article discouraging the issuance of a credit by reference to a previously issued credit has been negated through the advances in, and use of, technology for the delivery of a credit application and the issuance of the credit. The absence of a specific rule in UCP 600 in relation to instructions to issue or amend credits does not relieve issuing banks from their duty of care for the proper creation, completeness and content of their credit or any amendment thereto. 5
  • 6. Revocation of a Credit – UCP 500 Article 8 – Revocation of a Credit and UCP 500 Sub-article 6 (b) – Revocable v. Irrevocable Credits UCP 600 does not contain any reference to the issuing or handling of revocable credits due to their minimal usage today. For a bank to issue a revocable credit in the future, they have two options: To issue the credit subject to UCP 600, but include a specific condition that the credit is revocable and include the full conditions relating to the revocability and handling of the credit – which will, invariably, come down to incorporation of the basic conditions expressed in article 8 of UCP 500. To issue the credit subject to UCP 500; provided all parties are in agreement to the usage of those rules. 6
  • 7. Unclear Instructions – UCP 500 Article 12 – Incomplete or Unclear Instructions Article 12 of UCP 500 covered the issuance of a preliminary notification, by the advising bank, in the event a credit or an amendment was incomplete or unclear in its terms. If a credit is received that is unworkable or incomplete there is no necessity for a rule to instruct an advising bank that they should seek clarification or request a complete message. Similarly, it is not necessary to provide a rule that the issuing bank must give the appropriate information without delay. The decision as to whether an advising bank provides a preliminary advice of a credit or amendment should be governed by the information that is before that advising bank and not be subject to a rule that may not take account of the reasons why a bank sought further clarification in the first place. The absence of a specific rule in UCP 600 in relation to incomplete or unclear instructions does not relieve issuing banks from their duty of care for the proper creation, completeness and content of their credit or any amendment thereto. 7
  • 8. Reserve or Indemnity – UCP 500 Sub - a rticle 14 (f) – Discrepant Documents and Notice Whether a nominated bank has honoured or negotiated under reserve or indemnity is of no concern to an issuing bank or confirming bank as it does not affect or influence their determination as to whether or not they will refuse or take up documents. UCP 500 sub-article 14 (f) If the remitting bank draws the attention of the Issuing Bank and/or Confirming Bank, if any, to any discrepancy(ies) in the document(s) or advises such banks that it has paid, incurred a deferred payment undertaking, accepted Draft(s) or negotiated under reserve or against an indemnity in respect of such discrepancy(ies), the Issuing Bank and/or Confirming Bank, if any, shall not be thereby relieved from any of their obligations under any provision of this Aritcle. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained. UCP 600 does not contain an equivalent of sub-article 14 (f). 8
  • 9. Freight Payable/Prepaid – UCP 500 Sub-articles 33 (a), (b-part), (c) and (d-part) – Freight Payable/Prepaid Transport Documents Article 33 of UCP 500 contained information as to how the status of freight costs were to be shown on transport documents and took the view that credits may not be precise in this respect. When issuing a credit, a bank would invariably indicate whether a transport document is to evidence that freight is to be prepaid or payable at destination. Failing this, a credit would indicate the applicable Incoterm which by its definition will imply whether freight is to be prepaid i.e. CFR or CIF or payable at destination i.e. FOB or FCA. 46A: Documents Required COMMERCIAL INVOICE IN 1 ORIGINAL AND 3 COPIES PACKING LIST IN 4 COPIES FULL SET CLEAN ON BOARD OCEAN BILLS OF LADING ISSUED TO ORDER OF ORIGINAL BANK LTD, HONG KONG MARKED NOTIFY ACME DIESEL ENGINE COMPANY, UPPER STREET, UPPER BAY, HONG KONG AND FREIGHT PREPAID CERTIFICATE OF UK ORIGIN 45A: Description of Goods and/or Services 4 MARK 3 DIESEL ENGINES FOR AGRICULTURAL USE TOGETHER WITH SPARE PARTS FOR 12 MONTHS AS PER PROFORMA INVOICE 123456 DATED JUNE 1, 2007, CIF HONG KONG 9
  • 10. Freight Payable/Prepaid – UCP 500 Sub-articles 33 (a), (b-part), (c) and (d-part) – Freight Payable/Prepaid Transport Documents (cont’d) The content of sub-article 33 (c) was seen as stating the obvious in that “prepayable” or “to be prepaid” clearly do not indicate that freight has been paid and a rule is not necessary to reflect this position. Sub-article 33 (d) is now re-phrased and appears at sub-article 26 (c) of UCP 600 as “A transport document may bear a reference, by stamp or otherwise, to charges additional to the freight”. The position concerning transport documents evidencing costs additional to freight is covered further in the transport section of the ISBP. 10
  • 11. Other Documents – UCP 500 Article 38 – Other Documents Article 38 of UCP 500 has no equivalent in UCP 600. UCP 500 article 38 – Other Documents If a Credit calls for an attestation or certification of weight in the case of transport other than by sea, banks will accept a weight stamp or declaration of weight which appears to have been superimposed on the transport document by the carrier or his agent unless the Credit specifically stipulates that the attestation or certification of weight must be by means of a separate document. The basis for the issuance of any credit is that it will specify the type of document that is required for presentation and its content. If a condition such as an attestation of certification of weight is required, then the credit should specify the form and document in which such information is to appear. 11
  • 12. Expiry Date – UCP 500 Sub-article 42 (c) – Expiry Date and Place for Presentation of Documents UCP 500 sub-article 42 (c) If an Issuing Bank states that the Credit is to be available “for one month”, “for six months” or the like, but does not specify the date from which the time is to run, the date of issuance of the Credit by the Issuing Bank will be deemed to be the first day from which such time is to run. Banks should discourage indication of the expiry date of the Credit in this manner. The requirement of sub-article 6 (d) (i) of UCP 600 is that a credit must state an expiry date for presentation. Having stated a rule that a credit must have an expiry date it is not deemed necessary to provide options for determining an expiry date where the information is vague or unclear as from when a period would commence. Such an occurrence would be deemed to be an unworkable credit and the issuing bank should be requested to provide a definitive date of expiry. 12
  • 13. Dates for Shipment – UCP 500 Sub-article 46 (a) – General Expressions as to Dates for Shipment UCP 500 sub-article 46 (a) Unless otherwise stipulated in the Credit, the expression “shipment” used in stipulating an earliest and/or a latest date for shipment will be understood to include expressions such as, “loading on board”, “dispatch”, “accepted for carriage”, “date of post receipt”, “date of pick-up”, and the like, and in the case of a Credit calling for a multimodal transport document the expression “taking in charge”. Sub-article 46 (a) of UCP 500 has been omitted from UCP 600 as the transport document articles (articles 19-25) include the expressions such as shipped on board, taking in charge, dispatch, that are relevant to each of those transport documents linking them to a definition of the date of shipment. 13
  • 14. UCP 600 Articles not found in UCP 500 Article Article Article Article Article Article 2 3 9 12 15 17 Definitions Interpretations Advising of Credits and Amendments Nomination Complying Presentation Original Documents and Copies 14
  • 15. UCP 600 – Overview of Article 1 UCP 600 Article 1 Application of UCP Publication Number & Date of Revision Modify or Exclude – The concept in UCP 600 is that a rule is a rule, thus UCP 600 allows for any rule to be modified or excluded by the terms & conditions of a credit Applicable when the LC expressly indicates that it is subject to these “rules” By establishing the articles as rules negates the need for an article to either commence or include the words “unless otherwise stipulated in the credit” or similar, thus no reference to “unless otherwise stipulated in the credit” throughout Retention of Standby Letters of Credit due to high usage of UCP for Standbys UCP 500 Article 1 The Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication No 500 shall apply to all Documentary Credits (including to the extent to which they may be applicable, Standby Letter(s) of Credit) where they are incorporated into the text of the Credit. They are binding on all parties thereto, unless otherwise expressly stipulated in the Credit. 15
  • 16. UCP 600 – Overview of Article 2 UCP 600 Article 2 Definitions Advising Bank Applicant* Banking Day* Beneficiary Complying Presentation* Confirmation Confirming Bank Credit Honour* Issuing Bank Negotiation* Nominated Bank Presentation Presenter 16
  • 17. UCP 600 – Overview of Article 2 Applicant: the party on whose request the credit is issued. The reference to party does not impose any greater role for the applicant under UCP 600. It is merely to signify that it may encompass one of any number of different entities i.e. a bank, a customer, a customer of another bank (outsourced processing) etc. Banking Day: a day on which a bank is regularly open at the place at which an act subject to these rules is to be performed. A bank may be regularly open Mondays to Saturdays but its trade department is only open Mondays to Fridays. In this example, the bank is regularly open Mondays to Saturdays but only regularly open for trade transactions Mondays to Fridays. In this context, a banking day would be any day between Monday to Friday. Complying Presentation: a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice. The reference in this definition to international standard banking practice does not relate solely to the ICC publication of the same name. International standard banking practice as seen in this definition is wider than the publication. There are a number of practices that are carried out by banks globally that are not encompassed within the ISBP publication. 17
  • 18. UCP 600 – Overview of Article 2 Honour: a. to pay at sight if the credit is available by sight payment. b. to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c. to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance. 18
  • 19. UCP 600 – Overview of Article 2 Negotiation: The purchase by the nominated bank of drafts (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 definition emphasizes that negotiation relates to the purchase of a draft drawn on a bank other than the nominated bank. If it was drawn on the nominated bank, it would be a payment or acceptance credit. Further, negotiation is either the advancing or agreeing to advance funds to a beneficiary. Use of agreeing to advance allows the bank and beneficiary to determine the terms under which negotiation will occur. These terms would include when, for how much and whether or not the advance is with or without recourse. 19
  • 20. UCP 600 – Overview of Article 3 UCP 600 Article 3 Interpretations Where applicable, words in the singular include the plural and in the plural include the singular. A credit is irrevocable even if there is no indication to that effect. Branches of a bank in different countries are considered to be separate banks. Unless required to be used in a document, words such as “prompt”, “immediately” or “as soon as possible” will be disregarded – article 46 of UCP 500 made reference to these terms but only in relation to general expressions as to the dates for shipment. ISBP widened the application to any usage of these terms. UCP 600 adopts the same stance as ISBP but creates a caveat where the credit may require the word or words to appear within a document i.e. within a certification made by a beneficiary. The words “from” and “after” when used to determine a maturity date exclude the date mentioned – UCP 500 covered the issue of “from” and “after” but only in relation to the date terminology for periods of shipment. There are two separate interpretations in relation to the word “from” in article 3 of UCP 600. For maturity date calculation, it excludes the date mentioned but for determination of periods of shipment, it includes the date mentioned. 20
  • 21. UCP 600 – Overview of Article 3 Interpretations (from UCP 500 Article 20): A document may be signed by handwriting, facsimile signature, perforated signature, stamp, symbol or any other mechanical or electronic method of authentication. A requirement for a document to be legalized, visaed, certified or similar will be satisfied by any signature, mark, stamp or label on the document which appears to satisfy that requirement. Terms such as “first class”, “well known”, “qualified”, “independent”, “official”, “competent” or “local” used to describe the issuer of a document allow any issuer except the beneficiary to issue that document. 21
  • 22. UCP 600 – Overview of Article 3 Interpretations (from UCP 500 Articles 46 & 47): The expression “on or about” or similar will be interpreted as a stipulation that an event is to occur during a period of five calendar days before until five calendar days after the specified date, both start and end dates included. The words “to”, “until”, “till”, “from” and “between” when used to determine a period of shipment include the date or dates mentioned, and the words “before” and “after” exclude the dates mentioned. The terms “first half” and “second half” of a month shall be construed respectively as the 1st to 15th and the 16th to the last day of the month, all dates inclusive. The terms “beginning”, “middle” and “end” of a month shall be construed respectively as the 1st to the 10th, the 11th to the 20th and the 21st to the last day of the month, all dates inclusive. 22
  • 23. UCP 600 – Overview of Article 4 UCP 600 Article 4 Credits v. Contracts Addition: An issuing bank should discourage any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like. UCP 500 Article 3 a. Credits, by their nature are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the Credit. Consequently, the undertaking of a bank to pay, accept and pay Draft(s) or negotiate and/or to fulfil any other obligation under the Credit, is not subject to claims or defences by the Applicant resulting from his relationships with the Issuing Bank of the Beneficiary. b. A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank. 23
  • 24. UCP 600 – Overview of Article 5 UCP 600 Article 5 Documents v. Goods, Services or Performance Banks deal with documents, other parties deal with documents and/or goods. There is a just a structural change to this article, to emphasize that banks deal with documents and not with goods, services or performance. As the UCP is generally related to actions of banks, the wording in this article creates the rule under which banks operate. UCP 500 Article 4 In Credit operations all parties concerned deal with documents, and not with goods, services and/or performances to which the documents may relate. 24
  • 25. UCP 600 – Overview of Article 6 UCP 600 Article 6 Availability, Expiry Date and Place for Presentation Same principle in Article 6(b) Always available with issuing bank Freely available credits as opposed to freely negotiable Stronger wording “must not” and no reference to additional document UCP 500 sub-Articles 10(a) and (b)(i) All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation Unless the Credit stipulates that it is available only with the Issuing Bank, all Credits must nominate the bank (the “Nominated Bank”) which is authorised to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate. In a freely negotiable Credit any bank is a Nominated Bank. UCP 500 sub-Articles 9(a)(iv) and 9(b)(iv) A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s). 25
  • 26. UCP 600 – Overview of Article 6 UCP 600 Article 6 Availability, Expiry Date and Place for Presentation Covered in Article 6(d)(i) and (ii) A place other than the issuing bank includes the place of the issuing bank Covered in Article 6(e) UCP 500 sub-Articles 42(a) and (b) a. All Credits must stipulate an expiry date and a place for presentation of documents for payment, acceptance, or with the exception of freely negotiable Credits, a place for presentation of documents for negotiation. An expiry date stipulate for payment, acceptance or negotiation will be construed to express an expiry date for presentation of documents. b. Except as provided in sub-Article 44(a), documents must be presented on or before such expiry date. 26
  • 27. Availability 27
  • 28. Introduction The primary function of a letter of credit is to provide payment security for an international trade transaction coupled with the opportunity for banks to provide financing thereunder. UCP 600 has specific rules as to how credits can be made available with banks to facilitate payment and permit financing. 28
  • 29. Available With Under UCP 600 a credit may be issued stating that it is available with the issuing bank or with a nominated bank. Article 2 of UCP 600 defines nominated bank. UCP 600 article 2 – definition Nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank. Where a credit is available with a nominated bank, the presentation of documents by or on behalf of the beneficiary will typically be made to that nominated bank, however, documents may be presented directly to an issuing bank. 29
  • 30. Available By A credit may be made available with a nominated bank: By sight payment (Draft is optional) By deferred payment (Draft not required) By acceptance (Draft required) By negotiation (Draft is optional) A credit may be made available with an issuing bank: By sight payment (Draft is optional) By deferred payment (Draft not required) By acceptance (Draft required) A credit cannot be available with an issuing bank by negotiation Where a credit is available by sight payment or negotiation, the use of a draft is optional and it is for the issuing bank and applicant to decide at the time of issuance of the credit whether or not a draft is needed. Credit available by sight payment (Draft is optional) Credit available by negotiation (Draft is optional) A credit must not be made available by sight payment, acceptance or negotiation with a draft drawn on the applicant. 30
  • 31. Nominated Bank In nominating a bank to pay, incur a deferred payment undertaking, accept a draft or negotiate, an issuing bank authorizes that nominated bank to honour or negotiate upon receipt of a complying presentation. A nominated bank is under no obligation to honour or negotiate unless it has added its confirmation to the credit or it has expressly communicated to the beneficiary its agreement to honour or negotiate. Where a nominated bank honours or negotiates under a complying presentation, an issuing bank undertakes to reimburse them. 31
  • 32. Honour Article 2 of UCP 600 defines how credits can be settled by honour or negotiation. UCP 600 article 2 – definition Honour means: To pay at sight if the credit is available by sight payment. To incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. To accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance. 32
  • 33. Negotiation UCP 600 article 2 – definition Negotiation means the purchase by the nominated bank of drafts (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. If a nominated bank with which a credit is available by negotiation examines documents, determines compliance but does not advance funds or agree to advance funds to the beneficiary, then that nominated bank has not negotiated as defined by UCP 600. 33
  • 34. Expiry Date and Place Linked to where a credit is available is the need for the credit to indicate an expiry date and a place for presentation. An expiry date stated for honour or negotiation will be deemed to be an expiry date for presentation. Where a credit states that it is available with a nominated bank and that the expiry date is at the place of the nominated bank, the expiry date would also apply to a presentation made directly to the issuing bank. 34
  • 35. Confirmation UCP 600 article 2 – definition Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation. UCP 600 sub-article 8 (b) A confirming bank is irrevocably bound to honour or negotiate as of the time it adds its confirmation to the credit. In most cases a confirming bank will be a nominated bank but this is not always the case. 35
  • 36. Prepay or Purchase When a nominated bank, acting on its nomination, a confirming bank, if any or an issuing bank receives a complying presentation under a credit available by deferred payment, it incurs a deferred payment undertaking and pays at maturity. When a nominated bank, acting on its nomination, a confirming bank, if any or an issuing bank receives a complying presentation under a credit available by acceptance, it accepts the bill of exchange and pays at maturity. Sometimes the beneficiary may wish to receive funds in advance of the maturity or due date and request the nominated or issuing bank to prepay or purchase an accepted draft or a deferred payment undertaking. UCP 600 sub-article 12 (b) is a new rule that states where a credit is issued available by acceptance or deferred payment such issuance provides an implicit authority from an issuing bank to a nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by the nominated bank. “Article 7 – Issuing Bank Undertaking” and “Article 8 – Confirming Bank Undertaking” clarify that reimbursement for the amount of a complying presentation is due at maturity whether or not the nominated bank prepaid or purchased. 36
  • 37. UCP 600 – Overview of Article 7 UCP 600 Article 7 Issuing Bank Undertaking Definition of credit An issuing bank ‘honours’ – it does not negotiate Refined wording to reflect the position if a nominated bank does not act (as shown in next slide) UCP 500 sub-Article 9(a) a. An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with: i. if the Credit provides for sight payment – to pay at sight; ii. if the Credit provides for deferred payment – to pay on the maturity date(s) – determinable in accordance with the stipulations of the Credit; iii. if the Credit provides for acceptance: a. by the Issuing Bank – to accept Draft(s) drawn by the Beneficiary on the Issuing Bank and pay them at maturity or b. by another drawee bank – to accept and pay at maturity Draft(s) drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity. 37
  • 38. UCP 600 – Overview of Article 7 UCP 600 Article 7(a) Issuing Bank Undertaking ii. iii. iv. v. sight payment with a nominated bank and that nominated bank does not pay; deferred payment with a nominated bank and that nominated bank does not incur its deferred payment undertaking or, having incurred its deferred payment undertaking, does not pay at maturity; acceptance with a nominated bank and that nominated bank does not accept a draft drawn on it or, having accepted a draft drawn on it, does not pay at maturity; negotiation with a nominated bank and that nominated bank does not negotiate. NOTE: same principle for Article 8 Confirming Bank Undertaking 38
  • 39. UCP 600 – Overview of Article 7 UCP 600 Article 7 Issuing Bank Undertaking Covered in Article 6(c) Issuing bank irrevocable bound to honour as of time of issuance Reimbursement condition appears in Article 7(c) Reimbursement due whether or not Draft or DP Undertaking prepaid or purchased – see Article 12 UCP 500 sub-Article 9(a) iv. if the Credit provides for negotiation – to pay without recourse to drawers and/or bonafide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s). UCP 500 sub-Article 10(d) By nominating another bank, or by allowing for negotiation by any bank, or by authorising or requesting another bank to add its confirmation, the Issuing Bank authorises such bank to pay, accept Draft(s) or negotiate as the case may be, against documents which appear on their face to be in compliance with the terms and conditions of the Credit and undertakes to reimburse such bank in accordance with the provisions of these Articles. 39
  • 40. UCP 600 – Overview of Article 8 UCP 600 Article 8 Confirming Bank Undertaking Definition of confirmation and confirming bank Confirming bank – honours or negotiates Confirming bank is irrevocably bound to honour or negotiate as of time it adds confirmation Reimbursement due whether or not Draft or DP Undertaking purchased or prepaid UCP 500 sub-Article 9(b) b. A confirmation of an irrevocable Credit by another bank (the “Confirming Bank”) upon the authorisation or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with: i. ii. iii. if the Credit provides for sight payment – to pay at sight; if the Credit provides for deferred payment – to pay on the maturity date(s) determinable in accordance with the stipulations of the Credit; if the Credit provides for acceptance: a. by the Confirming Bank – to accept Draft(s) drawn by the Beneficiary on the Confirming Bank and pay them at maturity, or 40
  • 41. UCP 600 – Overview of Article 8 UCP 600 Article 8 Confirming Bank Undertaking Covered in Article 6 (c) Reflects position if a nominated bank does not act (see slide where NOTE mentioned “same principle for Article 8 Confirming Bank Undertaking”) Nominated bank may or may not be a confirming bank Refined wording in Article 8 (d) UCP 500 sub-Article 9(b) and (c)(i) and (ii) b. by another drawee bank – to accept and pay at maturity, Draft(s) drawn by the Beneficiary on the Confirming Bank, in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity; iv. if the Credit provides for negotiation – to negotiate without recourse to drawers and/or bonafide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s). c. i. If another bank is authorised or requested by the Issuing Bank to add its confirmation to a Credit but is not prepared to do so, it must so inform the Issuing Bank without delay. ii. Unless the Issuing Bank specifies otherwise in its authorisation or request to add confirmation, the Advising Bank may advise the Credit to the Beneficiary without adding its confirmation. 41
  • 42. UCP 600 – Overview of Article 9 UCP 600 Article 9 Advising of Credits and Amendments Concept of 2nd advising bank Bank now “satisfies itself” as to the apparent authenticity Advice of credit or amendment “accurately reflects” the terms and conditions of the credit or amendment Now appears in Article 9(d) UCP 500 Article 7 a. b. A Credit may be advised to a Beneficiary through another bank (the “Advising Bank”) without engagement on the part of the Advising Bank, but that bank, if it elects to advise the Credit, shall take reasonable care to check the apparent authenticity of the Credit which it advises. If the bank elects not to advise the Credit, it must so inform the Issuing Bank without delay. If the Advising Bank cannot establish such apparent authenticity it must inform, without delay, the bank from which the instructions appear to have been received that it has been unable to establish the authenticity of the Credit and if it elects nonetheless to advise the Credit it must inform the Beneficiary that it has not been able to establish the authenticity of the Credit. UCP 500 sub-Article 11(b) If a bank uses the services of an Advising Bank to have the Credit advised to the Beneficiary, it must also use the services of the same bank for advising an amendment(s). 42
  • 43. UCP 600 – Overview of Article 10 UCP 600 Article 10 Amendments UCP 500 sub-Article 9(d) i. Except as otherwise provided by Article 48, an irrevocable Credit can neither be amended nor cancelled without the agreement of the Issuing Bank, the Confirming Bank, if any, and the Beneficiary. ii. The Issuing Bank shall be irrevocably bound by an amendment(s) issued by it from the time of the issuance of such amendment(s). A Confirming Bank may extend its confirmation to an amendment and shall be irrevocably bound as of the time of its advice of the amendment. A Confirming Bank may, however, choose to advise an amendment to the Beneficiary without extending its confirmation and if so, must inform the Issuing Bank and the Beneficiary without delay. Covered in Article 10(a) Covered in Article 10(b) 43
  • 44. UCP 600 – Overview of Article 10 UCP 600 Article 10 Amendments Covered in Article 10(c) Advice of acceptance or rejection to be advised Partial acceptance of an amendment = rejection Time limits for acceptance or rejection will be disregarded UCP 500 sub-Article 9(d) iii. The terms of the original Credit (or a Credit incorporating previously accepted amendment(s) will remain in force for the Beneficiary until the Beneficiary communicates his acceptance of the amendment to the bank that advised such amendment. The Beneficiary should give notification of acceptance or rejection of amendment(s). If the beneficiary fails to give such notification, the tender of documents to the Nominated Bank or Issuing Bank, that conform to the Credit and to not yet accepted amendment(s), will be deemed to be notification of acceptance by the Beneficiary of such amendment(s) and as of that moment the Credit will be amended. iv. Partial acceptance of amendments contained in one and the same advice of amendment is not allowed and consequently will not be given any effect. 44
  • 45. UCP 600 – Overview of Article 11 UCP 600 Article 11 Teletransmitted and PreAdvised Credits and Amendment Revised text to remove the “should a mail confirmation nevertheless be sent” Where a mail confirmation is the operative instrument, it must be issued in terms not inconsistent with the teletransmission UCP 500 Article 11 a. i. When an Issuing Bank instructs an Advising Bank by an authenticated teletransmission to advise a Credit or an amendment to a Credit, the teletransmission will be deemed to be the operative Credit instrument or the operative amendment, and no mail confirmation should be sent. Should a mail confirmation nevertheless be sent, it will have not effect and the Advising Bank will have no obligation to check such mail confirmation against the operative Credit instrument or the operative amendment received by teletransmission. ii. If the teletransmission states “full details to follow” (or words of similar effect) or states that the mail confirmation is to be the operative Credit instrument or the operative amendment, then the teletransmission will not be deemed to be the operative Credit instrument or the operative amendment. The Issuing Bank must forward the operative Credit instrument or the operative amendment to such Advising Bank without delay. 45
  • 46. UCP 600 – Overview of Article 11 UCP 600 Article 11 Teletransmitted and PreAdvised Credits and Amendment Covered in Article 9(d) Revised and shortened text appears in Article 11(b) UCP 500 Article 11 b. c. If a bank uses the services of an Advising Bank to have the Credit advised to the Beneficiary, it must also use the services of the same bank for advising an amendment(s). A preliminary advice of the issuance or amendment of an irrevocable Credit (pre-advice), shall only be given by an Issuing Bank if such bank is prepared to issue the operative Credit instrument or the operative amendment thereto. Unless otherwise stated in such preliminary advice by the Issuing Bank, an Issuing Bank having given such pre-advice shall be irrevocably committed to issue or amend the Credit, in terms not inconsistent with the pre-advice, without delay. 46
  • 47. UCP 600 – Overview of Article 12 UCP 600 Article 12 Nomination Covered in Article 12(c) but widened to include honour Covered in Article 12(a) referencing honour or negotiation For new Article 12(b) – see next slide UCP 500 sub-Article 10(b)(ii) Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorised to negotiate. Mere examination of the documents without giving of value does not constitute a negotiation. UCP 500 sub-Article 10(c) Unless the Nominated Bank is the Confirming Bank, nomination by the Issuing Bank does not constitute any undertaking by the Nominated Bank to pay, incur a deferred payment undertaking, to accept Draft(s), or to negotiate. Except where expressly agreed to by the Nominated Bank and so communicated to the Beneficiary, the Nominated Bank’s receipt of and/or examination and/or forwarding of the documents does not make that bank liable to pay, to incur a deferred payment undertaking, to accept Draft(s), or to negotiate. 47
  • 48. UCP 600 – Overview of Article 12 UCP 600 Article 12 Nomination Article 12(b): By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank. 48
  • 49. UCP 600 – Overview of Article 13 UCP 600 Article 13 Bank-to-Bank Reimbursement Arrangement Principle in Article 13(a) is that the credit and reimbursement authorisation must reference URR or Article 13(b) will apply Reimbursement authorisation subject to Article 13(b) must not include an expiry date – to bring in line with URR UCP 500 Article 19 a. b. c. d. If an Issuing Bank intends that the reimbursement to which a paying, accepting or negotiating bank is entitled, shall be obtained by such bank (the “Claiming Bank”, claiming on another party (the “Reimbursing Bank”), it shall provide such Reimbursing Bank in good time with the proper instructions or authorisation to honour such reimbursement claims. Issuing banks shall not require a Claiming Bank to supply a certificate of compliance with the terms and conditions of the Credit to the Reimbursing Bank. An Issuing Bank shall not be relieved from any of its obligations to provide reimbursement if and when reimbursement is not received by the Claiming Bank from the Reimbursing Bank. The Issuing Bank shall be responsible to the Claiming Bank for any loss of interest if reimbursement is not provided by the Reimbursing Bank on first demand, or as otherwise specified in the Credit, or mutually agreed, as the case may be. 49
  • 50. UCP 600 – Overview of Article 13 UCP 600 Article 13 Bank-to-Bank Reimbursement Arrangement Article 13(b)(iv) states that reimbursing bank charges are for account of the issuing bank. If they are for account of beneficiary it must be clearly indicated in the credit and the reimbursement authorisation UCP 500 Article 19 e. The Reimbursing Bank’s charges should be for the account of the Issuing Bank. However, in cases where the charges are for the account of another party, it is the responsibility of the Issuing Bank to so indicate in the original Credit and in the reimbursement authorisation. In cases where the Reimbursing Bank’s charges are for the account of another party they shall be collected from the Claiming Bank when the Credit is drawn under. In cases where the Credit is not drawn under, the Reimbursing Bank’s charges remain the obligation of the Issuing Bank. 50
  • 51. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Applicable banks defined “On their face” – sole reference here Definition: complying presentation Check on the basis of documents alone Covered in Article 14(d) – see next slide Covered in Article 14(g) UCP 500 Article 13 Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit. Documents not stipulated in the Credit will not be examined by banks. If they receive such documents, they shall return them to the presenter or pass them on without responsibility. 51
  • 52. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Article 14(d): Data in a document, when read in context with the credit, 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 credit. 52
  • 53. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Removal of “reasonable time” Maximum of 5 banking days Period of 5 banking days not subject to any upcoming event Covered in Article 14(h) UCP 500 Article 13 b. The Issuing Bank, the Confirming Bank, if any, or a Nominated Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly. c. If a Credit contains conditions without stating the document(s) to be presented in compliance therewith, banks will deem such conditions as not stated and will disregard them. 53
  • 54. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Covered in Article 14(f) Document must appear to fulfil its function Principle extended to a document may be dated no later than the date of its presentation UCP 500 Article 21 When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom such documents are to be issued and their wording or data content. If the Credit does not so stipulate, banks will accept such documents as presented, provided that their data content is not inconsistent with any other stipulated document presented. UCP 500 Article 22 Unless otherwise stipulated in the Credit, banks will accept a document bearing a date of issuance prior to that of the Credit, subject to such document being presented within the time limits set out in the Credit and in these Articles. 54
  • 55. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Article was not deemed to be necessary as UCP does not define who has to “issue” the transport document. Covered in Article 14(l) Covered in Article 14(k) and widened to any document UCP 500 Article 30 Unless otherwise authorised in the Credit, banks will only accept a transport document issued by a freight forwarder if it appears on its face to indicate: i. the name of the freight forwarder as a carrier or multimodal transport operator and to have been signed or otherwise authenticated by the freight forwarder as carrier or multimodal transport operator, or ii. The name of the carrier or multimodal transport operator and to have been signed or otherwise authenticated by the freight forwarder as a named agent for or on behalf of the carrier or multimodal transport operator. UCP 500 sub-Article 31(iii) Indicates as the consignor of the goods a party other than the Beneficiary of the Credit. 55
  • 56. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Article 14(j): When the addresses of the beneficiary and the applicant appear in any stipulated document, they need not be the same as those stated in the credit or in any other stipulated document, but must be within the same country as the respective addresses mentioned in the credit. Contact details (telefax, telephone, email and the like) stated as part of the beneficiary’s and the applicant’s address will be disregarded. However, when the address and contact details of the applicant appear as part of the consignee or notify party details on a transport document subject to articles 19, 20, 21, 22, 23, 24 or 25, they must be as stated in the credit. 56
  • 57. UCP 600 – Overview of Article 14 UCP 600 Article 14 Standard for Examination of Documents Second sentence removed from Commercial Invoice Article and appears at Article 14(e) Default of 21 days applies where there is an original transport document to be presented UCP 500 sub-Article 37(c) The description of the goods in the commercial invoice must correspond with the description in the Credit. In all other documents, the goods may be described in general terms not inconsistent with the description of the goods in the Credit. UCP 500 sub-Article 43(a) In addition to stipulating an expiry date for presentation of documents, every Credit which calls for a transport document(s) should also stipulate a specified period of time after the date of shipment during which presentation must be made in compliance with the terms and conditions of the Credit. If no such period of time is stipulated, banks will not accept documents presented to them later than 21 days after date of shipment. In any event, documents must be presented not later than the expiry date of the Credit. 57
  • 58. Standard for Examination of Documents 58
  • 59. Introduction UCP 600 sub-article 14 (a) provides the standard for examination of documents. UCP 600 sub-article 14 (a) A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. A complying presentation is defined in article 2 of UCP 600. UCP 600 article 2 – definition Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice. It should be noted that reference in this definition to “international standard banking practice” is not confined to the practices detailed in the ICC Publication of the same name. By inclusion in sub-article 14 (a) of the reference to “appear on their face”, it is now deemed that there is no need for similar reference in the articles covering transport, insurance or commercial invoice as was the case in UCP 500. 59
  • 60. Documents Alone The document checker must decide on the basis of the documents alone whether or not the documents constitute a complying presentation. For example: The actual quality of goods received by the applicant – even if not of merchantable quality – is not a consideration for the document checker, who must determine compliance based on the documents alone as stated in sub-article 14 (a) of UCP 600. This point is emphasized by article 5 of UCP 600 which makes it clear that banks deal with documents and not with goods, services or performance to which the documents may relate. 60
  • 61. 5 Banking Days An issuing bank, a confirming bank or a nominated bank acting on its nomination, each have a maximum number of days in which to examine the documents and determine if the presentation complies. This maximum number of days is 5 banking days following the day of presentation. As defined in article 2 of UCP 600: UCP 600 article 2 – definition Presentation means either the delivery of documents under a credit to the issuing bank or nominated bank or the documents so delivered. It should be noted that in addition to the maximum number of days being reduced from 7 to 5 banking days following the day of presentation, the concept of “reasonable time” has been removed. Despite this removal of reference to reasonable time it is still expected that banks will not in all cases utilize the maximum number of days allowed by the rules. This position is emphasized by the content of article 15 of UCP 600 which states that when a bank determines that a presentation is complying it must honour or negotiate. 61
  • 62. Documents Required The document checker must examine all documents required by the terms and conditions of the credit. If the presentation contains a document that is not required by the credit, UCP 600 sub a rticle 14 (g) states that document will be disregarded and may be returned to the presenter. Furthermore, UCP 600 sub aticle 14 (h) states - r if a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it. 62
  • 63. Date of Issuance UCP 600 sub-article 14 (i) makes it clear that documents may be dated prior to the issuance date of the credit, but must not be dated later than its date of presentation. Example: Date of Issue: 070702 Date of Presentation: July 25 2007 Date of Invoice: July 1 2007 Date of Packing List: July 27 2007 In this presentation the invoice is dated prior to the issuance date but the packing list is dated after the date of presentation. The invoice complies with subarticle 14 (i). The packing list does not. In simple terms, a document may be dated any date upto and including the date of its presentation. 63
  • 64. Addresses Under UCP 500 there was some confusion as to whether the addresses of the beneficiary and the applicant as shown on the documents presented were to be identical to those stated in the credit. UCP 600 now states specifically that the addresses of the beneficiary and the applicant in any document need not be the same as those stated in the credit or in any other stipulated document, but must be within the same country as the respective addresses shown in the credit. There is however one exception and this relates to the situation where the address of the applicant is to appear as part of the consignee or notify party details on a transport document subject to articles 19 to 25. Sub-article 14 (j) states that when the address and the contact details of the applicant appear as part of the consignee or notify party details in a transport document they must be as stated in the credit. 64
  • 65. Contact Details In the past, document checkers have examined documents to determine that contact information such as telefax, telephone and email addresses are in compliance with those stated in the credit. UCP 600 sub-article 14 (j) removes the need to review contact information by expressly stating that contact details shown as part of the beneficiary or applicant addresses in the credit will be disregarded. 65
  • 66. Other Documents UCP 600 has specific articles that guide the document checker in determining compliance for: Transport documents – articles 19 to 25 Insurance documents – article 28 Commercial invoice – article 18 However, if a credit requires presentation of a document other than these, without stipulating by whom the document is to be issued or its data content, banks will accept the document as presented if its content appears to fulfil the function of the required document and otherwise complies with UCP 600. Examples of how a document would fulfil its function include: A certificate of origin showing the origin of the goods An inspection certificate indicating that the goods have been inspected 66
  • 67. Data in a Document UCP 600 makes it clear that when checking documents the data does not have to be identical. The essential requirement under UCP 600 sub a rticle 14 (d) is that data in a document, when read in context with the credit, 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 credit. 67
  • 68. Consignor UCP 600 sub-article 14 (k) states that the shipper or consignor of the goods indicated on any document need not be the beneficiary of the credit. In UCP 500 this provision applied only to transport documents, UCP 600 widens the scope beyond transport documents to any document that may contain a shipper or consignor field. 68
  • 69. Transport Document Issuer The transport articles of UCP 600 do not impose a condition as to who is to issue a transport document. These articles detail how the carrier, owner, master or charterer is to be shown on the transport document and how the documents are to be signed including the capacity of the signer. UCP 600 sub-article 14 (l) A transport document may be issued by any party other than a carrier, owner, master or charterer provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24 of these rules. Sub-article 14 (l) emphasizes that a transport document may be issued by a party other than the carrier, owner, master or charterer – i.e. freight forwarder, etc., provided that the transport document meets the requirements of articles 19 to 24 of UCP 600. 69
  • 70. 21 Calendar Days In addition to the document checker establishing that the presentation has been made within the expiry date of the credit, there is a need to ensure that the documents have been presented within the specified period of presentation after the date of shipment. A credit should specify the number of days after shipment within which presentation is to be made. In the absence of such indication in the credit, UCP 600 sub-article 14 (d) provides a default position of 21 calendar days after the date of shipment as evidenced on the transport document. It should be noted that the default position of 21 days after the date of shipment applies where the credit calls for the presentation of one or more original transport documents subject to articles 19 to 25 of UCP 600. For credits calling for copies of such transport documents or transport documents not covered by the UCP, the credit must make specific reference to the number of days within which presentation is to be made. 70
  • 71. UCP 600 – Overview of Article 15 UCP 600 Article 15 Complying Presentation Outlines the principle that honour or negotiation follows the determination of a complying presentation i.e., Article 15(b): When a confirming bank determines that a presentation is complying, it must honour or negotiate and forward the documents to the issuing bank. 71
  • 72. UCP 600 – Overview of Article 16 UCP 600 Article 16 Discrepant Documents, Waiver and Notice Applicable banks defined Removal of “on their face” “....may refuse to honour or negotiate” UCP 500 Article 14 a. b. When the Issuing Bank authorises another bank to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the Issuing Bank and the Confirming Bank, if any, are bound: i. to reimburse the Nominated Bank which has paid, incurred a deferred payment undertaking, accepted Draft(s), or negotiated ii. To take up documents. Upon receipt of the documents the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, must determine on the basis of the documents alone whether or not they appear on their face to be in compliance with the terms and conditions of the Credit. If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to take up the documents. 72
  • 73. UCP 600 – Overview of Article 16 UCP 600 Article 16 Discrepant Documents, Waiver and Notice Applicable banks defined Maximum of 5 banking days following day of presentation Notice must state (1) bank refuses, (2) each discrepancy and (3) status of the handling of documents – see next slide UCP 500 Article 14 c. d. If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy(ies). This does not, however, extend the period mentioned in sub-Article 13(b). i. If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents, or to the Beneficiary, if it received the documents directly from him. ii. Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter. 73
  • 74. UCP 600 – Overview of Article 16 UCP 600 Article 16 Discrepant Documents, Waiver and Notice Article 16(c)(iii): a) that the bank is holding the documents pending further instructions from the presenter; or b) that 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; or c) that the bank is returning the documents; or d) that the bank is acting in accordance with instructions previously received from the presenter. 74
  • 75. UCP 600 – Overview of Article 16 UCP 600 Article 16 Discrepant Documents, Waiver and Notice UCP 500 Article 14 iii. The Issuing Bank and/or Confirming Bank, if any, shall then be entitled to claim from the remitting bank, refund, with interest, of any reimbursement which has been made to that bank. Covered in Article 16(g) Covered in Article 16(f) If a bank has provided a notice of refusal and chosen (a) or (b), it may return the documents at any time e. If the Issuing Bank and/or Confirming Bank, if any, fails to act in accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or return them to the presenter, the Issuing Bank and/or Confirming Bank, if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the Credit. 75
  • 76. UCP 600 – Overview of Article 16 UCP 600 Article 16 Discrepant Documents, Waiver and Notice This is not included in UCP 600. This is considered to be a matter between beneficiary and the nominated bank. A confirming or issuing bank still makes a decision on the documents based on Articles 14 and 16. UCP 500 Article 14 f. If the remitting bank draws the attention of the Issuing Bank and/or Confirming Bank, if any, to any discrepancy(ies) in the document(s) or advises such banks that it has paid, incurred a deferred payment undertaking, accepted Draft(s) or negotiated under reserve or against an indemnity in respect of such discrepancy(ies), the Issuing Bank and/or Confirming Bank, if any, shal not be thereby relieved from any of their obligations under any provision of this Article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained. 76
  • 77. Discrepant Documents, Waiver and Notice 77
  • 78. Introduction Article 16 of UCP 600 provides that when a bank determines that the documents do not comply, it may refuse to honour or negotiate. The issuing bank having determined that a presentation does not comply may: Provide a notice of refusal to the presenter It may decide, in its sole judgement, to contact the applicant for a waiver of the discrepancies – subject to the presenter having not provided any instructions to the contrary. 78
  • 79. Giving Notice When a bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter. This notice must be sent: By telecommunication or other expeditious means But in any event no later than the close of fifth banking day following the day of presentation. The issuing bank must be aware that the act of contacting the applicant for a waiver does not extend the period of five banking days following the day of presentation for providing a notice of refusal to the presenter. 79
  • 80. Notice of Refusal When a bank decides to refuse to honour or negotiate, the creation and content of its notice of refusal are of critical importance. Sub-article 16 (c) provides banks with specific direction as to the required content of a notice of refusal. The notice must state: That the bank is refusing to honour or negotiate Each discrepancy in respect of which the bank refuses to honour or negotiate 80
  • 81. Notice of Refusal (cont’d) Additionally, it must state what action it is taking in relation to the status of the documents. There are 4 options provided in sub-article 16 (c) in relation to the status of the documents: That the bank is holding the documents pending further instructions from the presenter That 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 That the bank is returning the documents That the bank is acting in accordance with instructions previously received from the presenter 81
  • 82. Returning Documents Sub-article 16 (e) makes it clear that once the bank has given a notice of refusal, it may return the documents to the presenter at any time. UCP 600 sub-article 16 (e) A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time. In these circumstances it is expected that a bank will not return the documents without prior notice but it is important to remember that the bank has the right to merely return them. 82
  • 83. Preclusion Rule If an issuing bank or confirming bank fail to give a notice of refusal in accordance with article 16, it will be precluded from claiming that the presentation does not comply and must honour or negotiate. UCP 600 sub-article 16 (f) If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation. 83
  • 84. Reimbursement When an issuing bank or confirming bank has given its notice of refusal in accordance with article 16, it shall be entitled to claim refund with interest of any reimbursement previously made. UCP 600 sub a rticle 16 (g) When an issuing bank refuses to honour or a confirming bank refuses to honour or negotiate and has given notice to that effect in accordance with this article, it shall then be entitled to claim a refund, with interest, of any reimbursement made. 84
  • 85. Reserve or Indemnity Article 16 of UCP 600 does not contain an equivalent rule to that of sub-article 14 (f) of UCP 500. UCP 500 sub-article 14 (f) If the remitting bank draws the attention of the Issuing Bank and/or Confirming Bank, if any, to any discrepancy(ies) in the document(s) or advises such banks that it has paid, incurred a deferred payment undertaking, accepted Draft(s) or negotiated under reserve or against an indemnity in respect of such discrepancy(ies), the Issuing Bank and/or Confirming Bank, if any, shall not be thereby relieved from any of their obligations under any provision of this Article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained. 85
  • 86. Reserve or Indemnity (cont’d) Whether a nominated bank has honoured or negotiated under reserve or indemnity is of no concern to an issuing bank or confirming bank as it does not affect or influence the decision process of the issuing or confirming bank. To emphasize this point UCP 600 sub aticle 14 - r (a) clearly states that a confirming bank or an issuing bank must examine the presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. 86
  • 87. UCP 600 – Overview of Article 17 UCP 600 Article 17 Original Documents and Copies Based on concept in ICC Decision of Original Documents Article 17(a) makes clear that at least one of each document must be an original UCP 500 sub-Article 20(b) Unless otherwise stipulated in the Credit, banks will also accept as an original document(s), a document(s) produced or appearing to have been produced: i. by reprographic, automated or computerized systems; ii. As carbon copies; provided that it is marked as original and, where necessary, appears to be signed. 87
  • 88. UCP 600 – Overview of Article 17 UCP 600 Article 17 Original Documents and Copies Article 17(d) states that copies will be satisfied by either originals or copies (copies would include photocopies) Covered in Article 17(e) with emphasis on presentation of “at least one original....” UCP 500 sub-Article 20(c) i. Unless otherwise stipulated in the Credit, banks will accept as a copy(ies), a document(s) either labelled copy or not marked as an original – a copy(ies) need not be signed. ii. Credits that require multiple document(s) such as “duplicate”, “two fold”, “two copies” and the like, will be satisfied by the presentation of one original and the remaining number in copies except where the document itself indicates otherwise. 88
  • 89. UCP 600 – Overview of Article 18 UCP 600 Article 18 Commercial Invoice Definition of beneficiary Definition of applicant New (iii) stating that invoice must be in the same currency as the credit Old (iii) becomes (iv) UCP 500 Article 37 a. Unless otherwise stipulated in the Credit, commercial invoices: i. must appear on their face to be issued by the Beneficiary named in the Credit (except as provided in Article 48), and ii. must be made out in the name of the Applicant (except as provided in sub-Article 48(h)), and iii. need not be signed. 89
  • 90. UCP 600 – Overview of Article 18 UCP 600 Article 18 Commercial Invoice Emphasis is changed that banks may accept an invoice for a greater value, provided it has not honoured or negotiated for an amount in excess of the credit Covered in Article 18(c) with second sentence now appearing in Article 14(e) UCP 500 Article 37 b. Unless otherwise stipulated in the Credit, banks may refuse commercial invoices issued for amounts in excess of the amount permitted by the Credit. Nevertheless, if a bank authorised to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate under a Credit accepts such invoices, its decision will be binding upon all parties, provided that such bank has not paid, incurred a deferred payment undertaking, accepted Draft(s) or negotiated for an amount in excess of that permitted by the Credit. c. The description of the goods in the commercial invoice must correspond with the description in the Credit. In all other documents, the goods may be described in general terms not inconsistent with the description of the goods in the Credit. 90
  • 91. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport Article 1 – exclude or modify Indicate name of carrier On its face No reference to MTO – carrier or master only Authentication removed Consistent signing and capacity details No name of master UCP 500 Article 26 a. If a Credit calls for a transport document covering at least two different modes of transport (multimodal transport), banks will, unless otherwise stipulated in the Credit, accept a document, however named, which: i. appears on its face to indicate the name of the carrier or multimodal transport operator and to have signed or otherwise authenticated by: The carrier or multimodal transport operator or a named agent for or on behalf of the carrier or multimodal transport operator, or The master or a named agent for or on behalf of the master. Any signature or authentication of the carrier, multimodal transport operator or master must be identified as carrier, multimodal transport operator or master, as the case may be. An agent signing or authenticating for the carrier, multimodal transport operator or master must also indicate the name and capacity of the party i.e. carrier, multimodal transport operator or master, on whose behalf that agent is acting, and 91
  • 92. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport UCP 500 Article 26 ii. At the place stated in the credit Covered in Article 19(a)(ii) ii. Revised text appears in Article 19(a)(iii) – see next slide b. indicates that the goods have been dispatched, taken in charge or loaded on board. Dispatch, taking in charge or loading on board may be indicated by wording to that effect on the multimodal transport document and the date of issuance will be deemed to be the date of dispatch, taking in charge or loading on board and the date of shipment. However, if the document indicates, by stamp or otherwise, a date of dispatch, taking in charge or loading on board, such date will be deemed to be the date of shipment, and a. indicates the place of taking in charge stipulated in the Credit which may be different from the port, airport or place of lading, and the place of final destination stipulated in the Credit which may be different from the port, airport or place of discharge, and/or Contains the indication “intended” or similar qualification in relation to the vessel and/or port of loading and/or port of discharge, and 92
  • 93. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport Article 19(a)(iii): indicate the place of dispatch, taking in charge or shipment and the place of final destination stated in the credit, even if: a. b. the transport document states, in addition, a different place of dispatch, taking in charge or shipment or place of final destination, or the transport document contains the indication “intended” or similar qualification in relation to the vessel, port of loading or port of discharge. 93
  • 94. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport UCP 500 Article 26 iv. v. No reference to sail vi. Not necessary due to definition of complying presentation vii. consists of a sole original multimodal transport document or, if issued in more than one original, the full set as so issued, and appears to contain all of the terms and conditions of carriage, or some of such terms and conditions by reference to a source or document other than the multimodal transport document (short form/blank back multimodal transport document); banks will not examine the contents of such terms and conditions, and contains no indication that it is subject to a charter party and/or no indication that carrying vessel is propelled by sail only, and in all other respects meets the stipulations of the Credit. 94
  • 95. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport See next slide for revised transhipment clauses UCP 500 Article 26 b. Even if the Credit prohibits transhipment, banks will accept a multimodal transport document which indicates that transhipment will or may take place, provided that the entire carriage is covered by one and the same multimodal transport document. 95
  • 96. UCP 600 – Overview of Article 19 UCP 600 Article 19 Transport Document Covering at Least Two Different Modes of Transport Article 19(b) and (c): b. c. For the purpose of this article, transhipment means unloading from one means of conveyance and reloading to another means of conveyance (whether or not in different modes of transport) during the carriage from the place of dispatch, taking in charge or shipment to the place of final destinations as stated in the credit. i. A transport document may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same transport document. ii. A transport document indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment. 96
  • 97. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Article 1 exclude or modify On its face Indicate the carrier – see next slide Authentication removed Consistent signing and capacity details No name of master At the port of loading stated in the credit UCP 500 Article 23 a. If a Credit calls for a bill of lading covering a port-to-port shipment, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which: i. ii. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by: the carrier or a named agent for or on behalf of the carrier, or the master or a named agent for or on behalf of the master. Any signature or authentication of the carrier or master must be identified as carrier or master, as the case may be. An agent signing or authenticating for the carrier or master must also indicate the name and the capacity of the party i.e. carrier or master, on whose behalf that agent is acting, and Indicates that the goods have been loaded on board, or shipped on a named vessel. 97
  • 98. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Article 20(a)(i): i. indicate the name of the carrier and be signed by: • • the carrier or a named agent for or on behalf of the carrier, or the master or a named agent for or on behalf of the master. Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent. Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master. NOTE: consistent style for all transport articles 98
  • 99. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Covered in Article 20(a)(ii) Covered in Article 20(a)(ii) UCP 500 Article 23 Loading on board or shipment on a named vessel may be indicated by pre-printed wording on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment. In all other cases loading on board a named vessel must be evidenced by a notation on the bill of lading which gives the date on which the goods have been loaded on board, in which case the date of the on board notation will be deemed to be the date of shipment. If the bill of lading contains the indication “intended vessel”, or similar qualification in relation to the vessel, loading on board a named vessel must be evidenced by an on board notation on the bill of lading which, in addition to the date on which the goods have been loaded on board, also includes the name of the vessel on which the goods have been loaded, even if they been loaded on the vessel named as the “intended vessel”. 99
  • 100. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Covered in Article 20(a)(iii) Revised wording “If the bill of lading does not indicate the port of loading stated in the credit as the port of loading, or if it contains the indication “intended” or similar qualification in relation to the port of loading, an on board notation indicating the port of loading as stated in the credit, the date of shipment and the name of the vessel is required. This provision applies even when loading on board or shipment on a named vessel is indicated by pre-printed wording on the bill of lading” UCP 500 Article 23 If the bill of lading indicates a place of receipt or taking in charge different from the port of loading, the on board notation must also include the port of loading stipulated in the Credit and the name of the vessel on which the goods have been loaded, even if they have been loaded on the vessel named in the bill of lading. This provision also applies whenever loading on board the vessel is indicated by pre-printed wording on the bill of lading, and iii. indicates the port of loading and the port of discharge stipulated in the Credit, notwithstanding that it: a. b. indicates a place of taking in charge different from the port of loading, and/or a place of final destination different from the port of discharge, and/or contains the indication “intended” or similar qualification in relation to the port of loading and/or port of discharge, as long as the document also states the ports of loading and/or discharge stipulated in the Credit, and 100
  • 101. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading UCP 500 Article 23 iv. v. No reference to sail Not necessary due to definition of complying presentation vi. vii. consists of a sole original bill of lading or, if issued in more than one original, the full set as so issued, and appears to contain all of the terms and conditions of carriage, or some of such terms and conditions by reference to a source or document other than the bill of lading (short form/blank back bill of lading); banks will not examine the contents of such terms and conditions, and contains no indication that it is subject to a charter party and/or no indication that the carrying vessel is propelled by sail only, and in all other respects meets the stipulations of the Credit. 101
  • 102. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Covered in revised Article 20(b), (c) and (d) – see next slide UCP 500 Article 23 b. c. d. For the purpose of this Article, transhipment means unloading and reloading from one vessel to another vessel during the course of ocean carriage from the port of loading to the port of discharge stipulated in the Credit. Unless transhipment is prohibited by the terms of the Credit, banks will accept a bill of lading which indicates that the goods will be transhipped, provided that the entire ocean carriage is covered by one and the same bill of lading. Even if the Credit prohibits transhipment, banks will accept a bill of lading which: i. indicates that transhipment will take place as long as the relevant cargo is shipped in Container(s), Trailer(s) and/or “LASH” barge(s) as evidenced by the bill of lading, provided that the entire ocean carriage is covered by one and the same bill of lading, and/or ii. Incorporates clauses stating that the carrier reserves the right to tranship. 102
  • 103. UCP 600 – Overview of Article 20 UCP 600 Article 20 Bill of Lading Articles 20(b), (c) and (d): b. For the purpose of this article, transhipment means 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. c. i. A bill of lading may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same bill of lading. ii. A bill of lading indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment, if the goods have been shipped in a container, trailer or LASH barge as evidenced by the bill of lading. d. Clauses in a bill of lading stating that the carrier reserves the right to tranship will be disregarded. 103
  • 104. Bill of Lading 104
  • 105. Introduction When a credit requires port to port shipment, a bill of lading will be presented. In addition to reviewing the bill of lading against the terms and conditions of the credit, the document checker will also need to refer to article 20 of UCP 600. We will examine article 20 – Bill of Lading. 105
  • 106. However Named UCP 600 sub-article 20 (a) states that when a credit calls for a bill of lading, a bill of lading is acceptable ‘however’ named. For example, if the credit calls for an Ocean Bill of Lading and the document presented is named Liner Bill of Lading this would comply. 106
  • 107. Name and Signature When examining the bill of lading, the name of the carrier must appear to be indicated. The name of the carrier may be stated as a separate statement on the bill of lading i.e. “King Line – the Carrier” or in the manner the bill of lading is signed i.e. “For King Line – the Carrier”. The bill of lading must appear to have been signed by the carrier or the master, or a named agent acting for or on behalf of the carrier or master. Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master. It should be noted that where an agent signs for or on behalf of the master, there is no longer a need to state the name of the master. 107
  • 108. Shipped On Board The bill of lading must indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit. Shipped on board may be evidenced by a pre-printed wording to that effect. In this case the date of issue of the bill of lading is deemed to be the date of shipment. Alternatively, shipped on board may be evidenced by an on board notation indicating the date of shipment. In this case the date indicated in the on board notation will be taken as the date of shipment. The date indicated in the on board notation will be taken as the date of shipment irrespective of whether this date is before or after the date of issuance of the bill of lading. 108
  • 109. Intended Vessel Sometimes a bill of lading is not specific as to the name of the vessel and may indicate an “intended vessel” or similar qualification. Sub-article 20 (a) (ii) states that if the bill of lading contains the indication “intended vessel” or similar qualification in relation to the name of the vessel, an on board notation indicating the date of shipment and the name of the actual vessel is required. This is required even if the name of the actual vessel on which the goods have been shipped is the one stated in the bill of lading as the intended vessel. 109
  • 110. Port of Loading The port of loading in a bill of lading should be the same as that stated in the credit. It can happen that the bill of lading evidences a port of loading that is not the same as that indicated in the credit or has a qualification such as “intended port of loading”. In this event, the bill of lading must contain an on board notation which includes the port of loading indicated in the credit, the date of shipment and the name of the vessel. 110
  • 111. Original(s) Bills of lading are issued in sets of one or more originals – usually 3. UCP 600 sub-article 20 (a) (iv) states that if the credit calls for a bill of lading then the bill of lading presented must be the sole original bill of lading or, if issued in more than one original, be the full set as indicated on the bill of lading. 111
  • 112. Terms and Conditions Bills of lading are issued subject to terms and conditions which reflect the contract of carriage. UCP 600 sub a rticle 20 (a) (v) makes it clear that the document checker must verify that the bill of lading contains terms and conditions or carriage or that it makes reference to another source containing the terms and conditions of carriage. However, it is not necessary for a document checker to examine the contents of the terms and conditions of carriage. 112
  • 113. Charter Party A charter party is a contract under which the owner of a ship hires it to another party for a specific time or purpose. In such an event the bill of lading should make reference to the fact that it is subject to a charter party. UCP 600 sub-article 20 (a) (vi) stipulates that for a bill of lading to be acceptable under article 20, it must not appear to contain an indication that it is subject to a charter party. 113
  • 114. Transhipment During a port-to-port shipment, transhipment will often occur. UCP 600 sub-article 20 (b) provides a definition of transhipment where a bill of lading is presented. UCP 600 sub-article 20 (b) For the purpose of this article, transhipment means 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. Generally, credits will indicate whether transhipment is allowed or not. if a credit does not contain any condition in relation to transhipment, then transhipment is allowed. Even if a credit prohibits transhipment a bill of lading indicating that transhipment will or may take place is acceptable, provided the bill of lading indicates that the goods have been shipped in containers, trailers or LASH barges. 114
  • 115. UCP 600 – Overview of Article 21 UCP 600 Article 21 Non-Negotiable Sea Waybill UCP 500 Article 24 Same comments apply as for Article 20 – Bill of Lading 115
  • 116. UCP 600 – Overview of Article 22 UCP 600 Article 22 Charter Party Bill of Lading Changed opening – “containing an indication it is subject to a charter party” On its face Authentication removed New capacity/signer = Charterer No name of master UCP 500 Article 25 a. If a Credit calls for or permits a charter party bill of lading, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which: i. ii. contains any indication that it is subject to a charter party, and appears on its face to have been signed or otherwise authenticated by: the master or a named agent for or on behalf of the master, or the owner or a named agent for or on behalf of the owner. Any signature or authentication of the master or owner must be identified as master of owner as the case may be. An agent signing or authenticating for the master or owner must also indicate the name and the capacity of the party, i.e. master or owner, on whose behalf that agent is acting, and 116
  • 117. UCP 600 – Overview of Article 22 UCP 600 Article 22 Charter Party Bill of Lading No equivalent in Article 22 “....at the port of loading stated in the credit....” Covered in Article 22(a)(ii) UCP 500 Article 25 iii. iv. does or does not indicate the name of the carrier, and Indicates that the goods have been loaded on board or shipped on a named vessel. Loading on board or shipment on a named vessel may be indicated by preprinted wording on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment. In all other cases loading on board a named vessel must be evidenced by a notation on the bill of lading which gives the date on which the goods have been loaded on board, in which case the date of the on board notation will be deemed to be the date of shipment, and 117
  • 118. UCP 600 – Overview of Article 22 UCP 600 Article 22 Charter Party Bill of Lading Geographical or region as port of discharge is acceptable Reference to sail is deleted Not necessary due to definition of complying presentation Refined text in Article 22(b) – “A bank will not examine charter party contracts, even if they are required to be presented by the terms of the credit.” UCP 500 Article 25 v. vi. vii. viii. b. indicates the port of loading and the port of discharge stipulated in the Credit, and consists of a sole original bill of lading or, if issued in more than one original, the full set as so issued, and contains no indication that the carrying vessel is propelled by sail only, and in all other respects meets the stipulations of the Credit. Even if the Credit requires the presentation of a charter party contract in connection with a charter party bill of lading, banks will not examine such charter party contract, but will pass it on without responsibility on their part. 118
  • 119. UCP 600 – Overview of Article 23 UCP 600 Article 23 Air Transport Document Article 1 exclude or modify On its face Authentication removed Indicate the name of the carrier Signing capacities shown in Article 23(a)(i) Covered in Article 23(a)(ii) UCP 500 Article 27 a. If a Credit calls for an air transport document, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which: i. ii. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by: the carrier, or a named agent for or on behalf of the carrier. Any signature or authentication of the carrier must be identified as carrier. An agent signing or authenticating for the carrier must also indicate the name and the capacity of the party, i.e. carrier, on whose behalf that agent is acting, and indicates that the goods hae been accepted for carriage, and 119
  • 120. UCP 600 – Overview of Article 23 UCP 600 Article 23 Air Transport Document Date in a notation = date of shipment (whether requested by the credit or not) Any other information outside the notation, will not be considered for determining the date of shipment Covered in Article 22(a)(iv) UCP 500 Article 27 iii. iv. where the Credit calls for an actual date of dispatch, indicates a specific notation of such date, the date of dispatch so indicated on the air transport document will be deemed to be the date of shipment. For the purpose of this Article, the information appearing in the box on the air transport document (marked “For Carrier Use Only” or similar expression) relative to the flight number and date will not be considered as a specific notation of such date of dispatch. In all other cases, the date of issuance of the air transport document will be deemed to be the date of shipment, and indicates the airport of departure and the airport of destination stipulated in the Credit, and 120
  • 121. UCP 600 – Overview of Article 23 UCP 600 Article 23 Air Transport Document Covered in Article 23(a)(v) Covered in Article 23(a)(vi) Not necessary due to definition of complying presentation UCP 500 Article 27 v. appears to be the original for consignor/shipper even if the Credit stipulates a full set of originals, or similar expressions, and vi. appears to contain all of the terms and conditions of carriage, or some of such terms and conditions, by reference to a source or document other than the air transport document; banks will not examine the contents of such terms and conditions, and vii. In all other respects meets the stipulations of the Credit. 121
  • 122. UCP 600 – Overview of Article 23 UCP 600 Article 23 Air Transport Document UCP 500 Article 27 b. Covered in Article 23(b) and (c) – see next slide c. For the purpose of this Article, transhipment means unloading and reloading from one aircraft to another aircraft during the course of carriage from the airport of discharge to the airport of destination stipulated in the Credit. Even if the Credit prohibits transhipment, banks will accept an air transport document which indicates that transhipment will or may take place, provided that the entire carriage is covered by one and the same air transport document. 122
  • 123. UCP 600 – Overview of Article 23 UCP 600 Article 23 Air Transport Document Articles 23(b) and (c): b. c. For the purpose of this article, transhipment means unloading from one aircraft and reloading to another aircraft during the carriage from the airport of departure to the airport of destination stated in the credit. i. An air transport document may indicate that the goods will or may be transhipped, provided that the entire carriage is covered by one and the same air transport document. ii. An air transport document indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment. 123
  • 124. Air Transport Document 124
  • 125. Introduction When a credit requires a transport document covering shipment from an airport to an airport, an air transport document will be presented. In addition to reviewing the air transport document against the terms and conditions of the credit, the document checker will also need to refer to article 23 of UCP 600. We will examine article 23 – Air Transport Document. 125
  • 126. However Named UCP 600, sub-article 23 (a) states that when a credit calls for an air transport document, then an air transport document is acceptable “however” named. For example, if the credit calls for an Air Waybill and the document presented is named Air Consignment Note this would comply. 126
  • 127. Name and Signature When examining the air transport document, the name of the carrier must appear to be indicated. The name of the carrier may be stated as a separate statement on the air transport document i.e. “King Air Cargo – the Carrier” or in the manner the air transport document is signed i.e. “For King Air Cargo – the Carrier”. The air transport document must appear to have been signed by the carrier, or a named agent acting for or on behalf of the carrier. Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier. 127
  • 128. Date of Shipment The air transport document must indicate that the goods have been accepted for carriage and indicate a date of issuance. For example, an air transport document was issued on the 10th of August. Thus, 10th of August will be deemed to be the date of shipment unless the air transport document contains a specific notation of the actual date of shipment. In this event, the date stated in the notation, for example, 9th of August, then 9th of August will be deemed to be the date of shipment. If a specific notation exists on the air transport document, the date of shipment will be the date appearing in the notation i.e. 9th August. 128
  • 129. Flight Number and Date UCP 600 sub-article 23 (a) (iii) states that any information appearing on the air transport document relative to the flight number and date will not be considered in determining the date of shipment. The shipment date is deemed to be the date of shipment from the airport of departure to the airport of destination stated in the credit. 129
  • 130. Airports Indicated UCP 600, sub-article 23 (a) (iv) stipulates that an air transport document must indicate the airport of departure and the airport of destination stated in the credit. 130
  • 131. Original For Consignor UCP 600, sub-article 23 (a) (v) states that the air transport document must be the original for the consignor or shipper, even if the credit stipulates a full set of originals. 131
  • 132. Terms and Conditions Air transport documents are issued subject to terms and conditions which reflect the contract of carriage. UCP 600 sub-article 23 (a) (vi) makes it clear that the document checker must verify that the air transport document contains terms and conditions of carriage or that it makes reference to another source containing the terms and conditions of carriage. However, it is not necessary for a document checker to examine the contents of the terms and conditions of carriage. 132
  • 133. Transhipment During the air transport of goods from an airport of departure to the airport of destination, transhipment will often occur. UCP 600 sub-article 23 (b) provides a definition of transhipment where an air transport document is presented. UCP 600 sub-article 23 (b) For the purpose of this article, transhipment means unloading from one aircraft and reloading to another aircraft during the carriage from the airport of departure to the airport of destination stated in the credit. Generally, credits will indicate whether transhipment is allowed or not. If a credit does not contain any condition in relation to transhipment, then transhipment is allowed. Even if a credit prohibits transhipment, an air transport document indicating that transhipment will or may take place is acceptable, provided that the entire carriage is covered by one and the same air transport document. 133
  • 134. UCP 600 – Overview of Article 24 UCP 600 Article 24 Road, Rail or Inland Waterway Transport Document Article 1 exclude or modify On its face Authentication removed Article 24(a)(i) outlines the signing requirements and capacity identification UCP 500 Article 28 a. If a Credit calls for a road, rail, or inland waterway transport document, banks will, unless otherwise stipulated in the Credit, accept a document of the type called for, however, named, which: i. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by the carrier or a named agent for or on behalf of the carrier and/or to bear a reception stamp or other indication of receipt by the carrier or a named agent for or on behalf of the carrier. Any signature, authentication, reception stamp or other indication of receipt of the carrier, must be identified on its face as that of the carrier. An agent signing or authenticating for the carrier, must also indicate the name and capacity of the party, i.e. carrier on whose behalf that agent is acting, and 134
  • 135. UCP 600 – Overview of Article 24 UCP 600 Article 24 Road, Rail or Inland Waterway Transport Document Revised wording to capture – reception stamp, date of receipt or date of shipment Covered in Article 24(a)(iii) Not required due to definition of complying presentation Covered in Article 24(c) UCP 500 Article 28 ii. iii. iv. b. indicates that the goods have been received for shipment, dispatch or carriage or wording to this effect. The date of issuance will be deemed to be the date of shipment unless the transport document contains a reception stamp, in which case the date of the receptions stamp will be deemed to be the date of shipment, and indicates the place of shipment and the place of destination stipulated in the Credit, and in all other respects meets the stipulations of the Credit. In the absence of any indication on the transport document as to the numbers issued, banks will accept the transport document(s) presented as constituting a full set. Banks will accept as original(s) the transport document(s) whether marked as original(s) or not. 135
  • 136. UCP 600 – Overview of Article 24 UCP 600 Article 24 Road, Rail or Inland Waterway Transport Document Article 24(b) – new provisions i. ii. iii. A road transport document must appear to be the original for consignor or shipper or bear no marking indicating for whom the document has been prepared. A rail transport document marked “duplicate” will be accepted as original. A rail or inland waterway transport document will be accepted as an original whether marked as an original or not. 136
  • 137. UCP 600 – Overview of Article 24 UCP 600 Article 24 Road, Rail or Inland Waterway Transport Document UCP 500 Article 28 c. Changed to reflect transhipment must occur within the same mode – otherwise Article 19 applies Covered in Article 24(e) – see next slide d. For the purpose of this Article, transhipment means unloading and reloading from one means of conveyance to another means of conveyance, in different modes of transport, during the course of carriage from the place of shipment to the place of destination as stipulated in the Credit. Even if the Credit prohibits transhipment, banks will accept a road, rail or inland waterway transport document which indicates that transhipment will or may take place, provided that the entire carriage is covered by one and the same transport document and within the same mode of transport. 137
  • 138. UCP 600 – Overview of Article 24 UCP 600 Article 24 Road, Rail or Inland Waterway Transport Document Article 24(e)(i) and (ii): i. ii. A road, rail or inland waterway transport document may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same transport document. A road, rail or inland waterway transport document indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment. 138
  • 139. UCP 600 – Overview of Article 25 UCP 600 Article 25 Courier Receipt, Post Receipt or Certificate of Posting Article 25(c) covers the dispatch by post Not necessary due to definition of complying presentation UCP 500 Article 29 a. If a Credit calls for a post receipt or certificate of posting, banks will, unless otherwise stipulated in the Credit, accept a post receipt or certificate of posting which: i. ii. appears on its face to have been stamped or otherwise authenticated and dated in the place from which the Credit stipulates the goods are to be shipped or dispatched and such date will be deemed to be the date of shipment or dispatch, and in all other respects meets the stipulations of the Credit. 139
  • 140. UCP 600 – Overview of Article 25 UCP 600 Article 25 Courier Receipt, Post Receipt or Certificate of Posting Removal of expedited delivery service Covering receipt of goods for transport Article 1 exclude or modify On its face Authentication removed Not necessary due to definition of complying presentation UCP 500 Article 29 b. If a Credit calls for a document issued by a courier or expedited delivery service evidencing receipt of the goods for delivery, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which: i. appears on its face to indicate the name of the courier/service, and to have been stamped, signed or otherwise authenticated by such named courier/service (unless the Credit specifically calls for a document issued by a named Courier/Service, banks will accept a document issued by any Courier/Service), and ii. indicates a date of pick-up or of receipt or wording to this effect, such date being deemed to be the date of shipment or dispatch, and iii. In all other respects meets the stipulations of the Credit. 140
  • 141. UCP 600 – Overview of Article 26 UCP 600 Article 26 “On Deck”, “Shipper’s Load and Count”, “Said by Shipper to Contain” and Charges Additional to Freight Article 1 exclude or modify Change of emphasis in opening sentence “A bank will only accept a clean transport document” Covered in Article 26(b) Covered in Article 26(c) UCP 500 sub-Article 31(i) and (ii) Unless otherwise stipulated in the Credit, banks will accept a transport document which: i. does not indicate, in the case of carriage by sea or by more than one means of conveyance including carriage by sea, that the goods are or will be loaded on deck. Nevertheless, banks will accept a transport document which contains a provision that the goods may be carried on deck, provided that it does not specifically state that they are or will be loaded on deck, and/or ii. bears a clause on the face thereof such as “shipper’s load and count” or “said by shipper to contain” or words of similar effect. UCP 500 sub-Article 33(d) Banks will accept transport documents bearing reference by stamp or otherwise to costs additional to the freight, such as costs of, or disbursements incurred in connection with, loading, unloading or similar operations, unless the conditions of the Credit specifically prohibit such reference. 141
  • 142. UCP 600 – Overview of Article 27 UCP 600 Article 27 Clean Transport Documents Addition: A bank will only accept a clean transport document The word “clean” need not appear on a transport document Not necessary due to definition of complying presentation UCP 500 Article 32 a. b. c. A clean transport document is one which bears no clause or notation which expressly declares a defective condition of the goods and/or the packaging. Banks will not accept transport documents bearing such clauses or notations unless the Credit expressly stipulates the clauses or notations which may be accepted. Banks will regard a requirement in a Credit for a transport document to bear the clause “clean on board” as complied with if such document meets the requirements of this Article and of Articles 23, 24, 25, 26, 27, 28 or 30. 142
  • 143. UCP 600 – Overview of Article 28 UCP 600 Article 28 Insurance Documents and Coverage Insurance documents are described including declaration under open cover Agents or proxies Signing conditions similar to transport documents No cover notes accepted UCP 500 Article 34 a. b. c. d. Insurance documents must appear on their face to be issued and signed by insurance companies or underwriters or their agents. If the insurance document indicates that it has been issued in more than one original, all the originals must be presented unless otherwise authorised in the Credit. Cover notes issued by brokers will not be accepted, unless specifically authorised in the Credit. Unless otherwise stipulated in the Credit, banks will accept an insurance certificate or a declaration under an open cover pre-signed by insurance companies or underwriters or their agents. If a Credit specifically calls for an insurance certificate or a declaration under an open cover, banks will accept, in lieu thereof, an insurance policy. 143
  • 144. UCP 600 – Overview of Article 28 UCP 600 Article 28 Insurance Documents and Coverage Covered in Article 28(e) New condition – LC stating “insurance for 110%” = minimum of insurance coverage Covered in Article 28(f)(ii) Article 28(f)(iii) insurance must be covered at least between the two places/ports/airports stated in the credit UCP 500 Article 34 e. f. Unless otherwise stipulated in the Credit, or unless it appears from the insurance document that the cover is effective at the latest from the date of loading on board or dispatch or taking in charge of the goods, banks will not accept an insurance document which bears a date of issuance later than the date of loading on board or dispatch or taking in charge as indicated in such transport document. i. Unless otherwise stipulated in the Credit, the insurance document must be expressed in the same currency as the Credit. ii. Unless otherwise stipulated in the Credit, the minimum amount for which the insurance document must indicate the insurance cover to have been effected is the CIF or CIP value of the goods, as the case may be, plus 10%, but only when the CIF or CIP value can be determined from the documents on their face. Otherwise, banks will accept as such minimum amount of 110% of the amount for which payment, acceptance or negotiation is requested under the Credit, or 110% of the gross amount of the invoice, whichever is greater. 144
  • 145. UCP 600 – Overview of Article 28 UCP 600 Article 28 Insurance Documents and Coverage UCP 500 Article 35 a. Covered in Article 28(g) Banks will accept insurance documents with any exclusion clause Covered in Article 28(j) b. c. Credits should stipulate the type of insurance required and, if any, the additional risks which are to be covered. Imprecise terms such as “usual risks” or “customary risks” shall not be used; if they are used, banks will accept insurance documents as presented, without responsibility for any risks not being covered. Failing specific stipulations in the Credit, banks will accept insurance documents as presented, without responsibility for any risks not being covered. Unless otherwise stipulated in the Credit, banks will accept an insurance document which indicates that the cover is subject to a franchise or an excess (deductible). 145
  • 146. UCP 600 – Overview of Article 28 UCP 600 Article 28 Insurance Documents and Coverage Covered in Article 28(h) UCP 500 Article 36 Where a Credit stipulates “insurance against all risks”, banks will accept an insurance document which contains any “all risks” notation or clause, whether or not bearing the heading “all risks”, even if the insurance document indicates that certain risks are excluded, without responsibility for any risk(s) not being covered. 146
  • 147. Insurance Documents and Coverage 147
  • 148. Introduction Three different types of insurance documents are typically issued to cover the risks of goods being lost, damaged or stolen during international transport, these are: Insurance policies Insurance certificates Declarations under open cover When checking these documents under credits to establish compliance, document checkers will refer to article 28 of UCP 600. We will examine article 28 of UCP 600 – Insurance Documents and Coverage which is an amalgamation of articles 34, 35 and 26 of UCP 500. 148
  • 149. Issued and Signed Sub-article 28 (a) of UCP 600 states than an insurance policy, insurance certificate or a declaration under an open cover must appear to be issued and signed by an insurance company, an underwriter, or their agents or their proxies. Any signature by an agent or proxy must indicate whether the agent or proxy has signed for or on behalf of the insurance company or the underwriter. 149
  • 150. Number of Originals As in the case of transport documents, insurance documents can be issued in one or more originals. Sub a rticle 28 (b) of UCP 600 makes it clear that when the insurance document indicates that it has been issued in more than one original, all originals must be presented. If there is no indication of the number of originals issued, only one original must be presented. 150
  • 151. Cover Note Cover notes, such as those issued by an insurance broker, evidence insurance cover approval, however, they are not formal insurance documents, such as an insurance policy, an insurance certificate or a declaration under an open cover. Sub-article 28 (c) of UCP 600 makes it clear that cover notes will not be accepted by banks under a credit. UCP 600 sub-article 28 (c) Cover notes will not be accepted 151
  • 152. Insurance Policy An insurance policy is a contract of insurance cover. It provides full details of the insurance between the insurance company or underwriter and the insured party. Insurance certificates or a declaration under open cover do not contain full details of the insurance contract but are issued in respect of a shipment undertaken during the life of an insurance policy. UCP 600 sub-article 28 (d) An insurance policy is acceptable in lieu of an insurance certificate or a declaration under an open cover. 152
  • 153. Effective Cover Date Insurance documents must indicate the date on which the insurance cover becomes effective. In most instances, insurance cover is effective from the date of issuance of the insurance document itself. However, sometimes the insurance document contains a clause expressly stating the date on which the cover becomes effective. Sub-article 28 (e) of UCP 600 stipulates that the date of the insurance document must be no later than the date of shipment as evidenced on the transport document unless it appears from the insurance document that the cover is effective not later than the date of shipment. For the purposes of UCP 600 each of the transport articles (articles 19-25) defines what is the date of shipment for each document type. 153
  • 154. Amount and Currency Sub-article 28 (f) (i) of UCP 600 states that the insurance document must indicate the amount of insurance coverage and be in the same currency as the credit. Sub-article 28 (f) (ii) of UCP 600 stipulates that if there is no indication in the credit of the insurance coverage, the minimum amount of coverage required must be at least 110% of the CIF or CIP value of the goods and when the CIF or CIP value cannot be determined from the documents, the amount of coverage must be calculated on the basis of the amount for which honour or negotiation is requested or the gross value of the goods as shown on the invoice, whichever is greater. 154
  • 155. Cover Effective From/To Sub-article 28 (f) (iii) of UCP 600 states that 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 credit. 155
  • 156. Exclusions UCP 600, sub-article 28 (h) states when a credit requires insurance against “all risks” and an insurance document is presented containing any “all risks” notation or clause, whether or not bearing the heading “all risks”, the insurance document will be accepted without regard to any risks stated to be excluded. Sub-article 28 (i) stipulates that an insurance document may contain reference to any exclusion clause. Sub-article 28 (j) states that an insurance document may indicate that the cover is subject to a franchise or excess (deductible). 156
  • 157. UCP 600 – Overview of Article 29 UCP 600 Article 29 Extension of Expiry Date or Last Day for Presentation No material change from UCP 500 Covered in Article 29(a) Covered in Article 29(c) Covered in Article 29(b) UCP 500 Article 44 a. If the expiry date of the Credit and/or the last day of the period of time for presentation of documents stipulated by the Credit or applicable by virtue of Article 43 falls on a day on which the bank to which presentation has to be made is closed for reasons other than those referred to in Article 17, the stipulated expiry date and/or the last day of the period of time after date of shipment for presentation of documents, as the case may be, shall be extended to the first following day on which such bank is open. b. The latest date for shipment shall not be extended by reason of the extension of the expiry date and/or the period of time after date of shipment for presentation of documents in accordance with sub-Article (a) above. If no such latest date for shipment is stipulated in the Credit or amendments thereto, banks will not accept transport documents indicating a date of shipment later than the expiry date stipulated in the Credit or amendments thereto. c. The bank to which presentation is made on such first following business day must provide a statement that the documents were presented within the time limits extended in accordance with sub-Article 44(a) of UCPDC, 1993 Revision, ICC Publication No. 500. 157
  • 158. UCP 600 – Overview of Article 30 UCP 600 Article 30 Tolerance in Credit Amount, Quantity and Unit Prices UCP 500 Article 39 a. Deletion of “circa” b. Article 1 exclude or modify Article 1 exclude or modify Principle applies whether partial shipments allowed or not c. The words “about”, “approximately”, “circa” or similar expressions used in connection with the amount of the Credit or the quantity or the unit price stated in the Credit are to be construed as allowing a difference not to exceed 10% more or 10% less than the amount or the quantity or the unit price to which they refer. Unless a Credit stipulates that the quantity of the goods specified must not be exceeded or reduced, a tolerance of 5% more or 5% less will be permissible, always provided that the amount of the drawings does not exceed the amount of the Credit. This tolerance does not apply when the Credit stipulates the quantity in terms of a stated number of packing units or individual items. Unless a Credit which prohibits partial shipments stipulates otherwise, or unless sub-Article (b) above is applicable, a tolerance or 5% less in the amount of the drawing will be permissible, provided that if the Credit stipulates the quantity of the goods, such quantity of goods is shipped in full, and if the Credit stipulates a unit price, such price is not reduced. This provision does not apply when expressions referred to subArticle (a) above are used in the Credit. 158
  • 159. UCP 600 – Overview of Article 31 UCP 600 Article 31 Partial Drawings or Shipments Article 1 exclude or modify Clarification given in Article 31(b) that in the case of multiple presentations on same mode, latest date = date of shipment New rule where more than one mode used Covered in Article 31(c) UCP 500 Article 40 a. b. c. Partial drawing and/or shipments are allowed, unless the Credit stipulates otherwise. Transport documents which appear on their face to indicate that shipment has been made on the same means of conveyance and for the same journey, provided they indicate the same destination, will not be regarded as covering partial shipments, even if the transport documents indicate different dates of shipment and/or different ports of loading, places of taking in charge or dispatch. Shipments made by post or by courier will not be regarded as partial shipments if the post receipts or certificates of posting or courier’s receipts or dispatch notes appear to have been stamped, signed or otherwise authenticated in the place from which the Credit stipulates the goods are to be dispatched, and on the same date. 159
  • 160. UCP 600 – Overview of Article 32 UCP 600 Article 32 Instalment Drawings or Shipments Article 1 exclude or modify Article 3 Interpretations – singular/plural No change from UCP 500 UCP 500 Article 41 If drawings and/or shipments by instalments within given periods are stipulated in the Credit and any instalment is not drawn and/or shipped within the period allowed for that instalment, the Credit ceases to be available for that and any subsequent instalments, unless otherwise stipulated in the Credit. 160
  • 161. UCP 600 – Overview of Article 33 UCP 600 Article 33 Hours of Presentation Article 3 Interpretations – singular/plural No change from UCP 500 UCP 500 Article 45 Banks are under no obligation to accept presentation of documents outside their banking hours. 161
  • 162. UCP 600 – Overview of Article 34 UCP 600 Article 34 Disclaimer on Effectiveness of Documents Article 3 Interpretations – singular/plural Addition of “services or performance” to bring in line with Article 5 UCP 500 Article 15 Banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s), or for the general and/or particular conditions stipulated in the document(s) or superimposed thereon; nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of goods represented by any document(s), or for the good faith or acts and/or omissions, solvency, performance or standing of the consignors, the carriers, the forwarders, the consignees or the insurers of the goods, or any other person whomsoever. 162
  • 163. UCP 600 – Overview of Article 35 UCP 600 Article 35 Disclaimer on Transmission and Translation The two sentences that make up UCP 500 Article 16 have been split New addition to this rule covering loss of documents in transit – see next slide UCP 500 Article 16 Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of any message(s), letter(s) or document(s), or for delay, mutilation or other error(s) arising in the transmission of any telecommunication. Banks assume no liability or responsibility for errors in translation and/or interpretation of technical terms, and reserve the right to transmit Credit terms without translating them. 163
  • 164. UCP 600 – Overview of Article 35 UCP 600 Article 35 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, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour 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. 164
  • 165. UCP 600 – Overview of Article 36 UCP 600 Article 36 Force Majeure Addition of “Acts of Terrorism” as a force majeure event “Unless specifically authorised” has been deleted ICC National Committees were offered this version or one allowing 5 days after bank re-opened. This version was chosen UCP 500 Article 17 Banks assume no liability or responsibility for the consequences arising out of the interruption of their business by Acts of God, riots, civil commotions, insurrections, wars or any other causes beyond their control, or by any strikes or lockouts. Unless specifically authorised, banks will not, upon resumption of their business, pay, incur a deferred payment undertaking, accept Draft(s) or negotiate under Credits which expired during such interruption of their business. 165
  • 166. UCP 600 – Overview of Article 37 UCP 600 Article 37 Disclaimer for Acts of an Instructed Party “Banks” has been defined as the issuing bank or advising bank In UCP 500 Article 18(c), the word “party” has been replaced with “bank” and “beneficiary” respectively New rule covering issuance of LCs with request for charges to be collected in advance – “A credit or amendment should not stipulate that the advising to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges” UCP 500 Article 18 a. b. c. d. Banks utilizing the services of another bank or other banks for the purpose of giving effect to the instructions of the Applicant do so for the account and at the risk of such Applicant. Banks assume no liability or responsibility should the instructions they transmit not be carried out, even if they have themselves taken the initiative in the choice os such other bank(s). i. A party instructing another party to perform services is liable for any charges, including commissions, fees, costs or expenses incurred by the instructed party in connection with its instructions. ii. Where a Credit stipulates that such charges are for the account of a party other than the instructing party, and charges cannot be collected, the instructing party remains ultimately liable for the payment thereof. The Applicant shall be bound by and liable to indemnify the banks against all obligations and responsibilities imposed by foreign laws and usages. 166
  • 167. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits UCP 500 Article 48 a. (c) now forms the basis for Article 38(a) as this is the principle rule Definitions have been given for Transferable Credit, Transferring Bank and Transferred Credit – see next slide b. c. A transferable Credit is a Credit under which the Beneficiary (First Beneficiary) may request the bank authorised to pay, incur a deferred payment undertaking, accept or negotiate (the “Transferring Bank”), or in the case of a freely negotiable Credit, the bank specifically authorised in the Credit as a Transferring Bank, to make the Credit available in whole or in part to one or more other Beneficiary(ies) (Second Beneficiary(ies)). A Credit can be transferred only if it is expressly designated as “transferable” but the Issuing Bank. Terms such as “divisible”, “fractionable”, “assignable”, and “transmissible” do not render the Credit transferable. If such terms are used they shall be disregarded. The Transferring Bank shall be under no obligation to effect such transfer except to the extent and in the manner expressly consented to by such bank. 167
  • 168. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits Article 38(b): Transferable credit means a credit that specifically states it is “transferable”. A transferable credit may be made available in whole or in part to another beneficiary (“second beneficiary”) at the request of the beneficiary (“first beneficiary”). Transferring Bank means a nominated bank that transfers the credit or, in a credit available with any bank, a bank that is specifically authorised by the issuing bank to transfer and that transfers the credit. An issuing bank may be a transferring bank. Transferred credit means a credit that has been made available by the transferring bank to a second beneficiary. 168
  • 169. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits UCP 500 Article 48 d. Covered in Article 38(e). No longer a requirement for “irrevocable” instructions regarding amendments e. Covered in Article 38(f) Covered in Article 38(c) f. At the time of making a request for transfer and prior to transfer of the Credit, the Fist Beneficiary must irrevocably instruct the Transferring Bank whether or not he retains the right to refuse to allow the Transferring Bank to advise amendments to the Second Beneficiary(ies). If the Transferring Bank consents to the transfer under these conditions, it must, at the time of transfer, advise the Second Beneficiary(ies) of the First Beneficiary’s instructions regarding amendments. If a Credit is transferred to more than one Second Beneficiary(ies), refusal of an amendment by one or more Second Beneficary(ies) does not invalidate the acceptance(s) by the other Second Beneficiary(ies) with respect to whom the Credit will be amended accordingly. With respect to the Second Beneficiary(ies) who rejected the amendment, the Credit will remain unamended. Transferring Bank charges in respect of transfers including commissions, fees, costs or expenses are payable by the First Beneficiary, unless otherwise agreed. If the Transferring Bank agrees to transfer the Credit it shall be under no obligation to effect the transfer until such charges are paid. 169
  • 170. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits UCP 500 Article 48 g. Article 1 exclude or modify Covered in Article 38(d) Covered in Article 38(g) – on the terms and conditions specified “including confirmation” h. Unless otherwise stated in the Credit, a transferable Credit can be transferred once only. Consequently, the Credit cannot be transferred at the request of the Second Beneficiary to any subsequent Third Beneficiary. For the purpose of this Article, a retransfer to the First Beneficiary does not constitute a prohibited transfer. Fractions of a transferable Credit (not exceeding in the aggregate the amount of the Credit) can be transferred separately, provided partial shipments/drawings are not prohibited, and the aggregate of such transfers will considered as constituting only one transfer of the Credit. The Credit can be transferred only on the terms and conditions specified in the original Credit, with the exception of: the amount of the Credit, any unit price stated therein, the expiry date, the last date for presentation of documents in accordance with Article 43, the period of shipment, any or all of which may be reduced or curtailed. 170
  • 171. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits UCP 500 Article 48 Covered in Article 38(g) New wording in (g) such requirement must be reflected in the transferred credit Covered in Article 38(h) i. The percentage for which insurance cover must be effected may be increased in such a way as to provide the amount of cover stipulated in the original Credit, or these Articles. In addition, the name of the First Beneficiary can be substituted for that of the Applicant, but if the name of the Applicant is specifically required by the original Credit to appear in any document(s) other than the invoice, such requirement must be fulfilled. The First Beneficiary has the right to substitute his own invoice(s) (and Draft(s)) for those of the Second Beneficiary(ies), for amounts not in excess of the original amount stipulated in the Credit and for the original unit prices if stipulated in the Credit, an upon such substitution of invoice(s) (and Draft(s)) the First Beneficiary can draw under the Credit for the difference, if any, between his invoice(s) and the Second Beneficiary’s(ies’) invoice(s). 171
  • 172. UCP 600 – Overview of Article 38 UCP 600 Article 38 Transferable Credits Revised text to reflect that in the event of discrepancies in substituted documents, 1st beneficiary must replace on demand or 2nd beneficiary documents used Article 1 exclude or modify New (k) documents must be sent to the transferring bank – “Presentation of documents by or on behalf of a second beneficiary must be made to the transferring bank” UCP 500 Article 48 j. When a Credit has been transferred and the First Beneficiary is to supply his own invoice(s) (and Draft(s)) in exchange for the Second Beneficiary’s(ies’) invoice(s) (and Draft(s)) but fails to do so on first demand, the Transferring Bank has the right to deliver to the Issuing Bank the documents received under the transferred Credit, including the Second Beneficiary’s(ies’) invoice(s) (and Draft(s)) without further responsibility to the First Beneficiary. The First Beneficiary may request that payment or negotiation be effected to the Second Beneficiary(ies) at the place to which the Credit has been transferred up to and including the expiry date of the Credit, unless the original Credit expressly states that it may not be made available for payment or negotiation at a place other than that stipulated in the Credit. This is without prejudice to the First Beneficiary’s right to substitute subsequently his own invoice(s) (and Draft(s)) for those of the Second Beneficary(ies) and to claim any difference due to him. 172
  • 173. UCP 600 – Overview of Article 39 UCP 600 Article 39 Assignment of Proceeds No change from UCP 500 UCP 500 Article 49 The fact that a Credit is not stated to be transferable shall not affect the Beneficiary’s right to assign any proceeds to which he may be, or may become, entitled under such Credit, in accordance with the provisions of the applicable law. This Article relates only to the assignment of proceeds and not to the assignment of the right to perform under the Credit itself. 173
  • 174. UCP 600 – An Overview Thank You 174