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  • 1.
    • International Trade Settlement & Payment System
    • - Akshay Samant
  • 2.
    • Advance Payment
    • Open Account / On Account
    • Sales – Consignment Basis
    • Collection Method
    • - Documentary Collection
    • * Demand Bills
    • * Usance Bills
    • - Clean collection
    • Documentary Credit / Letters of Credit
    INTERNATIONAL TRADE SETTLEMENT AND PAYMENT SYSTEM
  • 3.
    • An arrangement at the request and on instructions of a customer
    • To make payment / authorise other bank to pay or negotiate
    • Against stipulated documents
    • Provided terms and conditions are complied with
    DOCUMENTARY CREDITS
  • 4.
    • Applicant (Opener / Importer)
    • Issuing Bank
    • Beneficiary (Exporter)
    • Advising Bank
    • Confirming Bank
    • Negotiating Bank
    • Reimbursing Bank
    PARTIES TO DOCUMENTARY CREDIT
  • 5.
    • Revocable / Irrevocable
    • Confirmed
    • Restricted / Unrestricted
    • Transferable
    • Back-to-back
    • Revolving
    • Deferred
    • Red Clause / Green Clause
    • Standby
    TYPES OF CREDIT
  • 6. COMPARING PAYMENT TERMS METHOD OF PAYMENT TIMING OF PAYMENT GOODS AVAILABILITY SELLERS’ RISK BUYERS’ RISK Advance Before Shipment At Destination Arrival None 100% Reliance on Seller Sight L/C Presentation of Docs after shipment When L/C is paid Minimal issuing / confirming bank obligation to pay if docs conform to L/C Assurance of Shipment, but depends on seller to supply goods ordered Usance L/C Maturity date or at discount of the draft At acceptance of draft drawn under the L/C Minimal bank obligation to pay if docs conform to L/C terms Regardless of product quality, payment due at maturity Collection Demand Bills When docs received are presented to the drawee When payment is made Non-payment of draft Assurance of shipment, but depends on seller to supply goods ordered Usance bills on D/A basis When accepted B/E matures At time B/E is accepted Non-payment of B/E, even though buyer has the merchandise Minimal, may refuse to pay at maturity Open A/c As per the arrangement Upon arrival Reliance on buyer Zero
  • 7. UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS UCP – 600
  • 8. INTERNATIONAL TRADE – ICC’S PUBLICATIONS
    • International Standard Banking Practice (ISBP) – for the examination of documents under Documentary Credits – Publication No.681
    • International Standby Practices (ISP 98) – Publication No.590
  • 9. INTERNATIONAL TRADE – ICC’S PUBLICATIONS
    • Uniform Customs and Practice for Documentary Credits – UCP 600
    • and
    • Supplement to UCP 600 for electronic presentation (eUCP 1.1 version)
    • Uniform Rules for Bank-to-Bank Reimbursement (URR 525)
  • 10. INTERNATIONAL TRADE – ICC’S PUBLICATIONS
    • Uniform Rules for Collection (URC 522)
    • INCOTERMS 2000
    • Uniform Rules for Demand Guarantees (URDG) – Publication No.458
  • 11.
    • Universally recognised set of guidelines governing Letters of Credit
    • Brochure framed by ICC, HQ at Paris.
    • ICC – World Business Organisation of non-govt. nature working towards Trade Liberalisation, Free & Fair competition
    • 1933 – revised in 1951, 1962, 1974, 1983,1993
    UCPDC – UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS
  • 12.
    • Latest Publication No.600, 2007 revision adopted w.e.f. 01/07/2007
    • L/C being one of the safe methods of settlements is commonly used in trade, hence UCPDC has become indispensable. Constructive delivery of goods since matching physical delivery with payment is not possible.
    • By handing over documents or transferring title or to control over the goods is possible under L/C mechanism.
    • UCPDC balances the interests of all parties to L/C and gives maximum possible guidance and assistance.
  • 13. TRIANGULAR CONTRACTUAL ARRANGEMENT EXPORTER SALE CONTRACT DEFINING TERMS IMPORTER ISSUING BANK ADVISING BANK L/C APPLICATION ISSUANCE OF THE LETTER OF CREDIT ADVICE OF OPENING LETTER OF CREDIT
  • 14. Letter Of Credit
  • 15. Letter of Credit
    • Instrument for settlement of trade payments
      • Payment made against documents
    • An undertaking
      • of a bank to make payments
        • subject to certain terms/ conditions
        • as per UCPDC guidelines
      • given on behalf of its clients (buyer/Importer)
      • given to a third party (Seller/ Exporter)
  • 16. Letters of Credit - Types
    • Revocable LC
      • can be cancelled / amended without beneficiary’s consent
    • Irrevocable LC
      • cannot be amended without the consent of all parties of LC
      • definite payment by LC issuing bank
      • LC construed as irrevocable unless specified as “Revocable”
    • Revolving LC
      • amount of drawings reinstated
      • to allow further drawings during the validity period of the LC
  • 17.
    • Usance LC
      • documents delivered against acceptance (DA)
      • payment made on due date of bill
    • Sight LC
      • documents delivered only against payment (DP)
    • Transferable LC
      • transferable to others by the first beneficiary
  • 18. Letters of Credit – Income Potential
    • Source of fee income for the bank
    • Charges/commission collected upfront
    Usance Charges Commitment Charges Retirement Charges Swift Charges Advising Charges Confirmation Charges Source of fee income
  • 19. Parties concerned with a credit
    • Applicant :means the party on whose request the credit is issued. It is normally the Buyer or Importer of goods
    • Beneficiary means the party in whose favour a credit is issued .Is is the seller or exporter of goods.
    • Advising bank means the bank that advises the credit at the request of the issuing bank
  • 20. Parties concerned with a credit
    • Confirming Bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.
    • Issuing Bank means the bank that issues a credit at the request of an applicant or on its own behalf
    • Nominated Bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.
  • 21. Parties concerned with a credit
    • Confirming Bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.
    • Issuing Bank means the bank that issues a credit at the request of an applicant or on its own behalf
    • Nominated Bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.
  • 22. Definition of Certain terms
    • 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.
  • 23. Definition of Certain terms
    • 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.
  • 24. Definition of Certain terms
    • Banking day means a day on which a bank is regularly open at the place at which an act subject to these rules is to be performed.
    • Presentation means either the delivery of documents under a credit to the issuing bank or nominated bank or the documents so delivered
  • 25. Basic Documents used in International Trade
  • 26. Basic Documents used in International Trade
    • In any trade, documents are used to record a written evidence of having carried out a transaction.
    • International trade is no exception.
    • Normally documents are required to satisfy two basic requirements.
      • Operational / commercial requirements
      • Regulatory requirements, trade / exchange control authorities.
  • 27.
    • Classification of documents
      • Financial documents, (drafts / bill of exchange)
      • Commercial documents (invoice)
      • Transport documents (bill of lading, airway bill)
      • Risk covering documents (inspection certificate, health certificate)
  • 28. Draft / Bill of Exchange
    • Bill of Exchange, Draft, Hundi.
    • Legal document
    • Section 5 NI Act
    • Drawer, Drawee, Payee
    • Basic functions
      • Collecting payment
      • Demanding payment
      • Extending credit
      • Promise of payment (DA)
      • Receipt of payment
  • 29.
    • Two sets, exclusion clause.
    • Sola of Exchange, sols, First of exchange.
    • Honor, dishonor, protest
  • 30. Draft
    • The Beneficiary should draw it as per the tenor stipulated in the credit.
    • It should be drawn on the party stated in the credit.
    • It should indicate the credit number and the name of the issuing bank.
    • The amount should not exceed the credit Value / Invoice Value unless as a result of sub article 18.b of UCP 600.
  • 31.
    • It should be properly stamped if it is on DA Basis.
    • Corrections and alteration on a draft, if any, must appear to have been authenticated by the drawer.
  • 32. Commercial Invoice
    • Record of a complete sale
    • Sellers bill for payment
    • Proforma invoice
    • Consular invoice – Philippines & south America
    • Custom invoice – USA, Canada
    • Legalized invoice
  • 33. Commercial Invoice
    • The Beneficiary as mentioned in the credit should draw the invoice except as provided in article 38 of UCP 600.
    • It should be drawn in the name of the applicant of credit.
    • The description of the goods services or performance in a commercial invoice must correspond with that appearing in the credit.
    • The reference number of the credit and the bank, which has issued the credit, should be mentioned in the invoice.
  • 34.
    • The invoice value should not exceed the letter of credit Value unless as a result of UCP 600 sub article 18.b.
    • Terms of contract such as CIF, CFR, and FOB should be clearly indicated in the invoice as mentioned in the credit.
    • Other particulars like Bill of Lading Number, Shipping Marks, Import License Number (if any), Gross Weight, Net Weight, etc, should be mentioned.
    • The invoice should conform to Article 18 of UCP 600 .
  • 35. Certificate of Origin
    • Indicates the origin where goods were originally produced / manufactured.
    • Independent agency – Chamber of Commerce, Export promotion council, Trade association or any other body which is authorized.
    • Permission to import is refused .
  • 36.
    • Used to determine the concessional tariff rates.
    • Some countries may not wish to use the goods of a particular country or enemy country.
  • 37. Certificate of Origin
    • That it is a unique document and not combined with any other document
    • That it is signed, notarized, legalized as required by the Documentary Credit.
    • That the data on it is consistent with that of the other documents.
    • That the country of origin is specified, and that it meets the requirements of the Documentary Credit.
  • 38. Packing List / Weight List / Etc.
    • Packing list
      • Mainly facilitate easy identification of goods in each package / container by the importer or customs.
      • Nature and number of packages with distinctive numbers or marks.
      • Importer is importing goods for ultimate direct distribution to various suppliers.
      • Custom to check the goods on random basis
  • 39.
    • Weight certificate
      • Document certifying the weight of goods.
      • At times countersigned by an independent agency.
      • Gives net & gross weight
      • Generally required in case of bulk goods like iron ore, food items.
      • Requirement of L/C
  • 40. Packing List / Weight List / Etc.
    • That it is a unique document and not combined with any other document
    • That it is signed of a certificate is called for, or as otherwise stated in the Documentary Credit.
    • That the data on it is consistent with that of the other documents.
    • That it corresponds with the requirement of the Documentary Credit. A detailed packing list requires a listing of the contents of each package, carton, etc. and other relevant information.
  • 41. Certificate of Inspection
    • Certifying having inspected the goods.
    • Importer can be sure that the right type of goods ordered are being sent by the exporter.
    • Quality Control – preshipment inspection – Export Inspection council
  • 42.
    • Export Inspection – specifications, samples approved, ISI specification.
    • Credit calls for inspection certificate, it should specify the authority
  • 43. Health Certificate
    • In respect of live animals or plants.
    • Certificate indicating health & transportability.
    • Required as per laws of either importers country or exporter country.
    • Other certificates of this category are – phytosanitary / fumigation / radiation
  • 44. Bill of Lading
    • Formal receipt given by the ship owner (evidence of receipt).
    • Document of title goods.
    • Quasi negotiable – not fully negotiable.
    • Represents title to goods but governed by sale of goods act.
    • Bills of Lading are issued in a set of 2 or 3 (void)
  • 45.
    • Received for shipment Bill of Lading
      • Merely received for shipment.
    • On board Bill of Lading
      • Goods have been put on board a ship for shipment
    • Short form of Bill of Lading
      • Terms and conditions of carriage not printed.
  • 46.
    • Clean Bill of Lading
      • No super-imposed clause or notation which expressly declares the defective condition of the goods and package
    • Claused Bill of Lading
      • Opposite to clean
      • Foul / dirty / unclean
      • Disclaim liability to deliver the goods in good order and condition
  • 47.
    • Through Bill of Lading.
      • Issued for the entire voyage covering several modes of transport / trans-shipment.
    • Straight Bill of Lading
      • Issued directly in the name of the consignee.
      • No endorsement either in blank or by the shipper.
  • 48.
    • Charter party Bill of Lading
      • Issued to charter party hired the space in the vessel full or in part
    • Lash Bill of Lading
      • Issued by operators
      • Goods put on barge to be carried and put on a parent vessel.
  • 49.
    • House Bill of Lading
      • Generally issued by an association of forwarding agencies or non vessel owning carriers (Shipping People)
      • Safe when issued subject to ICC rules
  • 50. Bill Of Lading
    • The bill of lading should be in sets with the number of non negotiable copies as stipulated in the credit.
    • The shipping company or its authorized agents should sign it.
    • It should be marked clean and should not have any indication to the defective conditions of package or goods, etc.
    • The description of the goods should be as per the credit requirement and should agree with the description in the invoice.
  • 51.
    • The credit should call for ‘Shipped on Board’ Bill of Lading.
    • ‘ Freight Prepaid’ or ‘Freight to be paid at Destination’ should be clearly indicated in the Bill of Lading as per the credit terms.
    • It should be to the order of the shipper blank endorsed or in favor of the issuing bank as stipulated in the credit.
    • Partial Shipment, transshipment, if it is to be prohibited it should be clearly indicated at the time of issuing credit.
  • 52.
    • Shipping marks if any, should be as called in the credit.
    • Gross weight / Net weight, etc. should be as per the invoice, Weight Certificate etc.
    • The date of shipment should be within the date stipulated in the credit.
    • Clear indication should be made in the credit stating that it will not accept document bearing a date of issuance prior to that of the credit.
  • 53. Airway Bill
    • Acknowledgement issued by an airline company / agent
    • Airway Bill is not a document of title to goods because it is merely an acknowledgement of goods.
    • Not negotiable document
    • Consignee need not posses the airway bill for taking delivery of the goods
  • 54. Air Consignment Note
    • Air receipt issued by the forwarding agents
  • 55. House Airway Bill
    • Receipt of goods issued not by the actual carriers but an intermediary cargo consolidating agent.
    • When shipped the airline company issues an airway bill called the master airway bill
    • Not safe a document as airway bill
  • 56. Multimodal transport document
    • Movement of goods involves more than one mode of transport.
    • Combined transport document
    • Document evidencing receipt of goods and not shipment on board
    • Negotiable document and issued on sets.
  • 57. Insurance Policy – Certificate
    • Is a contract of Insurance.
    • Promise to compensate in case the goods under movement subjected to loss, theft, damage etc.
    • In International trade – marine Insurance is the most common document.
    • Basic cover is perils of sea.
    • Policies are fully assignable to anyone who acquires insurable interest without notice to the underwriters.
  • 58.
    • The assignment is usually effected by blank endorsement.
    • Specific policy – policy issued for a particular voyage covering specific goods.
    • Open policy – blank policy for a specific amount and period and exporter can cover any number of shipments within the stipulated amt. & period.
    • Details of each shipment to be informed with premium if any.
    • Most commonly used.
  • 59. Insurance Policy – Certificate
    • Insurance Policy should be issued and signed by Insurance company or underwriters or Agents or proxies and it should be as per the terms of the credit.
    • Cover Notes will not be accepted.
    • It must not be dated later than the date of Bill of Lading on board the vessel. Otherwise it must have retrospective effect from the date of / on board / loading / the vessel.
  • 60.
    • The Insurance Policy should be expressed in the same currency as that of the credit.
    • It must cover at least 110% of the CIF Value of the goods.
    • The credit should indicate the particular risks to be covered – words Like ‘Usual Risks’ ; ‘All Risks’ should be avoided.
  • 61.
    • It should be blank endorsed.
    • It should cover the entire voyage (i.e. warehouse to warehouse) Institute Cargo Clause ‘A’ with additional War Clauses etc.
    • It must indicate the name of the Vessel, Bill of Lading, Number and Date, Shipping Marks, Description of the goods.
  • 62. Most Commonly Observed Discrepancies
    • Credit expired
    • Late shipment
    • Late presentation
    • Documents not marked original
    • In case of Transport Documents:
      • Not indicating the name of the vessel.
      • If issued to order, endorsement not complete.
      • Inconsistent in weight/measurement with other documents.
      • Claused bill of lading.
  • 63.
    • Airway bill
      • Not signed as agent of a named carrier.
      • Consigned to a wrong party.
      • Not presented within the stipulated time period.
    • Insurance
      • Certain risks not covered as required in the credit.
      • Certificate issued in lieu of the policy.
      • Not drawn in the same currency of the credit/drawings
      • Not covering 110% of the Invoice / drawing value.
      • Not covering from the date of shipment.
  • 64.
    • Invoice
      • Not marked original.
      • Goods description not mentioned as per credit terms.
      • Not signed even when the credit requires signed Invoice.
      • Amount differs with the Bill of Exchange.
      • Payment terms not properly mentioned.
    • Draft
      • Not drawn as per the requirement of the Credit.
      • Drawn on the wrong drawee.
      • Amount in words and figures differs.
      • Amount differs with the Invoice.
  • 65.
    • Other documents
      • Not issued by the specified issuer.
      • Inconsistent with each other.
  • 66. INCOTERMS 2000
  • 67. INTERNATIONAL TRADE
    • Contract For Local Carriage
    • Export Customs Clearance & Related Documentation
    • Contract Of International Carriage
    • Contract Of Insurance
    • Import Clearance
    • Contract Of Domestic Delivery
    BUYER SELLER CONTRACT OF SALE
  • 68. NEED FOR STANDARD TERMS
    • Different Trade Practices
    • Languages
    • Uncertainties Of Interpretations
        • Misunderstandings
        • Disputes
        • Litigation
        • Waste Of Time And Money
  • 69. INTERNATIONAL COMMERCIAL TERMS
    • Devised And Published By ICC
    • First Version Introduced In 1936
    • Updated Six Times
    • Latest Version Effective January 1, 2000
  • 70.
    • INCOTERMS
    • Set Of International Rules
    • Provide Mutual Confidence Between Business Partners
    • Deal With The Contract Of Sale
    • Do Not Deal With Consequences Of Breach Of Contract
    • Scope Is Limited To Tangibles
    • Clarify Responsibilities Between Buyer And Seller
      • Who Pays For What
      • Export And Import Clearance
      • Point Of Transfer Of Risk
  • 71. GUIDING PRINICIPLES
    • Deal Only With The Time And Place At Which Costs & Risks Are To Be Shifted From Seller to Buyer
    • Do Not Deal With Title Or Ownership
    • Goal Is To Impose Minimum Obligations On The Seller
    • Party Domiciled To Clear Goods For Customs
    • Two Distinct Groups To Avoid Confusions
  • 72. GUIDING PRINICIPLES …..CONTD
    • Variants Of Incoterms Can Be Created
    • Specifies That Terminal Handling Charges Are Not Covered
    • Incoterms 2000 Are Overridden By Specific Sales Contracts
    • Incoterms Are Voluntary
  • 73. REVISION OF THE TERMS
    • To Adapt To Contemporary Commercial Practice
    • INCOTERM 2000
    • Major Changes:
    • - Customs Clearnce And Duty Payment
    • Obligations Under FSA And DEQ
    • - Loading And Unloading Obligations
    • Under FCA
  • 74. GROUPING ‘ E’ DEPARTURE TERM EXW ‘ F’ MAIN CARRIAGE UNPAID FCA FAS FOB ‘ C’ MAIN CARRIAGE PAID CFR CIF CPT CIP ‘ D’ ARRIVAL AT DESTINATION DAF DES DEQ DDU DDP
  • 75.
    • THE STRUCTURE OF INCOTERMS 2000
    • 4 Groups of terms
    • Group E : Departure
    • EXW EX Works (….named place)
    • Group F : Main Carriage Unpaid
    • FCA Free Carrier (…named place)
    • FAS Free Alongside Ship (…named place)
    • FOB Free On Board (…named port of shipment)
    • Group C : Main Carriage Paid
    • CFR Cost and Freight (…named port of destination)
    • CIF Cost Insurance and Freight (…named port of destination)
    • CPT Carriage Paid To (…named place of destination)
    • CIP Carriage Insurance Paid To (…named place of destination)
    • Group D :
    • DAF Delivered at Frontier (…named place)
    • DES Delivered Ex Ship (…named port of destination)
    • DEQ Delivered Ex Quay (…named port of destination)
    • DDU Delivered Duty Unpaid (…named place of destination)
    • DDP (Delivered Duty Paid (…named place of destination)
  • 76.
    • The terms have been grouped in four basically different categories
      • E term – Seller makes the goods available to the buyer at the sellers own premises.
      • F term – Seller is called upon to deliver the goods to carrier appointed by the buyer.
  • 77.
      • C term – The seller has to contract for
      • carriage but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after the shipment & dispatch.
      • D term – The seller has to bear all costs and risks needed to bring the goods to the country of destination.
  • 78.
    • C terms are distinguishable from all other terms in that they contain two ‘critical’ points
      • One indicating the point to which seller is bound to arrange and bear the costs of a contract of carriage.
      • Another one for the allocation of risk.
  • 79.
    • Important distinction between the delivered terms –
      • Under D terms sellers delivery obligation extended to the country of destination.
      • Other trade terms the delivery obligation in his own country.
  • 80.  
  • 81. EXW - EX-WORKS …..NAMED PLACE Delivery At Seller’s Place Cost From Seller To Buyer When Goods Placed At Buyer’s Disposal Seller’s Obligations Buyer’s Obligations
    • Goods At Disposal Of Buyer At Named Place
    • Sufficient Notice To Buyer
    • Minimum Involvement
    • Take Delivery From Named Place
    • Carriage
    • Insurance
    • Maximum Involvement
    Risk Transfers When Goods Are At Disposal Of Buyer
  • 82. FCA - FREE CARRIER ….NAMED PLACE Multimodal Seller Delivers Good At Buyer’s Collecting Vehicle Cost Transferred To Buyer When Goods Delivered At The Named Place/Carrier Seller’s Obligations Buyer’s Obligations
    • Take Responsibility For Risks & Costs Up To Handover, Including Export Customs Clearance.
    • Deliver Goods To The Carrier Or Another Person Nominated By Buyer
    • Insurance Upto Delivery
    • Point
    • Main Carriage Arranged By Buyer/By Seller On Behalf Of Buyer
    • Insurance On Delivery
    • Risk Transfers When Goods Delivered To Carrier
  • 83. FAS - FREE ALONGSIDE SHIP…. NAMED PORT OF SHIPMENT Monomodal Delivery Of Cargo Alongside The Vessel Seller’s Obligations Buyer’s Obligations
    • Export Clearance
    • All Costs Upto Delivery, Including Costs Of Customs Formalities, Duties, Taxes, And Other Charges Payable Upon Export
    • All Costs & Risks Of Loss Or Damage After Delivery
    • Carriage
    • Insurance
    • Risk Transfer When Goods Placed Alongside Ship
  • 84. FOB - FREE ON BOARD … NAMED PORT OF SHIPMENT Monomodal Deliver Goods On Board Cost From Seller To Buyer When Goods Pass The Ship’s Rail Seller’s Obligations Buyer’s Obligations Seller To Clear The Goods For Export Carriage Insurance Risk Transfers When Goods Pass The Ship’s Rail
  • 85. CPT - CARRIAGE PAID TO… NAMED PLACE OF DESTINATION Multimodal Cost Transfer At The Place Of Destination In Buyer’s Country Seller’s Obligations Buyer’s Obligations
    • Carriage By Seller
    • Freight And Costs Of Loading
    • Export Clearance
    • Insurance
    • Import Clearance
    Risk Transfers When Goods Have Been Delivered To Carrier
  • 86. CIP - CARRIAGE & INSURANCE PAID… NAMED PLACE OF DESTINATION Multimodal Cost Transfer At The Place Of Destination In Buyer’s Country Seller’s Obligations Buyer’s Obligations
    • Carriage & Insurance
    • Freight And Costs Of Loading The Goods
    • Export Clearance
    • Import Clearance And Unloading Charges
    • Risk Transfers When Goods Have Been Delivered To Carrier
  • 87. CFR - COST AND FREIGHT… NAMED PORT OF DESTINATION Monomodal Cost Transfer At Port Of Destination Seller’s Obligations Buyer’s Obligations
    • Carriage And Freight
    • Export Clearance, Duties, Taxes
    • Insurance
    • Import Clearance , Duties, Taxes
    Risk Transfers When Goods Pass The Ship’s Rail
  • 88. CIF - COST, INSURANCE & FREIGHT… NAMED PORT OF DESTINATION Monomodal Cost Transfers At Port Of Destination Seller’s Obligations Buyer’s Obligations
    • Carriage
    • Insurance
    • Costs And Freight Necessary To Bring The Goods To The Named Port Of Destination
    • Any Additional Charges After Delivery
    • Import Clearance
    Risk Transfer When Goods Pass The Ship’s Rail
  • 89. DAF - DELIVERED AT FRONTIER… NAMED PLACE Multimodal Cost Transfers When Goods Delivered At Frontier Delivery At Frontier Seller’s Obligations Buyer’s Obligations
    • Carriage
    • Export Clearance
    • Import Clearance
    • Unloading Charges
    Risk Transfers When Goods Have Been Delivered At Frontier
  • 90. DES - DELIVERED EX-SHIP… NAMED PORT OF DESTINATION Monomodal Delivery On The Board Of The Ship At Port Of Destination Cost Transfer When Goods Placed On Board Seller’s Obligations Buyer’s Obligations
    • Carriage
    • Costs And Risks Involved In Bringing The Goods To The Named Port Of Destination
    • Import Formalities, Duties, Taxes And Other Charges Payable Upon Import Of The Goods
    Risk Transfers When Goods Placed On Board
  • 91. DEQ - DELIVERED EX QUAY… NAMED PORT OF DESTINATION Monomodal Deliver Goods On Quay At Buyer’s Destination Cost Transfer When Goods Placed On Quay Seller’s Obligations Buyer’s Obligations
    • Carriage By Seller
    • Costs And Risks Involved In Bringing The Goods To The Named Port Of Destination And Discharging The Goods On The Quay
    • Clear The Goods For Import And To Pay For All Formalities, Duties, Taxes And Other Charges Upon Import
    Risk Transfers When Goods Placed On The Quay
  • 92. DDU - DELIVERED DUTY UNPAID… NAMED PLACE OF DESTINATION Multimodal Delivery At Named Place Of Destination Cost Transfer When Goods Placed At Disposal Of Buyer Seller’s Obligations Buyer’s Obligations
    • Carriage
    • Export Clearance, Duties, Taxes And Other Charges Payable Upon Export
    • Import Clearance, Duties, Taxes And Other Charges Payable Upon Import Of The Goods
    Risk Transfers When Goods Placed At Disposal Of The Buyer
  • 93. DDP - DELIVERED DUTY PAID… NAMED PLACE OF DESTINATION Multimodal Delivery At Named Destination Point Cleared For Import Cost Transfer When Goods Placed At Disposal Of Buyer Seller’s Obligations Buyer’s Obligations
    • Carriage
    • Export And Import Clearance, Duties, Taxes And Other Charges
    • Maximum Obligation
    • Unloading
    • Minimum Obligation
    Risk Transfers When Goods Placed At Disposal Of The Buyer
  • 94. UCP 600 – Effective from 1 st July 2007 An OVERVIEW
  • 95. FEATURES
    • A leaner set of articles – 39 articles as against
    • 49 of UCP 500
    • Certain articles of UCP 500 deleted in UCP 600
    • New UCP 600 articles – now incorporated.
    • Simplified language.
    • Contents of certain UCP 500 articles have been merged/catered for in other ways.
  • 96. New articles incorporated in UCP 600
    • article 2 “Definitions”
    • article 3 “Interpretations”
    • article 9 “Advising of credits/amendments”
    • article 12 “Nomination”
    • article 15 “Complying Presentation”
    • article 17 “Original documents & copies”
  • 97. UCP 600
    • article 1 - Application of UCP
    • Reference to new publication - effective date 1 st July 2007.
    • UCP 600 introduces:
    • This credit is subject to UCP 600 or This credit is subject to UCP 600 ICC 2007 Revision unless excluded/modified in the credit
    • SWIFT: 40E – Applicable rules – UCP latest version
    • Continues to cover SBLC also.
  • 98. UCP 600
    • article 2 - Definitions
    • Concept of definitions - new to the UCP & avoids repetitive text. Some drawn from URR 525 / ISP 98.
    • “ Complying presentation”, no need to repeat “that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice” at each place
    • “ Honour” - The letter of credit (LC), when issued, should actually state how it is available i.e., by payment, acceptance or deferred payment and not state “by Honour”.
  • 99. UCP 600
    • article 2 – Definitions … (cont.)
    • “ Negotiation” Under UCP 500, the ICC Position Paper (No. 2) attempted to explain its correct application and the concept of ‘giving value’.
    • UCP 600 now defines it under article 2
    • “ Nominated bank” definition widens UCP 500 concept of “freely negotiable credits”. Under UCP 600, a credit could be available with any bank by payment, acceptance, deferred payment or negotiation, by use of the words “a credit available with any bank”. Hence, a nominated bank may or may not be a confirming bank
  • 100. UCP 600
    • article 3 – Interpretations
    • Aims to take the ambiguity out of vague / unclear language that appear in LC.
    • To provide a definite elucidation.
    • Singular includes plural and vice-a-versa
    • Branches of a bank in different countries are considered to be separate banks.
    • A few provisions of article 20 / 46 / 47 of UCP 500 shifted to article 3
  • 101. UCP 600
    • article 4 - Credits v. Contracts
    • A new rule to deter banks from allowing applicant to incorporate excessive goods descriptions, by attaching pro-forma invoices or contracts to LC or sending them to advising Bank after issuance by making it an integral part of LC (article 4.b.).
    • banks forced to review line by line goods detail to determine compliance as a result - not in line with international standard banking practice.
  • 102. UCP 600
    • article 5 - Documents v. Goods, Services or Performance
    • i t is the banks that make a decision based on the documents and have no concern as to the goods, services or performance to which they may relate (UCP 500 wording “In Credit operations all parties concerned deal with documents).
  • 103. UCP 600
    • article 6 - Availability, Expiry Date and Place for Presentation
    • a credit to specify a named bank with whom it is available or that it is available with any bank (freely available)
    • beneficiary may present documents to a nominated bank or issuing bank (new).
    • A credit must not be issued available by a draft drawn on the applicant.
  • 104. UCP 600
    • article 7 - Issuing Bank Undertaking
    • an issuing bank honours –
    • It does not negotiate. Negotiation is an act carried out by a confirming bank or nominated bank
    • article 7.c. …. Keeping in view provisions of article 12.b.
  • 105. UCP 600
    • article 8 - Confirming Bank Undertaking
    • confirming bank honours i.e., it pays at sight, incurs a deferred payment undertaking or accepts a draft OR negotiates
    • Negotiation by a confirming bank ( if available by negotiation with the confirming bank) or nominated bank
    • article 8.c. …. Keeping in view provisions of article 12.b.
  • 106. UCP 600
    • article 9 - Advising of Credits and Amendments
    • Separate article dealing with advising bank’s responsibilities in advising a credit and any amendment thereto. Introduces the role of a second advising bank.
    • that the advice accurately reflects the terms and conditions of the credit or amendment received”.
    • Advising bank to take due care to pass on all the relevant information received under a credit or amendment to the beneficiary or second advising bank
  • 107. UCP 600
    • article 10 – Amendments
    • If beneficiary notifies acceptance or rejection prior to presentation date, it follows this route - from second advising bank to advising bank or from advising bank to issuing bank.
    • partial acceptance of an amendment is deemed to be notification of rejection.
    • imposing time limits for acceptance/ rejection of amendments –wording like “unless beneficiary rejects this amendment within 7 days of this amendment date, it will be deemed to have been accepted” would be disregarded.
    • article 10.f. – time limit if any shall be disregarded.
  • 108. UCP 600
    • article 11 - Teletransmitted and Pre-Advised Credits and Amendments
    • article 12 – Nomination
    • Unless a nominated bank has confirmed the credit it has no obligation to honour or negotiate.
    • By issuing a credit available with a nominated bank or any bank, by deferred payment or acceptance of a draft, the issuing bank is explicit authorising a nominated bank to prepay/ purchase the deferred payment undertaking incurred, or draft that has been accepted.
  • 109. UCP 600
    • article 13 - Bank-to-Bank Reimbursement Arrangements
    • credit (and associated reimbursement authorisation, if any) to indicate the applicable bank-to-bank reimbursement rules (currently URR 525).
    • If not subject to ICC Rules – 13.b.
    • there should be no expiry date in a reimbursement authorisation
  • 110. UCP 600
    • article 14 - Standard for Examination of Documents
    • sub-article 14 (a) contains the only reference in UCP 600 to “appear on their face”.
    • Reference to ‘reasonable time’ has been removed from UCP.
    • Time limit for a bank to determine a complying presentation reduced from seven to five banking days following the day of receipt of the documents.
    • An original transport document subject to UCP 600 articles 19-25 must be presented not later than 21 days after the shipment date.
  • 111. UCP 600
    • article 14 (Cont.)
    • data linkage (14 (d)) - No mirror images required but it should not conflict. Banks to look at data in relation to the credit.
    • Addresses of the beneficiary and applicant – Under UCP 600 any address of the applicant or beneficiary will be acceptable provided it is in their respective countries.
    • article 14 (k) – UCP 600 widens the scope beyond a transport document to any document with a shipper or consignor being different from beneficiary.
  • 112. UCP 600
    • article 14 (Cont.)
    • article 14 (l) – to cater the provisions of article 30 of UCP 500. It allows any party i.e., a freight forwarder, NVOCC, etc. to issue a transport document if it meets the requirements of UCP 600 articles 19-25.
    • issues such as with or without recourse are outside UCP scope and are for agreement between the nominated bank and the beneficiary.
  • 113. UCP 600
    • article 15 - Complying Presentation
    • When a bank ( nominated/confirming/ issuing) determines a presentation as complying it should honour or negotiate.
    • Banks having determined compliance, the process of honour or negotiation should commence.
  • 114. UCP 600
    • article 16 - Discrepant Documents, Waiver and Notice
    • advice of discrepancies must be given in a single notice of refusal within 5 banking days
  • 115. UCP 600
    • article 16 (Cont.)
    • to act according to instructions previously received
    • issuing bank may indicate that they are holding documents until they receive applicant’s waiver and agree to accept it or until they receive instructions from the presenter, whichever earlier
    • After refusal of documents and requesting further instructions from the presenter or seeking waiver, UCP 600 allows issuing bank to return documents at any time
  • 116. UCP 600
    • article 17 - Original Documents and Copies
    • Mostly taken from the ICC Decision “The determination of an ‘Original’ document”
    • ‘ at least one original and the remaining number in copies’.
  • 117. UCP 600
    • article 18 - Commercial Invoice
    • beneficiary must present invoices in the currency of the credit.
    • a nominated bank may accept invoices for an amount in excess of the credit provided it has not honoured or negotiated for an amount in excess of that permitted by the credit.
  • 118. UCP 600
    • article 19 - Transport Document Covering at Least Two Different Modes of Transport
    • A transport document covering at least two different modes of transport defined in UCP 600 article 19 as a multimodal or combined transport document.
    • When an agent signs ‘for or on behalf of the master’ there is no longer a need for the name of the master to be quoted (common for all transport articles).
    • date of shipment - date of issuance of the transport document - unless, the transport document indicates, by stamp or notation, a date of dispatch, taking in charge or shipped on board, then, this date (common for all transport articles).
  • 119. UCP 600
    • article 20 - Bill of Lading
    • No specific reference to a bill of lading “covering a port-to-port shipment”
    • “ date of shipment” -The date of issuance of bill of lading unless it contains an on board notation indicating the date of shipment, in which case, the on board notation date is the date of shipment
    • Covers “intended port of loading” or where the port of loading stated in the credit does not appear in the corresponding box on the bill of lading and is quoted as the place of receipt or similar -
    • There is a requirement for a suitable on board notation .
    • ‘ Transhipment’.
  • 120. UCP 600
    • article 22 - Charter Party Bill of Lading
    • A new rule for UCP 600 is the signing of a charter party bill of lading by the charterer or a named agent on behalf of the charterer.
    • Charter party bills of lading seldom show the name of a carrier, hence, reference to the same is omitted in UCP 600.
    • Charter party bills of lading that it may indicate a discharge port within a range or geographical area of ports as stated in the credit.
    • A bank will not examine Charter Party contracts even if they are required to be presented by the terms of the credit.
  • 121. UCP 600
    • article 23 - Air Transport Document
    • The date of shipment will be considered to be the date of issuance unless the air transport document contains a specific notation of the actual date of shipment, in which case the date stated in the notation will be deemed to be the date of shipment
    • “ Any other information appearing on the air transport document relative to the flight number and date will not be considered in determining the date of shipment”.
  • 122. UCP 600
    • article 24 - Road, Rail or Inland Waterway Transport Documents
    • article 25 - Courier Receipt, Post Receipt or Certificate of Posting
    • article 26 - "On Deck", "Shipper's Load and Count", “Said by Shipper to Contain” and Charges Additional to Freight
  • 123. UCP 600
    • article 27 - Clean Transport Document
    • A transport document need not bear the word “clean” in order for it to be acceptable under a credit that requires the presentation of a “clean” transport document
  • 124. UCP 600
    • article 28 - Insurance Document and Coverage
    • UCP 600 brings in the concept of the signing of the insurance documents by a proxy .
    • Cover notes issued by any entity will not be allowed.
    • The amount of coverage (article 28.f.)
    • Risk coverage (article 28.h.)
    • Exclusion clause (article 28.i.)
  • 125. UCP 600
    • article 29 - Extension of Expiry Date or Last Day for Presentation
    • Will be extended to the first following banking day
    • The last date for shipment will not be extended
    • article 30 - Tolerance in Credit Amount, Quantity and Unit Prices
    • ‘ about’ – not the exceed 10% plus or minus then the amount/quantity/unit price
    • Tolerance not to exceed 5% plus or minus subject to --------
    • Tolerance – where part shipments are not allowed
    • article 31 - Partial Drawings or Shipments
    • Multiple transport documents evidencing shipment on the same means of conveyance, for the same journey and same destination NOT be considered to be a partial shipment.
    • A presentation consisting of one or more sets of transport documents evidencing shipment on more than one means of conveyance within the same mode of transport even though they depart from the same place, for the same destination, on the same date, IS a partial shipment.
  • 126. UCP 600
    • article 32 - Instalment Drawings or Shipments
    • Any installment not drawn/shipped within the period allowed for THAT installment, the credit ceases to be available for that and any subsequent installment
    • article 33 - Hours of Presentation
    • No obligation to accept outside of its banking hours
    • article 34 - Disclaimer on Effectiveness of Documents
    • No liability or responsibility for the form/sufficiency/accuracy/genuineness/falsification/legal effect of any document --------
  • 127. UCP 600
    • article 35 - Disclaimer on Transmission and Translation
    • No liability or responsibility for the delay/loss in transit/mutilation or other errors arising in the transmission of any message – when sent according to the requirements stated in the credit
    • Additional provisions - New paragraph (para 2 of article 35) – Documents lost in transit.
    • article 36 - Force Majeure
    • No liability or responsibility for – interruption of its business by Acts of God/riots/civil commotion/insurrections/wars/acts of terrorism --------
    • article 37 - Disclaimer for Acts of an Instructed Party
    • Emphasises that the issuing bank remains liable for payment of charges. UCP 600 seeks to stop issuing banks from inserting a clause that the advising of a credit or amendment to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges.
  • 128. UCP 600
    • article 38 - Transferable Credits
    • under a ‘transferable’ credit, no bank, including a confirming bank or an issuing bank , is under any obligation to transfer.
    • Defines Transferable credit, Transferring bank and Transferred credit.
    • An issuing bank may be a transferring bank.
  • 129. UCP 600
    • article 38 – (cont.)
    • UCP 600 refers to the transferred credit accurately reflecting the terms and conditions of the credit i.e., including the confirmation .
    • Presentation to the transferring bank – article 38 (k) documents of the second beneficiary must be routed through the transferring bank. Restricts the documents by-passing transferring bank and directly delivered to issuing bank denying substitution for first beneficiary.
  • 130. UCP 600
    • article 39 - Assignment of Proceeds
    • Relates only to assignment of proceeds and not to the assignment of the right to perform under the credit
  • 131. UCP 600 - an overview 1 JULY 2007
  • 132. UCP 600 Revision overview Commenced in May 2003 with ICC banking Commission approval Drafting Group – 9 members – Chair – Gary Collyer, Technical Advisor to ICC Banking Commission Consulting Group – 41 members from 26 countries 15 meetings by Drafting Group Over 5000 individual comments received and reviewed National Committees voted on various key issues specifically UCP 600 approved on 25 October 2006 at the Paris meeting by 91-0 votes to come into force w. e. f. 1 July 2007
  • 133. National committees asked to comment on the following issues- Negotiation On its face Reasonable time Parties or banks Relationship between ISBP and UCP 600 Discounting Deferred Payment undertakings Whether to split Article – 28 of UCP 500 Relevance of Article -30 of UCP 500 Capitalisation of defined terms in Article – 2 of UCP 600 Requirement for any new articles
  • 134. Key issues of interest to Letters of credit practitioners in UCP 600 UCP 500 articles omitted in UCP 600 Availability Standard for examination of documents Discrepant documents, waiver and notice Bill of lading Air transport documents Insurance documents
  • 135. UCP 500 Articles not incorporated in UCP 600 article 5 Instructions to Issue/amend credits article 8 Revocation article 12 Incomplete or Unclear instructions article 38 Other documents sub-article 6 (b) Revocable sub-article 14 (f) Payment under reserve/Indemnity sub-article 33 (a) (b-part) (c) (d-part) Freight Payable/prepaid sub-article 42 (c) Expiry date sub-article 46 (a) Expression of “shipment” UCP 500 articles 2,6,9,10,20,21,22,30,31,33,35,36,46 & 47 merged or provided for in other ways within the text of UCP 600.
  • 136. New UCP 600 articles not reflected in UCP 500 article 2 definitions article 3 interpretations article 9 advising of credits & amendments article 12 nomination article 15 complying presentation article 17 original documents & copies
  • 137.
    • Article 1 - Application of UCP
    • UCP 600 introduces:
    • the concept of no capitalisation
    • the use of words in the singular, wherever feasible,
    • the content as “ rules that apply to any documentary credit where there is an express indication within a credit that it is subject to UCP 600 unless excluded/modified in the credit
    • Examples of such express indication
    • SWIFT: 40E- Applicable rules – UCP latest version
    • telex or letter form: This credit is subject to UCP 600 or This credit is subject to UCP 600 ICC 2007 Revision
  • 138. Examples of Exclusion/Modification Insurance- sub-article 28 (c) “Cover notes will not be accepted” By stating “sub-article 28 (c) does not apply” UCP 600 sub-article 14 (i) “A document may be dated prior to the date of the credit, but must not be dated later than the date of its presentation” By stating “documents dated prior to credit date not acceptable” Applicability of SB LC issued subject to UCP 600 retained due to lack of global usage of the International Standby Practices (ISP98)
  • 139. Article 2 - Definitions (new) Concept of definitions - new to the UCP & avoids repetitive text. For example, by using the term “Complying presentation” , no need to repeat “that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice” at each place “ Honour” - means “to pay at sight”, “to incur a deferred payment undertaking and pay at maturity” or “to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity” . The letter of credit (LC), when issued, should actually state how it is available i.e., by payment, acceptance or deferred payment and not state “by Honour”.
  • 140. “ Negotiation” always carried confusion in its meaning. Under UCP 500, the ICC Position Paper (No. 2) attempted to explain its correct application and the concept of ‘giving value’ UCP 600 defines it as the advancing (immediate settlement - usually less interest) or agreeing to advance funds (settlement at a future date which is on or before the due date calculated according to the terms of the credit) issues such as with or without recourse are outside UCP scope and are for agreement between the nominated bank and the beneficiary “ Nominated bank” definition widens UCP 500 concept of “freely negotiable credits”. Under UCP 600, a credit could be available with any bank by payment, acceptance, deferred payment or negotiation, by use of the words “a credit available with any bank”. Hence, a nominated bank may or may not be a confirming bank
  • 141. Article 3 – Interpretations (new) new article to UCP UCP 600 does not recognise revocable credits - interpretation highlights this principle that a credit is irrevocable even if silent Branches of banks in different countries are considered to be separate banks to create a clear distinction in roles for the application of UCP 600 Usage of the words ‘prompt’, ‘immediately’ and ‘as soon as possible’ would be disregarded and now covers all areas in a credit except when required to be used as part of the wording on any document
  • 142. UCP 600 interprets the use of the words “from” and “after” In ‘after’ (and ‘before’) the date mentioned are considered to be excluded and ‘ from’ includes the date or dates mentioned, when used to determine a period for shipment. For example, if a credit states shipment to be effected from December 10, it would include December 10. If a credit states shipment to be effected after or before December 10, it would not include December 10 the use of ‘from’ and ‘after’ in respect of maturity dates follows the ISBP principle that in either event it excludes the date mentioned
  • 143. Article 4 - Credits v. Contracts A new rule to deter banks from allowing applicant to incorporate excessive goods descriptions, by attaching pro-forma invoices or contracts to LC or sending them to advising Bank after issuance by making it an integral part of LC banks forced to review line by line goods detail to determine compliance as a result - not in line with international standard banking practice
  • 144. Article 5 - Documents v. Goods, Services or Performance The essence of dealing with documentary credits - documents contain data and assessment of that data is the means by which banks determine compliance i t is the banks that make a decision based on the documents and have no concern as to the goods, services or performance to which they may relate ( as opposed to the UCP 500 wording “In Credit operations all parties concerned deal with documents )
  • 145. Article 6 - Availability, Expiry Date and Place for Presentation a credit to specify a named bank with whom it is available or that it is available with any bank (freely available) beneficiary may present documents to a nominated bank or issuing bank (new) a place for presentation stated in the credit which is other than that of issuing bank includes the offices of issuing bank . B eneficiary may present directly to issuing bank, but within the expiry of credit
  • 146. Article 7 - Issuing Bank Undertaking an issuing bank honours i.e., it pays at sight, incurs a deferred payment undertaking or accepts a draft. It does not negotiate. Negotiation is an act carried out by a confirming bank or nominated bank issuing bank responsible for reimbursement under an acceptance or deferred payment credit irrespective of whether a nominated bank has purchased or prepaid thereunder. Also, an issuing bank’s undertaking to a nominated bank is independent of its undertaking to the beneficiary
  • 147. Article 8 - Confirming Bank Undertaking confirming bank honours i.e., it pays at sight, incurs a deferred payment undertaking or accepts a draft OR negotiates Negotiation by a confirming bank ( if available by negotiation with the confirming bank) or nominated bank confirming bank responsible for reimbursement under an acceptance or deferred payment credit irrespective of whether another nominated bank has purchased or prepaid thereunder. Also, a confirming bank’s undertaking to another nominated bank is independent of its undertaking to the beneficiary
  • 148. Article 9 - Advising of Credits and Amendments (new) New - deals with advising bank’s responsibilities in advising a credit and any amendment thereto. Introduces the role of a second advising bank Scope of ‘reasonable care’, now expanded to include., “and that the advice accurately reflects the terms and conditions of the credit or amendment received”. Advising bank to take due care to pass on all the relevant information received under a credit or amendment to the beneficiary or second advising bank
  • 149. Article 10 – Amendments If beneficiary notifies acceptance or rejection prior to presentation date, it follows this route - from second advising bank to advising bank or from advising bank to issuing bank . If no notification given before presentation - nominated bank and the issuing bank to judge on their own and determine whether beneficiary had accepted/ rejected one or more amendments. partial acceptance of an amendment is deemed to be notification of rejection. imposing time limits for acceptance/ rejection of amendments –wording like “unless beneficiary rejects this amendment within 7 days of this amendment date, it will be deemed to have been accepted” would be disregarded
  • 150. Article 11 - Teletransmitted and Pre-Advised Credits and Amendments No major changes Article 12 – Nomination (New) Unless a nominated bank has confirmed the credit it has no obligation to honour or negotiate. A nominated bank may commit beyond what is requested by the issuing bank but must communicate this fact to beneficiary in their advice of the credit/ amendment or separate communication. By issuing a credit available with a nominated bank or any bank, by deferred payment or acceptance of a draft, the issuing bank is explicit authorising a nominated bank to prepay/ purchase the deferred payment undertaking incurred, or draft that has been accepted . Onus on applicant to ensure KYC
  • 151. Article 13 - Bank-to-Bank Reimbursement Arrangements ( UCP 500 Article – 19) credit (and associated reimbursement authorisation, if any) to indicate the applicable bank-to-bank reimbursement rules (currently URR 525). there should be no expiry date in a reimbursement authorisation
  • 152. Article 14 - Standard for Examination of Documents sub-article 14 (a) contains the only reference in UCP 600 to “appear on their face”. Reference to ‘reasonable time’ has been removed from UCP. Time limit for a bank to determine a complying presentation reduced from seven to five banking days following the day of receipt of the documents. An original transport document subject to UCP 600 articles 19-25 must be presented no later than 21 days after the shipment date. copy transport document would not be subject to this rule.
  • 153. data linkage (14 (d)) - No mirror images required but it should not conflict. Banks to look at data in relation to the credit, the document and international standard banking practice (not just the ISBP) Addresses of the beneficiary and applicant – Under UCP 600 any address of the applicant or beneficiary will be acceptable provided it is in their respective countries. shipper or consignor on a transport document being different from beneficiary - UCP 600 widens the scope beyond a transport document to any document with a shipper or consignor field. The UCP 600 has no equivalent article of UCP 500 article 30 (Transport Documents issued by Freight Forwarders). It allows any party i.e., a freight forwarder, NVOCC, etc. to issue a transport document if it meets the requirements of UCP 600 articles 19-25 .
  • 154. Article 15 - Complying Presentation (new) When a bank ( nominated/confirming/issuing) determines a presentation as complying it should honour or negotiate. Due to removal of ‘reasonable time’ in UCP 600, banks having determined compliance, the process of honour or negotiation should commence.
  • 155. Article 16 - Discrepant Documents, Waiver and Notice UCP 500 article 14 attracted maximum requests for ICC opinions UCP 600 article 16 is the equivalent with revised text. ICC 2002 document on “Examination of Documents, Waiver of Discrepancies and Notice under UCP 500 helped in its drafting advice of discrepancies must be given in a single notice of refusal within 5 banking days UCP 600 provides 4 alternative courses of action as opposed to 2 in UCP 500 . In addition to returning the documents or holding them pending further instructions (no requirement to hold the documents at the disposal of the presenter), it provides two further options
  • 156.
    • to act according to instructions previously received
    • issuing bank may indicate that they are holding documents until they receive applicant’s waiver and agree to accept it or until they receive instructions from the presenter, whichever earlier
    • After refusal of documents and requesting further instructions from the presenter or seeking waiver, UCP 600 allows issuing bank to return documents at any time (However, to be used with discretion)
  • 157. Article 17 - Original Documents and Copies (new) Mostly taken from the ICC Decision “The determination of an "Original" document Maintains the principle of ‘at least one original and the remaining number in copies’.
  • 158. Article 18 - Commercial Invoice beneficiary must present invoices in the currency of the credit. a nominated bank may accept invoices for an amount in excess of the credit provided it has not honoured or negotiated for an amount in excess of that permitted by the credit. UCP 500 sub-article 37 (c) wording has been removed and placed as a rule under UCP600 sub-article 14 (e) as it deals with a goods description appearing on documents other than a commercial invoice.
  • 159. Article 19 - Transport Document Covering at Least Two Different Modes of Transport A transport document covering at least two different modes of transport defined in UCP 600 article 19 as a multimodal or combined transport document. When an agent signs ‘for or on behalf of the master’ there is no longer a need for the name of the master to be quoted (common for all transport articles) . date of shipment - date of issuance of the transport document - unless, the transport document indicates, by stamp or notation, a date of dispatch, taking in charge or shipped on board, then, this date (common for all transport articles) .
  • 160. should not contain any indication that it is subject to a charter party (common for all transport articles except Article – 22 Charter party) . Reference to propelled by sail in UCP 500 dropped as it is considered an outdated practice in the present day context (common for all transport articles) . transhipment - “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 destination stated in the credit” in the context of a shipment involving at least two different modes of transport.
  • 161. Article 20 - Bill of Lading No specific reference to a bill of lading “covering a port-to-port shipment” (to create awareness to call for a multimodal or combined transport document per UCP 600 article 19 where goods are to be carried from an Inland location) “ date of shipment” -The date of issuance of bill of lading unless it contains an on board notation indicating the date of shipment, in which case, the on board notation date is the date of shipment Covers “intended port of loading” or where the port of loading stated in the credit does not appear in the corresponding box on the bill of lading and is quoted as the place of receipt or similar - There is a requirement for a suitable on board notation . ‘ Transhipment’ - position like UCP 500 Article 21 - Non-Negotiable Sea Waybill - No major changes
  • 162. Article 22 - Charter Party Bill of Lading A new rule for UCP 600 is the signing of a charter party bill of lading by the charterer or a named agent on behalf of the charterer . Charter party bills of lading seldom show the name of a carrier , hence, reference to the same is omitted in UCP 600. date of shipment -“The date of issuance of the charter party bill of lading unless it contains an on board notation indicating the date of shipment, in which case on board notation date will be the date of shipment” introduces a rule only applicable to charter party bills of lading that it may indicate a discharge port within a range or geographical area of ports as stated in the credit
  • 163. Article 23 - Air Transport Document The date of shipment will be considered to be the date of issuance unless the air transport document contains a specific notation of the actual date of shipment, in which case the date stated in the notation will be deemed to be the date of shipment “ Any other information appearing on the air transport document relative to the flight number and date will not be considered in determining the date of shipment”. A major change in UCP 600 is now in line with the other transport documents. If there is a notation indicating a flight date, then this date will be considered as the date of shipment, even if such notation was not required by the credit. Transhipment - position remains the same
  • 164. Article 24 - Road, Rail or Inland Waterway Transport Documents (UCP 500 Article 28) signature by the carrier or a named agent for or on behalf of the carrier, or indication of receipt of goods by signature, stamp or notation by the carrier or a named agent for or on behalf of the carrier would complete authentication “ In a rail transport document, as any signature or stamp of the railway company will be accepted as that of the carrier”. a rail transport document may be marked ‘duplicate’ as opposed to ‘original’
  • 165. date of shipment i.e., the road, rail or inland waterway transport document must indicate the date of shipment or the date the goods have been received for shipment, dispatch or carriage at the place stated in the credit. Unless the transport document contains a dated reception stamp, an indication of the date of receipt or a date of shipment , the date of issuance of the transport document will be deemed to be the date of shipment. Transhipment - unloading from one means of conveyance and reloading to another occurs within the same mode of transport . Under UCP 500, it was within different modes of transport.
  • 166. Article 25 - Courier Receipt, Post Receipt or Certificate of Posting UCP 600 rule covers the issuance of courier receipts where there is a shipment of goods involved . This rule does not cover situations where a courier receipt is required by the credit as evidence of having sent copy or original documents to the applicant or issuing bank. date of shipment i.e., in respect of a courier receipt “indicate the name of the courier service and be stamped or signed by the named courier service at the place from which the credit states the goods are to be shipped” and for a post receipt or certificate of posting a document that appears “to be stamped or signed and dated at the place from which the credit states the goods are to be shipped. This date will be deemed to be the date of shipment”.
  • 167. Article 26 - "On Deck", "Shipper's Load and Count", “Said by Shipper to Contain” and Charges Additional to Freight Provides a definitive rule “A transport document must not indicate that the goods are or will be loaded on deck” as compared to the wording of UCP 500 sub-article 31 (i). Under UCP 500, a transport document evidencing as consignor of the goods a party other than the beneficiary was acceptable. Under UCP 600 sub-article 14 (k) any document that evidences a consignor or shipper different to that of the beneficiary will be acceptable.
  • 168. Article 27 - Clean Transport Document (UCP 500 article 32 ) a transport document need not bear the word “clean” in order for it to be acceptable under a credit that requires the presentation of a “clean” transport document
  • 169. Article 28 - Insurance Document and Coverage UCP 600 article 28 combines articles 34, 35 and 36 of UCP 500. UCP 600 brings in the concept of the signing of the insurance documents by a proxy (as opposed to an agent) on behalf of an insurance company or underwriter. widened the scope of not allowing cover notes. Cover notes issued by any entity will not be allowed.
  • 170. The requirements for the currency of the insurance document, the amount of the coverage and the means to calculate the same, if not evident from the documents or the credit, is given in UCP 600 basing on the ISBP. 110% of the invoice value", is considered the minimum unless LC insists on exact %. risks are to be 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. creates a rule that even where the credit may specify the insurance clauses that are to be covered and the insurance document covers those clauses it may evidence exclusions thereto.
  • 171. Article 29 - Extension of Expiry Date or Last Day for Presentation No major changes Article 30 - Tolerance in Credit Amount, Quantity and Unit Prices word ‘circa’ removed due to the limited usage – no major changes. Article 31 - Partial Drawings or Shipments multiple transport documents evidencing shipment on the same means of conveyance, for the same journey and same destination not be considered to be a partial shipment. Multiple transport documents evidencing shipment on more than one means of conveyance within the same mode of transport even though they depart from the same place, for the same destination, on the same date, is a partial shipment.
  • 172. Article 32 - Instalment Drawings or Shipments (UCP 500 article 41) No Changes Article 33 - Hours of Presentation Banking hours are not defined in the rules but banking day is Article 34 - Disclaimer on Effectiveness of Documents No major Changes
  • 173. Article 35 - Disclaimer on Transmission and Translation Provides protection where a nominated bank that acts in accordance with its nomination, honours or negotiates but documents are lost in transit between them and an issuing or confirming bank Article 36 - Force Majeure ( UCP 500 Article – 17) ‘ acts of terrorism’ added as a force majeure event. Article 37 - Disclaimer for Acts of an Instructed Party Emphasises that the issuing bank remains liable for payment of charges”. Under UCP 500 banks, often, included a clause that the advising bank must collect their fees prior to advising to the beneficiary or the issuing bank would not pay them. UCP 600 seeks to stop issuing banks from inserting such clauses in their credit
  • 174. Article 38 - Transferable Credits under a ‘transferable’ credit, no bank, including a confirming bank or an issuing bank , is under any obligation to transfer Defines Transferable credit, Transferring bank and Transferred credit. Even if a credit names a transferring bank, it does not stop an issuing bank, that is willing to transfer, from transferring in the event that the named transferring bank declines to transfer UCP 600 refers to the transferred credit accurately reflecting the terms and conditions of the credit i.e., including the confirmation . new rule under UCP 600 is that documents of the second beneficiary must be routed through the transferring bank . Restricts the documents by-passing transferring bank and directly delivered to issuing bank denying substitution for first beneficiary
  • 175. Article 39 - Assignment of Proceeds There is no change to the position given in UCP 500 article 49.
  • 176. THANK YOU