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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
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
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
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
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
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
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
Reserve or Indemnity – UCP 500 Sub
- article 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
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
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
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
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
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
UCP 600 Articles not found in UCP 500

 Article 2 Definitions
 Article 3 Interpretations
 Article 9 Advising of Credits and Amendments
 Article 12 Nomination
 Article 15 Complying Presentation
 Article 17 Original Documents and Copies

14
UCP 600 – Overview of Article 1
UCP 600 Article 1 UCP 500 Article 1
Application of UCP
The Uniform Customs and Practice for
 Publication Number & Date of Revision Documentary Credits, 1993 Revision,
 Modify or Exclude – The concept in ICC Publication No 500 shall apply to
UCP 600 is that a rule is a rule, thus all Documentary Credits (including to
UCP 600 allows for any rule to be the extent to which they may be
modified or excluded by the terms & applicable, Standby Letter(s) of Credit)
conditions of a credit where they are incorporated into the
text of the Credit. They are binding
 Applicable when the LC expressly on all parties thereto, unless otherwise
indicates that it is subject to these expressly stipulated in the Credit.
“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

15
UCP 600 – Overview of Article 2
UCP 600 Article 2
Definitions

 Advising Bank  Credit


 Applicant*  Honour*
 Banking Day*  Issuing Bank
 Beneficiary  Negotiation*
 Complying  Nominated Bank
Presentation*  Presentation
 Confirmation  Presenter
 Confirming Bank

16
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
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
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
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
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
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
UCP 600 – Overview of Article 4
UCP 600 Article 4 UCP 500 Article 3
Credits v. Contracts a. Credits, by their nature are separate
transactions from the sales or other
Addition: contract(s) on which they may be
based and banks are in no way
 An issuing bank should concerned with or bound by such
discourage any attempt by contract(s), even if any reference
the applicant to include, as whatsoever to such contract(s) is
included in the Credit. Consequently,
an integral part of the the undertaking of a bank to pay,
credit, copies of the accept and pay Draft(s) or negotiate
underlying contract, and/or to fulfil any other obligation
proforma invoice and the under the Credit, is not subject to
claims or defences by the Applicant
like. 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
UCP 600 – Overview of Article 5
UCP 600 Article 5 UCP 500 Article 4
Documents v. Goods, In Credit operations all
Services or Performance parties concerned deal with
documents, and not with
 Banks deal with documents, goods, services and/or
other parties deal with performances to which the
documents and/or goods. documents may relate.
 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.

24
UCP 600 – Overview of Article 6
UCP 600 Article 6 UCP 500 sub-Articles 10(a) and (b)(i)
Availability, Expiry Date and Place for All Credits must clearly indicate
Presentation whether they are available by sight
payment, by deferred payment, by
 Same principle in acceptance or by negotiation
Article 6(b) Unless the Credit stipulates that it is
 Always available with available only with the Issuing Bank,
all Credits must nominate the bank
issuing bank (the “Nominated Bank”) which is
authorised to pay, to incur a deferred
 Freely available credits payment undertaking, to accept
Draft(s) or to negotiate. In a freely
as opposed to freely negotiable Credit any bank is a
negotiable Nominated Bank.

 Stronger wording UCP 500 sub-Articles 9(a)(iv) and 9(b)(iv)


“must not” and no A Credit should not be issued available
by Draft(s) on the Applicant. If the
reference to additional Credit nevertheless calls for Draft(s)
on the Applicant, banks will consider
document such Draft(s) as an additional
document(s).

25
UCP 600 – Overview of Article 6
UCP 600 Article 6 UCP 500 sub-Articles 42(a) and (b)
Availability, Expiry Date and Place a. All Credits must stipulate an
for Presentation expiry date and a place for
presentation of documents for
 Covered in Article payment, acceptance, or with the
6(d)(i) and (ii) exception of freely negotiable
Credits, a place for presentation
 A place other than the of documents for negotiation. An
expiry date stipulate for
issuing bank includes payment, acceptance or
the place of the issuing negotiation will be construed to
bank express an expiry date for
presentation of documents.
 Covered in Article 6(e)
b. Except as provided in sub-Article
44(a), documents must be
presented on or before such
expiry date.

26
Availability

27
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
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
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
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
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
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
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
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
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
UCP 600 – Overview of Article 7
UCP 600 Article 7  UCP 500 sub-Article 9(a)
Issuing Bank Undertaking a. An irrevocable Credit constitutes a definite
undertaking of the Issuing Bank, provided
that the stipulated documents are presented
 Definition of credit to the Nominated Bank or to the Issuing Bank
and that the terms and conditions of the
 An issuing bank Credit are complied with:
i. if the Credit provides for sight payment
‘honours’ – it does not – to pay at sight;
ii. if the Credit provides for deferred
negotiate payment – to pay on the maturity
date(s) – determinable in accordance
 Refined wording to iii.
with the stipulations of the Credit;
if the Credit provides for acceptance:
reflect the position if a a. by the Issuing Bank – to accept
Draft(s) drawn by the Beneficiary
nominated bank does on the Issuing Bank and pay them
at maturity
not act (as shown in or
next slide) 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
UCP 600 – Overview of Article 7
UCP 600 Article 7(a)
Issuing Bank Undertaking

ii. sight payment with a nominated bank and that nominated


bank does not pay;
iii. 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;
iv. 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;
v. negotiation with a nominated bank and that nominated
bank does not negotiate.

NOTE: same principle for Article 8 Confirming Bank Undertaking

38
UCP 600 – Overview of Article 7
UCP 600 Article 7 UCP 500 sub-Article 9(a)
Issuing Bank Undertaking iv. if the Credit provides for negotiation – to
pay without recourse to drawers and/or
 Covered in Article 6(c) bonafide holders, Draft(s) drawn by the
Beneficiary and/or document(s) presented
 Issuing bank irrevocable under the Credit. A Credit should not be
issued available by Draft(s) on the
bound to honour as of Applicant. If the Credit nevertheless calls
time of issuance for Draft(s) on the Applicant, banks will
consider such Draft(s) as an additional
 Reimbursement condition document(s).

appears in Article 7(c) UCP 500 sub-Article 10(d)


 Reimbursement due By nominating another bank, or by
allowing for negotiation by any bank, or
whether or not Draft or by authorising or requesting another bank
to add its confirmation, the Issuing Bank
DP Undertaking prepaid authorises such bank to pay, accept
or purchased – see Draft(s) or negotiate as the case may be,
against documents which appear on their
Article 12 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
UCP 600 – Overview of Article 8
UCP 600 Article 8 UCP 500 sub-Article 9(b)
Confirming Bank Undertaking b. A confirmation of an irrevocable Credit
by another bank (the “Confirming
 Definition of confirmation Bank”) upon the authorisation or
and confirming bank request of the Issuing Bank,
constitutes a definite undertaking of
 Confirming bank – the Confirming Bank, in addition to
that of the Issuing Bank, provided that
honours or negotiates the stipulated documents are
presented to the Confirming Bank or
 Confirming bank is to any other Nominated Bank and that
irrevocably bound to the terms and conditions of the Credit
are complied with:
honour or negotiate as of i. if the Credit provides for sight payment
time it adds confirmation ii.
– to pay at sight;
if the Credit provides for deferred
 Reimbursement due payment – to pay on the maturity
date(s) determinable in accordance
whether or not Draft or iii.
with the stipulations of the Credit;
if the Credit provides for acceptance:
DP Undertaking a. by the Confirming Bank – to
purchased or prepaid accept Draft(s) drawn by the
Beneficiary on the Confirming
Bank and pay them at maturity,
or

40
UCP 600 – Overview of Article 8
UCP 600 Article 8 UCP 500 sub-Article 9(b) and (c)(i) and (ii)
Confirming Bank Undertaking b. by another drawee bank – to accept and pay
at maturity, Draft(s) drawn by the Beneficiary
 Covered in Article 6 (c) on the Confirming Bank, in the event the
drawee bank stipulated in the Credit does not
 Reflects position if a accept Draft(s) drawn on it, or to pay Draft(s)
accepted but not paid by such drawee bank at
nominated bank does not maturity;
iv. if the Credit provides for negotiation –
act (see slide where to negotiate without recourse to
drawers and/or bonafide holders,
NOTE mentioned “same Draft(s) drawn by the Beneficiary
principle for Article 8 and/or document(s) presented under
the Credit. A Credit should not be
Confirming Bank issued available by Draft(s) on the
Applicant. If the Credit nevertheless
Undertaking”) calls for Draft(s) on the Applicant,
banks will consider such Draft(s) as an
 Nominated bank may or additional document(s).

may not be a confirming c. i. If another bank is authorised or


bank requested by the Issuing Bank to add
its confirmation to a Credit but is not
prepared to do so, it must so inform
 Refined wording in the Issuing Bank without delay.
Article 8 (d) 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
UCP 600 – Overview of Article 9
UCP 600 Article 9 UCP 500 Article 7
Advising of Credits and Amendments a. A Credit may be advised to a Beneficiary
through another bank (the “Advising Bank”)
 Concept of 2nd advising without engagement on the part of the
Advising Bank, but that bank, if it elects to
bank advise the Credit, shall take reasonable care
to check the apparent authenticity of the
 Bank now “satisfies Credit which it advises. If the bank elects not
to advise the Credit, it must so inform the
itself” as to the apparent b.
Issuing Bank without delay.
If the Advising Bank cannot establish such
authenticity apparent authenticity it must inform, without
delay, the bank from which the instructions
 Advice of credit or appear to have been received that it has been
unable to establish the authenticity of the
amendment “accurately Credit and if it elects nonetheless to advise
the Credit it must inform the Beneficiary that
reflects” the terms and it has not been able to establish the
conditions of the credit authenticity of the Credit.

or amendment UCP 500 sub-Article 11(b)


If a bank uses the services of an Advising
 Now appears in Article Bank to have the Credit advised to the
9(d) Beneficiary, it must also use the services of
the same bank for advising an
amendment(s).

42
UCP 600 – Overview of Article 10
UCP 600 Article 10 UCP 500 sub-Article 9(d)
Amendments i. Except as otherwise provided by
Article 48, an irrevocable Credit
can neither be amended nor
cancelled without the agreement of
 Covered in Article 10(a) the Issuing Bank, the Confirming
Bank, if any, and the Beneficiary.

ii. The Issuing Bank shall be


irrevocably bound by an
 Covered in Article 10(b) 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.

43
UCP 600 – Overview of Article 10
UCP 600 Article 10 UCP 500 sub-Article 9(d)
Amendments iii. The terms of the original Credit (or a
Credit incorporating previously
 Covered in Article accepted amendment(s) will remain in
force for the Beneficiary until the
10(c) Beneficiary communicates his
acceptance of the amendment to the
 Advice of acceptance bank that advised such amendment.
or rejection to be The Beneficiary should give notification
of acceptance or rejection of
advised amendment(s). If the beneficiary fails
to give such notification, the tender of
 Partial acceptance of documents to the Nominated Bank or
Issuing Bank, that conform to the
an amendment = Credit and to not yet accepted
amendment(s), will be deemed to be
rejection notification of acceptance by the
Beneficiary of such amendment(s) and
 Time limits for as of that moment the Credit will be
acceptance or amended.

rejection will be iv. Partial acceptance of amendments


disregarded contained in one and the same advice
of amendment is not allowed and
consequently will not be given any
effect.

44
UCP 600 – Overview of Article 11
UCP 600 Article 11 UCP 500 Article 11
a. i. When an Issuing Bank instructs an
Teletransmitted and Pre- Advising Bank by an authenticated
Advised Credits and teletransmission to advise a Credit or an
amendment to a Credit, the
Amendment teletransmission will be deemed to be the
operative Credit instrument or the
 Revised text to remove operative amendment, and no mail
confirmation should be sent. Should a
the “should a mail mail confirmation nevertheless be sent, it
confirmation will have not effect and the Advising Bank
will have no obligation to check such mail
nevertheless be sent” confirmation against the operative Credit
instrument or the operative amendment
 Where a mail received by teletransmission.
ii. If the teletransmission states “full
confirmation is the details to follow” (or words of similar
operative instrument, it effect) or states that the mail
confirmation is to be the operative Credit
must be issued in terms instrument or the operative amendment,
then the teletransmission will not be
not inconsistent with the deemed to be the operative Credit
teletransmission 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
UCP 600 – Overview of Article 11
UCP 600 Article 11 UCP 500 Article 11
Teletransmitted and Pre- b. If a bank uses the services of an
Advising Bank to have the Credit
Advised Credits and advised to the Beneficiary, it must
Amendment also use the services of the same
bank for advising an
amendment(s).
c. A preliminary advice of the issuance
 Covered in Article 9(d) or amendment of an irrevocable
Credit (pre-advice), shall only be
given by an Issuing Bank if such
bank is prepared to issue the
 Revised and shortened operative Credit instrument or the
text appears in Article operative amendment thereto.
Unless otherwise stated in such
11(b) 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
UCP 600 – Overview of Article 12
UCP 600 Article 12 UCP 500 sub-Article 10(b)(ii)
Nomination Negotiation means the giving of value
for Draft(s) and/or document(s) by the
 Covered in Article 12(c) bank authorised to negotiate. Mere
examination of the documents without
but widened to include giving of value does not constitute a
honour negotiation.

UCP 500 sub-Article 10(c)


 Covered in Article 12(a) Unless the Nominated Bank is the
Confirming Bank, nomination by the
referencing honour or Issuing Bank does not constitute any
negotiation undertaking by the Nominated Bank to
pay, incur a deferred payment
undertaking, to accept Draft(s), or to
negotiate. Except where expressly
 For new Article 12(b) – agreed to by the Nominated Bank and
see next slide 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
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
UCP 600 – Overview of Article 13
UCP 600 Article 13 UCP 500 Article 19
Bank-to-Bank Reimbursement a. If an Issuing Bank intends that the
reimbursement to which a paying,
Arrangement accepting or negotiating bank is entitled,
shall be obtained by such bank (the
 Principle in Article 13(a) “Claiming Bank”, claiming on another
is that the credit and party (the “Reimbursing Bank”), it shall
provide such Reimbursing Bank in good
reimbursement time with the proper instructions or
authorisation to honour such
authorisation must reimbursement claims.
reference URR or Article b. Issuing banks shall not require a Claiming
Bank to supply a certificate of compliance
13(b) will apply with the terms and conditions of the
Credit to the Reimbursing Bank.
 Reimbursement c. An Issuing Bank shall not be relieved from
authorisation subject to any of its obligations to provide
reimbursement if and when
Article 13(b) must not reimbursement is not received by the
Claiming Bank from the Reimbursing
include an expiry date – Bank.
to bring in line with URR d. 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
UCP 600 – Overview of Article 13
UCP 600 Article 13 UCP 500 Article 19
Bank-to-Bank Reimbursement e. The Reimbursing Bank’s charges
Arrangement should be for the account of the
Issuing Bank. However, in cases
 Article 13(b)(iv) states where the charges are for the
that reimbursing bank account of another party, it is the
charges are for account responsibility of the Issuing Bank
to so indicate in the original
of the issuing bank. If Credit and in the reimbursement
they are for account of authorisation. In cases where
beneficiary it must be the Reimbursing Bank’s charges
are for the account of another
clearly indicated in the party they shall be collected from
credit and the the Claiming Bank when the
reimbursement Credit is drawn under. In cases
where the Credit is not drawn
authorisation under, the Reimbursing Bank’s
charges remain the obligation of
the Issuing Bank.

50
UCP 600 – Overview of Article 14
UCP 600 Article 14 UCP 500 Article 13
Standard for Examination of  Banks must examine all documents
Documents stipulated in the Credit with
reasonable care, to ascertain whether
 Applicable banks defined or not they appear, on their face, to be
in compliance with the terms and
 “On their face” – sole conditions of the Credit. Compliance
of the stipulated documents on their
reference here face with the terms and conditions of
the Credit, shall be determined by
 Definition: complying international standard banking practice
presentation as reflected in these Articles.
Documents which appear on their face
 Check on the basis of to be inconsistent with one another
will be considered as not appearing on
documents alone their face to be in compliance with the
terms and conditions of the Credit.
 Covered in Article 14(d)
– see next slide Documents not stipulated in the Credit
will not be examined by banks. If they
 Covered in Article 14(g) receive such documents, they shall
return them to the presenter or pass
them on without responsibility.

51
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
UCP 600 – Overview of Article 14
UCP 600 Article 14 UCP 500 Article 13
Standard for Examination of b. The Issuing Bank, the Confirming
Documents Bank, if any, or a Nominated
Bank acting on their behalf, shall
 Removal of “reasonable each have a reasonable time, not
time” to exceed seven banking days
following the day of receipt of the
 Maximum of 5 banking documents, to examine the
days documents and determine
whether to take up or refuse the
 Period of 5 banking days documents and to inform the
not subject to any party from which it received the
documents accordingly.
upcoming event
 Covered in Article 14(h) 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
UCP 600 – Overview of Article 14
UCP 600 Article 14 UCP 500 Article 21
Standard for Examination of When documents other than
Documents transport documents, insurance
documents and commercial invoices
 Covered in Article 14(f) are called for, the Credit should
stipulate by whom such documents
 Document must appear are to be issued and their wording
to fulfil its function or data content. If the Credit does
not so stipulate, banks will accept
 Principle extended to a such documents as presented,
document may be dated provided that their data content is
not inconsistent with any other
no later than the date of stipulated document presented.
its presentation
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
UCP 600 – Overview of Article 14
UCP 600 Article 14 UCP 500 Article 30
Standard for Examination of Unless otherwise authorised in the Credit,
banks will only accept a transport
Documents document issued by a freight forwarder if
it appears on its face to indicate:
 Article was not deemed i. the name of the freight forwarder as a
to be necessary as UCP carrier or multimodal transport operator
and to have been signed or otherwise
does not define who has authenticated by the freight forwarder as
to “issue” the transport carrier or multimodal transport operator,
or
document. Covered in ii. The name of the carrier or multimodal
Article 14(l) 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
 Covered in Article 14(k) transport operator.

and widened to any UCP 500 sub-Article 31(iii)


document Indicates as the consignor of the goods a
party other than the Beneficiary of the
Credit.

55
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
UCP 600 – Overview of Article 14
UCP 600 Article 14 UCP 500 sub-Article 37(c)
Standard for Examination of The description of the goods in the
commercial invoice must correspond
Documents with the description in the Credit. In
all other documents, the goods may be
 Second sentence described in general terms not
removed from inconsistent with the description of the
goods in the Credit.
Commercial Invoice
Article and appears at UCP 500 sub-Article 43(a)
Article 14(e) In addition to stipulating an expiry
date for presentation of documents,
every Credit which calls for a transport
document(s) should also stipulate a
 Default of 21 days specified period of time after the date
of shipment during which presentation
applies where there is an must be made in compliance with the
original transport terms and conditions of the Credit. If
no such period of time is stipulated,
document to be banks will not accept documents
presented 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
Standard for
Examination of
Documents

58
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
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
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
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 - article
14 (g) states that document will be
disregarded and may be returned to the
presenter.
 Furthermore, UCP 600 sub - a rticle 14 (h) states
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
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 sub-
article 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
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
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
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
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
- article 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
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
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
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
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
UCP 600 – Overview of Article 16
UCP 600 Article 16 UCP 500 Article 14
Discrepant Documents, Waiver a. When the Issuing Bank authorises
another bank to pay, incur a deferred
and Notice 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.
b. Upon receipt of the documents the
 Applicable banks defined Issuing Bank and/or Confirming Bank, if
any, or a Nominated Bank acting on their
behalf, must determine on the basis of
 Removal of “on their the documents alone whether or not they
face” appear on their face to be in compliance
with the terms and conditions of the
 “....may refuse to honour Credit. If the documents appear on their
face not to be in compliance with the
or negotiate” terms and conditions of the Credit, such
banks may refuse to take up the
documents.

72
UCP 600 – Overview of Article 16
UCP 600 Article 16 UCP 500 Article 14
Discrepant Documents, Waiver c. If the Issuing Bank determines that the
documents appear on their face not to be
and Notice in compliance with the terms and
conditions of the Credit, it may in its sole
 Applicable banks defined judgment approach the Applicant for a
waiver of the discrepancy(ies). This does
 Maximum of 5 banking not, however, extend the period
days following day of d.
mentioned in sub-Article 13(b).
i. If the Issuing Bank and/or Confirming
presentation Bank, if any, or a Nominated Bank acting
on their behalf, decides to refuse the
 Notice must state (1) documents, it must give notice to that
effect by telecommunication or, if that is
bank refuses, (2) each not possible, by other expeditious means,
discrepancy and (3) without delay but no later than the close
of the seventh banking day following the
status of the handling of day of receipt of the documents. Such
notice shall be given to the bank from
documents – see next which it received the documents, or to the
slide 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
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
UCP 600 – Overview of Article 16
UCP 600 Article 16 UCP 500 Article 14
Discrepant Documents, Waiver iii. The Issuing Bank and/or
and Notice 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
 Covered in Article 16(g) bank.

e. If the Issuing Bank and/or


 Covered in Article 16(f) Confirming Bank, if any, fails to
act in accordance with the
provisions of this Article and/or
 If a bank has provided a fails to hold the documents at the
disposal of, or return them to the
notice of refusal and presenter, the Issuing Bank
chosen (a) or (b), it may and/or Confirming Bank, if any,
return the documents at shall be precluded from claiming
that the documents are not in
any time compliance with the terms and
conditions of the Credit.

75
UCP 600 – Overview of Article 16
UCP 600 Article 16 UCP 500 Article 14
Discrepant Documents, Waiver f. If the remitting bank draws the
and Notice attention of the Issuing Bank and/or
Confirming Bank, if any, to any
 This is not included in discrepancy(ies) in the document(s)
or advises such banks that it has
UCP 600. This is paid, incurred a deferred payment
considered to be a undertaking, accepted Draft(s) or
matter between negotiated under reserve or against
an indemnity in respect of such
beneficiary and the discrepancy(ies), the Issuing Bank
nominated bank. A and/or Confirming Bank, if any, shal
not be thereby relieved from any of
confirming or issuing their obligations under any
bank still makes a provision of this Article. Such
reserve or indemnity concerns only
decision on the the relations between the remitting
documents based on bank and the party towards whom
the reserve was made, or from
Articles 14 and 16. whom, or on whose behalf, the
indemnity was obtained.

76
Discrepant Documents,
Waiver and Notice

77
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
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
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
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
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
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
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 - article 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
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
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 - article 14
(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
UCP 600 – Overview of Article 17
UCP 600 Article 17 UCP 500 sub-Article 20(b)
Original Documents and Unless otherwise stipulated
Copies in the Credit, banks will also
accept as an original
 Based on concept in document(s), a
ICC Decision of document(s) produced or
Original Documents appearing to have been
produced:
 Article 17(a) makes i. by reprographic,
clear that at least automated or computerized
one of each systems;
ii. As carbon copies;
document must be provided that it is marked
an original as original and, where
necessary, appears to be
signed.

87
UCP 600 – Overview of Article 17
UCP 600 Article 17 UCP 500 sub-Article 20(c)
Original Documents and i. Unless otherwise stipulated in
Copies the Credit, banks will accept
 Article 17(d) states that as a copy(ies), a
document(s) either labelled
copies will be satisfied by copy or not marked as an
either originals or copies original – a copy(ies) need
(copies would include not be signed.
photocopies) ii. Credits that require multiple
document(s) such as
“duplicate”, “two fold”, “two
 Covered in Article 17(e) copies” and the like, will be
with emphasis on satisfied by the presentation
presentation of “at least of one original and the
one original....” remaining number in copies
except where the document
itself indicates otherwise.

88
UCP 600 – Overview of Article 18
UCP 600 Article 18 UCP 500 Article 37
Commercial Invoice a. Unless otherwise
 Definition of stipulated in the Credit,
commercial invoices:
beneficiary i. must appear on their
 Definition of face to be issued by the
applicant Beneficiary named in
the Credit (except as
 New (iii) stating that provided in Article 48),
invoice must be in and
ii. must be made out in
the same currency the name of the
as the credit Applicant (except as
provided in sub-Article
 Old (iii) becomes (iv) 48(h)), and
iii. need not be signed.

89
UCP 600 – Overview of Article 18
UCP 600 Article 18 UCP 500 Article 37
Commercial Invoice b. Unless otherwise stipulated in the
Credit, banks may refuse commercial
 Emphasis is changed that invoices issued for amounts in excess
banks may accept an of the amount permitted by the Credit.
Nevertheless, if a bank authorised to
invoice for a greater pay, incur a deferred payment
value, provided it has not undertaking, accept Draft(s), or
negotiate under a Credit accepts such
honoured or negotiated invoices, its decision will be binding
upon all parties, provided that such
for an amount in excess bank has not paid, incurred a deferred
of the credit payment undertaking, accepted
Draft(s) or negotiated for an amount
in excess of that permitted by the
Credit.
 Covered in Article 18(c) c. The description of the goods in the
with second sentence commercial invoice must correspond
with the description in the Credit. In
now appearing in Article all other documents, the goods may be
14(e) described in general terms not
inconsistent with the description of the
goods in the Credit.

90
UCP 600 – Overview of Article 19
UCP 600 Article 19 UCP 500 Article 26
Transport Document Covering at Least a. If a Credit calls for a transport document
Two Different Modes of Transport covering at least two different modes of
transport (multimodal transport), banks will,
 Article 1 – exclude or unless otherwise stipulated in the Credit,
accept a document, however named, which:
modify i. appears on its face to indicate the
name of the carrier or multimodal
 Indicate name of transport operator and to have signed
or otherwise authenticated by:
carrier - The carrier or multimodal transport
operator or a named agent for or on
behalf of the carrier or multimodal
 On its face transport operator, or
- The master or a named agent for or on
 No reference to MTO – behalf of the master.

carrier or master only Any signature or authentication of the


carrier, multimodal transport operator
 Authentication or master must be identified as carrier,
multimodal transport operator or
removed master, as the case may be. An agent
signing or authenticating for the carrier,
 Consistent signing and multimodal transport operator or
master must also indicate the name
capacity details and capacity of the party i.e. carrier,
multimodal transport operator or
master, on whose behalf that agent is
 No name of master acting,
and

91
UCP 600 – Overview of Article 19
UCP 600 Article 19 UCP 500 Article 26
Transport Document Covering ii. indicates that the goods have been
dispatched, taken in charge or loaded
at Least Two Different Modes of on board.
Transport Dispatch, taking in charge or loading on
board may be indicated by wording to
 At the place stated that effect on the multimodal transport
document and the date of issuance will
in the credit be deemed to be the date of dispatch,
taking in charge or loading on board
and the date of shipment. However, if
 Covered in Article the document indicates, by stamp or
otherwise, a date of dispatch, taking in
19(a)(ii) charge or loading on board, such date
will be deemed to be the date of
shipment, and
ii. a. indicates the place of taking in
charge stipulated in the Credit which
 Revised text appears may be different from the port, airport
or place of lading, and the place of final
in Article 19(a)(iii) – destination stipulated in the Credit
which may be different from the port,
airport or place of discharge, and/or
see next slide
b. Contains the indication “intended” or
similar qualification in relation to the
vessel and/or port of loading and/or
port of discharge, and

92
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. the transport document states, in addition, a different


place of dispatch, taking in charge or shipment or place of
final destination, or
b. the transport document contains the indication “intended”
or similar qualification in relation to the vessel, port of
loading or port of discharge.

93
UCP 600 – Overview of Article 19
UCP 600 Article 19 UCP 500 Article 26
Transport Document Covering iv. consists of a sole original
at Least Two Different Modes of multimodal transport document or,
Transport if issued in more than one original,
the full set as so issued, and
v. 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);
 No reference to sail banks will not examine the contents
of such terms and conditions, and
vi. contains no indication that it is
subject to a charter party and/or no
 Not necessary due to indication that carrying vessel is
propelled by sail only, and
definition of vii. in all other respects meets the
stipulations of the Credit.
complying
presentation

94
UCP 600 – Overview of Article 19
UCP 600 Article 19 UCP 500 Article 26
Transport Document b. Even if the Credit prohibits
Covering at Least Two transhipment, banks will
Different Modes of accept a multimodal
Transport transport document which
 See next slide for indicates that transhipment
will or may take place,
revised provided that the entire
transhipment carriage is covered by one
and the same multimodal
clauses transport document.

95
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. 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.
c. 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
UCP 600 – Overview of Article 20
UCP 600 Article 20 UCP 500 Article 23
Bill of Lading a. If a Credit calls for a bill of lading
covering a port-to-port shipment,
 Article 1 exclude or banks will, unless otherwise stipulated
in the Credit, accept a document,
modify however named, which:
 On its face i. appears on its face to indicate the
name of the carrier and to have been
signed or otherwise authenticated by:
 Indicate the carrier – see - the carrier or a named agent for
next slide -
or on behalf of the carrier, or
the master or a named agent for
 Authentication removed or on behalf of the master.
Any signature or authentication of
 Consistent signing and the carrier or master must be
identified as carrier or master, as
capacity details the case may be. An agent
signing or authenticating for the
 No name of master carrier or master must also
indicate the name and the
capacity of the party i.e. carrier or
 At the port of loading master, on whose behalf that
stated in the credit and
agent is acting,

ii. Indicates that the goods have been


loaded on board, or shipped on a
named vessel.

97
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
UCP 600 – Overview of Article 20
UCP 600 Article 20 UCP 500 Article 23
Bill of Lading Loading on board or shipment on a named
vessel may be indicated by pre-printed
wording on the bill of lading that the goods
 Covered in Article have been loaded on board a named vessel or
shipped on a named vessel, in which case the
20(a)(ii) 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
 Covered in Article named vessel must be evidenced by an on
board notation on the bill of lading which, in
20(a)(ii) 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
UCP 600 – Overview of Article 20
UCP 600 Article 20 UCP 500 Article 23
Bill of Lading If the bill of lading indicates a place of
receipt or taking in charge different
 Covered in Article 20(a)(iii) from the port of loading, the on board
notation must also include the port of
 Revised wording “If the bill of loading stipulated in the Credit and the
lading does not indicate the name of the vessel on which the goods
port of loading stated in the have been loaded, even if they have
credit as the port of loading, or been loaded on the vessel named in
if it contains the indication the bill of lading. This provision also
applies whenever loading on board the
“intended” or similar vessel is indicated by pre-printed
qualification in relation to the wording on the bill of lading, and
port of loading, an on board iii. indicates the port of loading and the
notation indicating the port of port of discharge stipulated in the
loading as stated in the credit, Credit, notwithstanding that it:
a. indicates a place of taking in charge
the date of shipment and the different from the port of loading,
name of the vessel is required. and/or a place of final destination
different from the port of discharge,
This provision applies even and/or
when loading on board or b. contains the indication “intended” or
shipment on a named vessel is similar qualification in relation to the
port of loading and/or port of
indicated by pre-printed discharge, as long as the document
wording on the bill of lading” also states the ports of loading and/or
discharge stipulated in the Credit, and

100
UCP 600 – Overview of Article 20
UCP 600 Article 20 UCP 500 Article 23
Bill of Lading iv. consists of a sole original bill of
lading or, if issued in more than
one original, the full set as so
issued, and
v. 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
 No reference to sail vi. contains no indication that it is
subject to a charter party and/or
 Not necessary due to no indication that the carrying
vessel is propelled by sail only, and
definition of vii. in all other respects meets the
complying stipulations of the Credit.

presentation

101
UCP 600 – Overview of Article 20
UCP 600 Article 20 UCP 500 Article 23
Bill of Lading b. For the purpose of this Article,
transhipment means unloading and
reloading from one vessel to another
vessel during the course of ocean
 Covered in revised carriage from the port of loading to the
port of discharge stipulated in the Credit.
Article 20(b), (c) and c. Unless transhipment is prohibited by the
terms of the Credit, banks will accept a
(d) – see next slide 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.
d. 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
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
Bill of Lading

104
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
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
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
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
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
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
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
Terms and Conditions
 Bills of lading are issued subject to terms and
conditions which reflect the contract of
carriage.
 UCP 600 sub - article 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
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
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
UCP 600 – Overview of Article 21
UCP 600 Article 21 UCP 500 Article 24
Non-Negotiable Sea
Waybill

 Same comments
apply as for
Article 20 – Bill of
Lading

115
UCP 600 – Overview of Article 22
UCP 600 Article 22 UCP 500 Article 25
Charter Party Bill of Lading a. If a Credit calls for or permits a
charter party bill of lading, banks will,
 Changed opening – unless otherwise stipulated in the
Credit, accept a document, however
“containing an indication named, which:
it is subject to a charter i. contains any indication that it is subject
to a charter party, and
party” ii. appears on its face to have been signed
or otherwise authenticated by:
 On its face - the master or a named agent for
or on behalf of the master, or
 Authentication removed - the owner or a named agent for
or on behalf of the owner.
 New capacity/signer = Any signature or authentication of the
Charterer master or owner must be identified as
master of owner as the case may be.
 No name of master 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
UCP 600 – Overview of Article 22
UCP 600 Article 22 UCP 500 Article 25
Charter Party Bill of Lading iii. does or does not indicate the name of the
carrier, and
 No equivalent in iv. Indicates that the goods have been
loaded on board or shipped on a named
Article 22 vessel.

 “....at the port of Loading on board or shipment on a


named vessel may be indicated by pre-
loading stated in the printed wording on the bill of lading that
the goods have been loaded on board a
credit....” 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
 Covered in Article the date of loading on board and the date
of shipment.
22(a)(ii)
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
UCP 600 – Overview of Article 22
UCP 600 Article 22 UCP 500 Article 25
Charter Party Bill of Lading v. indicates the port of loading and the
port of discharge stipulated in the
 Geographical or region as Credit, and
port of discharge is vi. consists of a sole original bill of lading
acceptable or, if issued in more than one original,
the full set as so issued, and
 Reference to sail is deleted vii. contains no indication that the carrying
vessel is propelled by sail only, and
 Not necessary due to viii. in all other respects meets the
definition of complying stipulations of the Credit.
presentation
 Refined text in Article 22(b) b. Even if the Credit requires the
presentation of a charter party
– “A bank will not examine contract in connection with a charter
charter party contracts, party bill of lading, banks will not
even if they are required to examine such charter party contract,
but will pass it on without
be presented by the terms responsibility on their part.
of the credit.”

118
UCP 600 – Overview of Article 23
UCP 600 Article 23 UCP 500 Article 27
Air Transport Document a. If a Credit calls for an air
transport document, banks will,
 Article 1 exclude or unless otherwise stipulated in the
modify Credit, accept a document,
however named, which:
 On its face i. appears on its face to indicate
 Authentication removed the name of the carrier and to
have been signed or otherwise
 Indicate the name of the authenticated by:
- the carrier, or
carrier - a named agent for or on
 Signing capacities shown behalf of the carrier.
Any signature or authentication
in Article 23(a)(i) of the carrier must be identified
as carrier. An agent signing or
 Covered in Article authenticating for the carrier
23(a)(ii) must also indicate the name and
the capacity of the party, i.e.
carrier, on whose behalf that
agent is acting, and
ii. indicates that the goods hae been
accepted for carriage, and

119
UCP 600 – Overview of Article 23
UCP 600 Article 23 UCP 500 Article 27
Air Transport Document iii. where the Credit calls for an actual
date of dispatch, indicates a specific
 Date in a notation = date notation of such date, the date of
dispatch so indicated on the air
of shipment (whether transport document will be deemed to
requested by the credit be the date of shipment.
or not) For the purpose of this Article, the
information appearing in the box on
 Any other information the air transport document (marked
“For Carrier Use Only” or similar
outside the notation, will expression) relative to the flight
not be considered for number and date will not be
considered as a specific notation of
determining the date of such date of dispatch.
shipment In all other cases, the date of issuance
of the air transport document will be
 Covered in Article deemed to be the date of shipment,
and
22(a)(iv) iv. indicates the airport of departure and
the airport of destination stipulated in
the Credit,

and

120
UCP 600 – Overview of Article 23
UCP 600 Article 23 UCP 500 Article 27
Air Transport Document v. appears to be the original for
 Covered in Article consignor/shipper even if the
Credit stipulates a full set of
23(a)(v) originals, or similar
 Covered in Article expressions, and
23(a)(vi) vi. appears to contain all of the
terms and conditions of
 Not necessary due to carriage, or some of such
definition of complying terms and conditions, by
presentation 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
UCP 600 – Overview of Article 23
UCP 600 Article 23 UCP 500 Article 27
Air Transport Document b. For the purpose of this
Article, transhipment means
 Covered in Article unloading and reloading from
23(b) and (c) – see one aircraft to another
aircraft during the course of
next slide carriage from the airport of
discharge to the airport of
destination stipulated in the
Credit.
c. 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
UCP 600 – Overview of Article 23
UCP 600 Article 23
Air Transport Document
Articles 23(b) and (c):

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.
c. 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
Air Transport
Document

124
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
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
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
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
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
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
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
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
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
UCP 600 – Overview of Article 24
UCP 600 Article 24 UCP 500 Article 28
Road, Rail or Inland Waterway a. If a Credit calls for a road, rail, or
Transport Document inland waterway transport document,
banks will, unless otherwise stipulated
 Article 1 exclude or in the Credit, accept a document of
the type called for, however, named,
modify which:
i. appears on its face to indicate the
 On its face name of the carrier and to have been
signed or otherwise authenticated by
 Authentication removed the carrier or a named agent for or on
behalf of the carrier and/or to bear a
 Article 24(a)(i) outlines reception stamp or other indication of
receipt by the carrier or a named agent
the signing requirements for or on behalf of the carrier.
Any signature, authentication,
and capacity reception stamp or other indication of
identification 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
UCP 600 – Overview of Article 24
UCP 600 Article 24 UCP 500 Article 28
Road, Rail or Inland Waterway ii. indicates that the goods have been
Transport Document received for shipment, dispatch or
carriage or wording to this effect. The
 Revised wording to date of issuance will be deemed to be
the date of shipment unless the
capture – reception transport document contains a
stamp, date of receipt or reception stamp, in which case the
date of the receptions stamp will be
date of shipment deemed to be the date of shipment,
and
 Covered in Article iii. indicates the place of shipment and
24(a)(iii) the place of destination stipulated in
the Credit, and
 Not required due to iv. in all other respects meets the
definition of complying stipulations of the Credit.
presentation b. In the absence of any indication on the
 Covered in Article 24(c) 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
UCP 600 – Overview of Article 24
UCP 600 Article 24
Road, Rail or Inland Waterway Transport Document
Article 24(b) – new provisions

i. 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.
ii. A rail transport document marked “duplicate” will be
accepted as original.
iii. A rail or inland waterway transport document will be
accepted as an original whether marked as an
original or not.

136
UCP 600 – Overview of Article 24
UCP 600 Article 24 UCP 500 Article 28
Road, Rail or Inland Waterway c. For the purpose of this Article,
Transport Document transhipment means unloading
and reloading from one means of
 Changed to reflect conveyance to another means of
transhipment must occur conveyance, in different modes of
within the same mode – transport, during the course of
carriage from the place of
otherwise Article 19 shipment to the place of
applies destination as stipulated in the
Credit.
d. Even if the Credit prohibits
 Covered in Article 24(e) transhipment, banks will accept a
road, rail or inland waterway
– see next slide 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
UCP 600 – Overview of Article 24
UCP 600 Article 24
Road, Rail or Inland Waterway Transport Document
Article 24(e)(i) and (ii):

i. 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.
ii. 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
UCP 600 – Overview of Article 25
UCP 600 Article 25 UCP 500 Article 29
Courier Receipt, Post Receipt or a. If a Credit calls for a post
Certificate of Posting receipt or certificate of
posting, banks will, unless
 Article 25(c) covers the otherwise stipulated in the
Credit, accept a post receipt
dispatch by post or certificate of posting
which:
i. appears on its face to have
 Not necessary due to been stamped or otherwise
definition of complying authenticated and dated in
presentation 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
ii. in all other respects meets
the stipulations of the Credit.

139
UCP 600 – Overview of Article 25
UCP 600 Article 25 UCP 500 Article 29
Courier Receipt, Post Receipt or b. If a Credit calls for a document issued
Certificate of Posting by a courier or expedited delivery
service evidencing receipt of the goods
 Removal of expedited for delivery, banks will, unless
otherwise stipulated in the Credit,
delivery service accept a document, however named,
which:
 Covering receipt of goods i. appears on its face to indicate
for transport the name of the courier/service,
and to have been stamped,
 Article 1 exclude or signed or otherwise authenticated
by such named courier/service
modify (unless the Credit specifically
 On its face calls for a document issued by a
named Courier/Service, banks
 Authentication removed will accept a document issued by
any Courier/Service), and
 Not necessary due to ii. indicates a date of pick-up or of
receipt or wording to this effect,
definition of complying such date being deemed to be
presentation the date of shipment or dispatch,
and
iii. In all other respects meets the
stipulations of the Credit.

140
UCP 600 – Overview of Article 26
UCP 600 Article 26 UCP 500 sub-Article 31(i) and (ii)
Unless otherwise stipulated in the Credit,
“On Deck”, “Shipper’s Load and banks will accept a transport document
Count”, “Said by Shipper to which:
Contain” and Charges i. does not indicate, in the case of
Additional to Freight carriage by sea or by more than one
means of conveyance including carriage
 Article 1 exclude or by sea, that the goods are or will be
loaded on deck. Nevertheless, banks will
modify accept a transport document which
contains a provision that the goods may
 Change of emphasis in be carried on deck, provided that it does
not specifically state that they are or will
opening sentence “A be loaded on deck, and/or
bank will only accept a ii. bears a clause on the face thereof such
as “shipper’s load and count” or “said by
clean transport shipper to contain” or words of similar
effect.
document”
 Covered in Article 26(b) UCP 500 sub-Article 33(d)
Banks will accept transport documents
 Covered in Article 26(c) 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
UCP 600 – Overview of Article 27
UCP 600 Article 27 UCP 500 Article 32
Clean Transport Documents a. A clean transport document is
one which bears no clause or
notation which expressly declares
 Addition: A bank will only a defective condition of the goods
and/or the packaging.
accept a clean transport b. Banks will not accept transport
document documents bearing such clauses
 The word “clean” need or notations unless the Credit
expressly stipulates the clauses
not appear on a or notations which may be
transport document accepted.
c. Banks will regard a requirement
 Not necessary due to in a Credit for a transport
definition of complying document to bear the clause
presentation “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
UCP 600 – Overview of Article 28
UCP 600 Article 28 UCP 500 Article 34
Insurance Documents and Coverage a. Insurance documents must appear on
their face to be issued and signed by
insurance companies or underwriters
or their agents.
 Insurance documents are b. If the insurance document indicates
described including that it has been issued in more than
declaration under open one original, all the originals must be
presented unless otherwise authorised
cover in the Credit.
c. Cover notes issued by brokers will not
 Agents or proxies be accepted, unless specifically
authorised in the Credit.
 Signing conditions similar d. Unless otherwise stipulated in the
to transport documents Credit, banks will accept an insurance
certificate or a declaration under an
 No cover notes accepted 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
UCP 600 – Overview of Article 28
UCP 600 Article 28 UCP 500 Article 34
Insurance Documents and Coverage e. Unless otherwise stipulated in the Credit, or
unless it appears from the insurance
document that the cover is effective at the
 Covered in Article 28(e) latest from the date of loading on board or
dispatch or taking in charge of the goods,
 New condition – LC banks will not accept an insurance document
which bears a date of issuance later than the
stating “insurance for date of loading on board or dispatch or taking
110%” = minimum of in charge as indicated in such transport
document.
insurance coverage f. i. Unless otherwise stipulated in the Credit,
the insurance document must be expressed in
 Covered in Article the same currency as the Credit.
ii. Unless otherwise stipulated in the Credit,
28(f)(ii) the minimum amount for which the insurance
document must indicate the insurance cover
 Article 28(f)(iii) to have been effected is the CIF or CIP value
of the goods, as the case may be, plus 10%,
insurance must be but only when the CIF or CIP value can be
determined from the documents on their face.
covered at least between Otherwise, banks will accept as such
minimum amount of 110% of the amount for
the two which payment, acceptance or negotiation is
places/ports/airports requested under the Credit, or 110% of the
gross amount of the invoice, whichever is
stated in the credit greater.

144
UCP 600 – Overview of Article 28
UCP 600 Article 28 UCP 500 Article 35
Insurance Documents and Coverage a. Credits should stipulate the type
of insurance required and, if any,
the additional risks which are to
 Covered in Article 28(g) 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
 Banks will accept presented, without responsibility
insurance documents for any risks not being covered.
with any exclusion clause b. Failing specific stipulations in the
Credit, banks will accept
insurance documents as
presented, without responsibility
for any risks not being covered.
 Covered in Article 28(j) c. 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
UCP 600 – Overview of Article 28
UCP 600 Article 28 UCP 500 Article 36
Insurance Documents and Coverage
Where a Credit stipulates
 Covered in Article “insurance against all risks”,
banks will accept an
28(h) 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
Insurance Documents
and Coverage

147
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
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
Number of Originals
 As in the case of transport documents,
insurance documents can be issued in one or
more originals.
 Sub- article 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
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
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
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
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
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
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
UCP 600 – Overview of Article 29
UCP 600 Article 29 UCP 500 Article 44
a. If the expiry date of the Credit and/or the last
Extension of Expiry Date or day of the period of time for presentation of
Last Day for Presentation documents stipulated by the Credit or
applicable by virtue of Article 43 falls on a day
 No material change from on which the bank to which presentation has
to be made is closed for reasons other than
UCP 500 those referred to in Article 17, the stipulated
expiry date and/or the last day of the period
 Covered in Article 29(a) 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
 Covered in Article 29(c) 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)
 Covered in Article 29(b) 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
UCP 600 – Overview of Article 30
UCP 600 Article 30 UCP 500 Article 39
Tolerance in Credit Amount, a. The words “about”, “approximately”, “circa”
or similar expressions used in connection with
Quantity and Unit Prices 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
 Deletion of “circa” amount or the quantity or the unit price to
which they refer.
b. 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
 Article 1 exclude or will be permissible, always provided that the
modify 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.
 Article 1 exclude or c. Unless a Credit which prohibits partial
modify 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
 Principle applies whether goods, such quantity of goods is shipped in
full, and if the Credit stipulates a unit price,
partial shipments allowed such price is not reduced. This provision does
not apply when expressions referred to sub-
or not Article (a) above are used in the Credit.

158
UCP 600 – Overview of Article 31
UCP 600 Article 31 UCP 500 Article 40
Partial Drawings or Shipments a. Partial drawing and/or shipments are
allowed, unless the Credit stipulates
 Article 1 exclude or otherwise.
modify b. Transport documents which appear on
their face to indicate that shipment
 Clarification given in has been made on the same means of
conveyance and for the same journey,
Article 31(b) that in the provided they indicate the same
case of multiple destination, will not be regarded as
covering partial shipments, even if the
presentations on same transport documents indicate different
mode, latest date = date dates of shipment and/or different
ports of loading, places of taking in
of shipment charge or dispatch.
c. Shipments made by post or by courier
 New rule where more will not be regarded as partial
than one mode used shipments if the post receipts or
certificates of posting or courier’s
 Covered in Article 31(c) 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
UCP 600 – Overview of Article 32
UCP 600 Article 32 UCP 500 Article 41
Instalment Drawings or Shipments
If drawings and/or
 Article 1 exclude or shipments by instalments
modify within given periods are
stipulated in the Credit and
 Article 3 any instalment is not drawn
Interpretations – and/or shipped within the
singular/plural period allowed for that
instalment, the Credit
 No change from UCP
ceases to be available for
500 that and any subsequent
instalments, unless
otherwise stipulated in the
Credit.

160
UCP 600 – Overview of Article 33
UCP 600 Article 33 UCP 500 Article 45
Hours of Presentation
Banks are under no
 Article 3 obligation to accept
Interpretations – presentation of
documents outside their
singular/plural banking hours.
 No change from
UCP 500

161
UCP 600 – Overview of Article 34
UCP 600 Article 34 UCP 500 Article 15
Disclaimer on Effectiveness of Banks assume no liability or
Documents responsibility for the form,
sufficiency, accuracy, genuineness,
 Article 3 Interpretations falsification or legal effect of any
– singular/plural document(s), or for the general
and/or particular conditions
 Addition of “services or stipulated in the document(s) or
superimposed thereon; nor do they
performance” to bring in assume any liability or responsibility
line with Article 5 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
UCP 600 – Overview of Article 35
UCP 600 Article 35 UCP 500 Article 16
Disclaimer on Transmission and Banks assume no liability or
Translation responsibility for the
 The two sentences that consequences arising out of
make up UCP 500 Article delay and/or loss in transit
16 have been split of any message(s), letter(s)
or document(s), or for
 New addition to this rule delay, mutilation or other
covering loss of error(s) arising in the
documents in transit – transmission of any
see next slide 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
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
UCP 600 – Overview of Article 36
UCP 600 Article 36 UCP 500 Article 17
Force Majeure Banks assume no liability or
 Addition of “Acts of responsibility for the
consequences arising out of
Terrorism” as a force the interruption of their
majeure event business by Acts of God,
 “Unless specifically riots, civil commotions,
insurrections, wars or any
authorised” has been other causes beyond their
deleted control, or by any strikes or
 ICC National Committees lockouts. Unless specifically
were offered this version authorised, banks will not,
upon resumption of their
or one allowing 5 days business, pay, incur a
after bank re-opened. deferred payment
This version was chosen undertaking, accept Draft(s)
or negotiate under Credits
which expired during such
interruption of their business.

165
UCP 600 – Overview of Article 37
UCP 600 Article 37 UCP 500 Article 18
Disclaimer for Acts of an Instructed a. Banks utilizing the services of another
Party bank or other banks for the purpose of
giving effect to the instructions of the
 “Banks” has been defined as Applicant do so for the account and at the
the issuing bank or advising risk of such Applicant.
b. Banks assume no liability or responsibility
bank should the instructions they transmit not
 In UCP 500 Article 18(c), the be carried out, even if they have
themselves taken the initiative in the
word “party” has been choice os such other bank(s).
replaced with “bank” and c. i. A party instructing another party to
“beneficiary” respectively perform services is liable for any charges,
including commissions, fees, costs or
 New rule covering issuance of expenses incurred by the instructed party
in connection with its instructions.
LCs with request for charges ii. Where a Credit stipulates that such
to be collected in advance – charges are for the account of a party
“A credit or amendment other than the instructing party, and
charges cannot be collected, the
should not stipulate that the instructing party remains ultimately liable
advising to a beneficiary is for the payment thereof.
conditional upon the receipt d. The Applicant shall be bound by and liable
to indemnify the banks against all
by the advising bank or obligations and responsibilities imposed
second advising bank of its by foreign laws and usages.
charges”

166
UCP 600 – Overview of Article 38
UCP 600 Article 38 UCP 500 Article 48
Transferable Credits a. A transferable Credit is a Credit under
which the Beneficiary (First Beneficiary)
may request the bank authorised to pay,
incur a deferred payment undertaking,
 (c) now forms the basis accept or negotiate (the “Transferring
Bank”), or in the case of a freely
for Article 38(a) as this is negotiable Credit, the bank specifically
authorised in the Credit as a Transferring
the principle rule Bank, to make the Credit available in
whole or in part to one or more other
Beneficiary(ies) (Second Beneficiary(ies)).
b. A Credit can be transferred only if it is
 Definitions have been expressly designated as “transferable” but
given for Transferable the Issuing Bank. Terms such as
“divisible”, “fractionable”, “assignable”,
Credit, Transferring Bank and “transmissible” do not render the
Credit transferable. If such terms are
and Transferred Credit – used they shall be disregarded.
see next slide c. 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
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
UCP 600 – Overview of Article 38
UCP 600 Article 38 UCP 500 Article 48
d. At the time of making a request for transfer
Transferable Credits and prior to transfer of the Credit, the Fist
Beneficiary must irrevocably instruct the
 Covered in Article 38(e). Transferring Bank whether or not he retains
the right to refuse to allow the Transferring
No longer a requirement Bank to advise amendments to the Second
for “irrevocable” Beneficiary(ies). If the Transferring Bank
consents to the transfer under these
instructions regarding conditions, it must, at the time of transfer,
advise the Second Beneficiary(ies) of the First
amendments Beneficiary’s instructions regarding
amendments.
e. If a Credit is transferred to more than one
Second Beneficiary(ies), refusal of an
 Covered in Article 38(f) 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
 Covered in Article 38(c) respect to the Second Beneficiary(ies) who
rejected the amendment, the Credit will
remain unamended.
f. 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
UCP 600 – Overview of Article 38
UCP 600 Article 38 UCP 500 Article 48
Transferable Credits g. Unless otherwise stated in the Credit, a
transferable Credit can be transferred once
only. Consequently, the Credit cannot be
 Article 1 exclude or transferred at the request of the Second
modify 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
 Covered in Article 38(d) 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
 Covered in Article 38(g) transfers will considered as constituting only
one transfer of the Credit.
– on the terms and h. The Credit can be transferred only on the
terms and conditions specified in the original
conditions specified Credit, with the exception of:
“including confirmation” - 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
UCP 600 – Overview of Article 38
UCP 600 Article 38 UCP 500 Article 48
Transferable Credits The percentage for which insurance cover
must be effected may be increased in
 Covered in Article 38(g) 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
 New wording in (g) such Beneficiary can be substituted for that of
the Applicant, but if the name of the
requirement must be Applicant is specifically required by the
original Credit to appear in any
reflected in the document(s) other than the invoice, such
transferred credit requirement must be fulfilled.
i. The First Beneficiary has the right to
substitute his own invoice(s) (and
Draft(s)) for those of the Second
 Covered in Article 38(h) 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
UCP 600 – Overview of Article 38
UCP 600 Article 38 UCP 500 Article 48
Transferable Credits When a Credit has been transferred and
the First Beneficiary is to supply his own
 Revised text to reflect that invoice(s) (and Draft(s)) in exchange for
the Second Beneficiary’s(ies’) invoice(s)
in the event of (and Draft(s)) but fails to do so on first
discrepancies in substituted demand, the Transferring Bank has the
right to deliver to the Issuing Bank the
documents, 1st beneficiary documents received under the transferred
must replace on demand or Credit, including the Second
Beneficiary’s(ies’) invoice(s) (and
2nd beneficiary documents Draft(s)) without further responsibility to
used the First Beneficiary.
j. The First Beneficiary may request that
 Article 1 exclude or modify payment or negotiation be effected to the
Second Beneficiary(ies) at the place to
 New (k) documents must which the Credit has been transferred up
be sent to the transferring to and including the expiry date of the
Credit, unless the original Credit expressly
bank – “Presentation of states that it may not be made available
documents by or on behalf for payment or negotiation at a place
other than that stipulated in the Credit.
of a second beneficiary This is without prejudice to the First
must be made to the Beneficiary’s right to substitute
subsequently his own invoice(s) (and
transferring bank” Draft(s)) for those of the Second
Beneficary(ies) and to claim any
difference due to him.

172
UCP 600 – Overview of Article 39
UCP 600 Article 39 UCP 500 Article 49
Assignment of Proceeds The fact that a Credit is not
stated to be transferable
 No change from UCP shall not affect the
500 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.

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UCP 600 – An Overview

Thank You

174