Documentary Credit and It Implications to Each Stakeholders

7/29/2019 Documentary Credit and It Implications to Each Stakeholders

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Logistics Company

When dealing with UCP 600, we observe a certain quandary, the bankers, who drafted

the UCP 600, argue that they are not experts in the field of logistics while the logistics

companies seem to not much bother about documentary credit transactions and the regulations

governing them. However, logistics companies, although not directly involved in D/Ctransactions, are bound to the rulings of the UCP 600. Thus, UCP 600 also affects them either

directly or indirectly.

In UCP 600 articles concerning on multimodal documents, bill of lading, non-negotiable

sea waybill, air transport documents and road, rail or inland waterway transport documents

require these documents to be signed by the carrier, master or an agent authorized and on behalf

of the carrier or master . The shipping company should be particularly careful that whoever

signed these documents should be in the name of the carrier or master. The revision in UCP 600

helps greatly in identification of carriers and agents. In the revised rules, an agent who signed a

transport document must indicate that he or she is an agent. Hence, it would eliminate theconfusion that occurred previously during the implementation of UCP 500.

In regards to UCP 600 Article 19, it has now a more precise definition of multimodal

transport documents and makes clear that when the term multimodal transport document is

used, it should also be accompanied by the term combined transport document which would

remove confusion. In addition, to further alleviate the ambiguity, UCP 600 replaced the term

multimodal transport document with the term Transport document covering at least two

different modes of transport

Moreover, the term multimodal transport operator used in UCP 500 is now modified tocarrier in UCP 600. It is pointed that the modification is because of the changes in th e logistics

industry which involve shipping companies requiring only one transport document for

multimodal transport. This is due to the fact that transport companies nowadays prefer to conduct

the entire duration of the transport of cargo.

Insurance Company

Similar to the case of logistics companies, the same conundrum also applies for insurance

companies. Since the bankers are the ones who formulated the UCP 600, there will be a tendency

that they somehow disregard the logistics and insurance companies in drafting the UCP 600

because of their lack of expertise in these aforementioned industries. This is why insurance

companies did not care much about UCP 600. Nevertheless, insurance companies should at least

be aware of the implications of these rules to them.

Similar to the transport documents, UCP 600 article 28a requires the insurance document

to be signed by the insurance company, agent or proxy. The insurance company should also take

note of a new rule in the same article that states that when an authorized agent or proxy signed


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the document, he or she must indicate that he or she is an agent or proxy authorized by the

insurance company.

One problem in article 28 is in its sub-article e which stipulates that the date shown in the

insurance document should not be later than the date of shipment. This provision seems to be not

in line with the insurance industry practice because in practice, the date of issuance of aninsurance document is indeed the effective date. However, due to this regulation, it would cause

a lot of confusion.

Nonetheless, the revised UCP 600 have cleared up one of the most significant source of

confusion in the previous UCP 500 article 36 and now article 28h. This article states that when

the credit requires insurance in an all risks basis, then the insurance document will be treated

as all risks coverage whether it is shown in the document or not and all of the exclusions will

be disregarded. However, the newly added provision in UCP 600 article 28i solves this problem

by allowing the insurance document to contain any exclusion clause. This will be good for the

insurance industry because they will not have to worry that their exclusion clauses will not behonored.


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Reference

Sindberg, Kim. From Beginning to Beginning: Trade Finance Articles from 2003 to 2011.

Copenhagen: Books on Demand PmbH, 2012

Burnett, Robin. Bath, Vivienne. Law of International Business in Australasia. New South Wales:McPherson Printing Group, 2009

Rhee, Chase C. Principles of International Trade (Import-Export): The First Step Toward

Globalization 5th

Edition. Bloomington: AuthorHouse, 2012

Branch, Alan E. Global Supply Chain Management and International Logistics. New York:

Routledge, 2009

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Documentary Credit and It Implications to Each Stakeholders