UCP 600 - A Presentation

Uniform Customs and Practice for Documentary Credits 600

Peter DJKMAGM.Trade FinanceIDBI Bank Ltd., New Delhi.

History of UCP. UCP 82 - 1933 created UCP 151 - 1951 1st revision UCP 222 - 1962 2nd revision UCP 290 - 1974 3rd revision UCP 400 - 1983 4th revision UCP 500 - 1993 5th revision UCP 600 - 2007 6th revision UCP 600 represents the sixth revision of the Uniform

Customs and Practice for Documentary Credits, since it’s inception. Final text of UCP 600 was unanimously approved on October 25, 2006 at the ICC Banking Committee meeting in Paris, France.

UCP 600 has become effective on July 1, 2007

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Article-1 Application of UCP

Applicable to any Documentary Credits (to The extent to which they may be applicable and Standby Letter(s) Of Credit

UCP applicable when the LC expressly indicates that it is subject to these “rules”;

Concept of “Modify or Exclude”;and Retention of Standby Letters of Credit

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Article 2 Definitions

ADVISING BANK APPLICANT BANKING DAY BENEFICIARY COMPLYING

PRESENTATION CONFIRMATION CONFIRMING BANK CREDIT

HONOR ISSUING BANK NEGOTIATION NOMINATED BANK PRESENTATION PRESENTER

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Article 2 Definitions

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.

Credit means any arrangement, however named or described, that is irrevocable and thereby constitute a definite undertaking of the issuing bank to honour a complying presentation.

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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.

Article 2 Cont……. Definitions

Article 2 Definition

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

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Article 3 Interpretations

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

The words “until”,”till”, “from” and “between” when used to determine a period of shipment include the dates mentioned. The words “before’ & “after” exclude the dates mentioned

The words “from” & “After when used to determine a maturity date exclude the date mentioned

Use of terms “FIRST CLASS, WELL KNOWN,INDEPENDENT, OFFICIAL, COMPETENT,LOCAL used to describe the issuer of a document allow any issuer except the beneficiary

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Article 3 Interpretations

A document may be signed by handwriting, by facsimile signature, by perforated signature, by stamp, by symbol, or by any other mechanical or electronic method of authentication

The expression “on or about” is interpreted as 5 calendar days before & 5 calendar days after the specified date both start and end date included.

Begining of month- 1st to 10th, middle -11th to 20th, end- 21st to end of month.

Ist half of month- 1st to 15th, 2nd half- 16th to end

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Article 4 Credit Vs Contracts

By nature are separate transactions from sales or other contracts on which they may be based and banks are no way concerned with or bound by such contract.

Bene cannot avail of contractual relationships between banks or between applicant and issuing bank

Issuing bank should discourage inclusion of underlying contract, proforma invoice and the like in to the text ( Addition)

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Article-6: Availability, Expiry Date & Place of Presentation

Must Indicate whether available by sight payment,by deferred payment, by acceptance or by negotiation.

Always available with issuing bank.

A Credit must not be issued available by a draft drawn on applicant

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Article-6: Availability, Expiry Date & Place of Presentation

Available with any bank, nominated bank or issuing bank

Expiry date is the last date for presentation.

The place of the bank with which the credit is available is the place for presentation. Place other than the issuing bank include the place of issuing bank.

Documents must be presented before expiry date.

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Article 7: Issuing Bank’s Undertaking

An issuing Bank is irrevocably bound to honour as of the time it issues the credit

Issuing bank ‘’Honours’’ It does not negotiate.

Provided the documents are presented to nominated bank or issuing bank and that they constitute a complying presentation, the issuing bank must honour.

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Article 8: Confirming Bank Undertaking The Confirming Bank is irrevocably bound to

negotiate or honour as of the time it adds its confirmation

Honours or Negotiates

If the bank is not ready to add its confirmation, it should inform the issuing bank without delay and may advise the credit without adding its confirmation

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Article 9:Advising Bank’s Liability.

Elects to advise : shall satisfy itself as to apparent authenticity .

Elects not to advise : must so inform the Issuing Bank without delay.

Second advising bank

Advice of credit or amendment “accurately reflects” the terms and conditions of the credit or amendment received.

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Article 10: Amendments

An issuing bank is irrevocably bound at the time it issues the amendment

A confirming bank may choose to advise the amendment without extending it confirmation

A beneficiary should give notification of acceptance/ rejection of amendment. Partial acceptance of amendment =Rejection

Time limit for acceptance or rejection will be disregarded

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Article11:Teletransmitted & Pre Advised Credits & Amendments

•An authenticated tele transmission of a credit or amendment will be deemed to be the operative credit or amendment, and any subsequent mail confirmation shall be disregarded.

• A preliminary advice of issuance of a credit or amendment(“pre-advice”) shall only be sent if the issuing bank is prepared to issue the operative credit or amendment. An issuing bank that sends a pre-advice is irrevocably committed to issue the operative credit or amendment, without delay, in terms not inconsistent with the pre-advice.

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Article 12: Nomination

By nominating a bank, the issuing bank authorizes the nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank

Unless nominated bank is the confirming bank, it does not impose any obligation to honour or negotiate

Nominated bank may obligate itself under an unconfirmed credit if expressly communicated to beneficiary

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Article 13: Bank to Bank Reimbursement.

(b) Issuing Banks shall not require a Claiming Bank to supply a certificate of compliance with the terms and conditions of the Credit to the Reimbursing Bank.

(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.

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Article 14 Standard Examination of Documents

Check on the basis of documents alone.

Appear ‘’on their face’’ compliant of credit terms.

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.

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Article 14 Contd..

Inconsistent Documents on their face will be treated as non-compliant.

Documents not stipulated in credit will not be examined.

Issuing/Confirming/Nominated bank each shall have a maximum of 5 banking days following the day of receipt .

If a credit contains conditions without stating the docs to be presented, banks will consider such condition

A) as not stated B) will disregard them.

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ARTICLE 15 COMPLYING PRESENATION

a. When an Issuing bank determines that a presentation is complying, it must Honour.

b. When a Confirming bank determines that a presentation is complying, it must Honour or negotiate and forward the documents to the Issuing bank.

c. When a Nominated bank determines that a presentation is complying and Honour or negotiates, it must forward the documents to the Confirming bank or Issuing bank.

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Article 16 Discrepant documents, waiver

& notice

(a) When the Issuing Bank authorises another bank to pay, incur a deferred payment undertaking, accept Draft (s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the Issuing Bank and the Confirming Bank ,if any, are bound to :

(i) Reimburse the Nominated Bank (ii) Honour or (iii) Negotiate

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Article 16 Contd…

(b) Upon receipt of the documents the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, must determine on the basis of the documents alone whether or not they appear on their face to be in compliance with the terms and conditions of the Credit. If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to honour or negotiate.

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Article 16 Contd…

(c) If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies). This does not, however, extend the period of 5 banking days

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Article 16 Contd…

d)If decides to refuse must give notice by telecommunication or other expeditious means without delay but no latter than the close of fifth banking day following the day of receipt.Notice to be given to(a) bank or beneficiary from whom received.

A single notice must be given to the presenter.

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Article 16 Contd

The notice must state that 1. The Bank is refusing to honour or negotiate and2. Each discrepancy in respect of which the bank refuses to

honour or negotiate3. Status of Document

That the bank is holding documents pending further instruction from presenter ,or

That the issuing bank is holding documents until it receives a waiver from the applicant and agree to accept it or receives further instruction from presenter prior to agreeing to accept a waiver ,or

That it is returning documents ,or That it is acting as per previous instructions received from

the presenter

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Article 17 Original Documents and copies

At least one original of each document must be presented.

A bank shall treat as an original any document bearing an apparently original signature, mark, stamp, or label of the issuer of the document, unless the document itself indicates that it is not an original.

Copies will be satisfied by either originals or copies. Photocopy = copy.

“In duplicate", “In two fold" or “In two copies", this will be satisfied by the presentation of at least one original and the remaining number in copies,

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Article 18 Commercial Invoice

A Commercial Invoice must appear to have been issued by the beneficiary

(except as provided in Article 38 Transferable credits) Must be made out in the name of the applicant Must be in the same currency as that of credit Need not be signed

Invoice for amount in excess of the credit is permitted provided the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit

The description of goods, services or performance in a commercial invoice must correspond to that appearing in the credit

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TRANSPORT DOCUMENTS

Art 19: Transport Document covering at least two different Modes of Transport

Art 20: Bill of LadingArt 21:Non Negotiable Seaway BillArt 22:Charter Party Bill of LadingArt 23:Air transport documentsArt 24: Road,rail or inland water way

trans port documentArt 25:Courier and Postal receipts

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Article 19 Transport Document Covering at least two different modes of transport

(a) May be however named,

(b) Signed by the carrier/ master or a named agent on behalf of the carrier/ master

(c) Any Signature by the carrier, master or agent must be identified as that of carrier, master or agent

(d) Any signature by an agent must indicate Whether the agent has signed on behalf of the carrier/ the

master

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Article 19 Contd..

(e) Indicate the place of dispatch, taking in charge or shipment and the place of final destination stated in the credit even if the transport document states in addition, a different place of dispatch, taking in charge or shipment or place of final destination or the transport document contains the indication “intended” or similar qualification in relation to the vessel, port of loading or port of discharge.

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Article 19 Contd

(f) 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

(g) Contains no indication that it is subject to a charter party

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Article 20 Bill of Lading

If a Credit calls for a bill of lading, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which:

Appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by:

The carrier or a named agent for or on behalf of the carrier, or

The master or a named agent for or on behalf of the master.

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Article 20 Contd..

(ii) indicates that the goods have been loaded on board, or shipped on a named vessel by a pre printed wording or an on board notation indicating the date of goods shipped on board.

(iii) indicates the port of loading and the port of discharge stipulated in the Credit.

(iv) consists of a sole original bill of lading or, if issued in more than one original, the full set as so issued, and

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Article 20 Contd…

(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

(vi) contains no indication that it is subject to a charter party

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CONTD….

(b) For the purpose of this Article, transshipment means unloading and reloading from one vessel to another vessel during the course of carriage from the port of loading to the port of discharge stipulated in the Credit.

(c) Unless transshipment is prohibited by the terms of the Credit, banks will accept a bill of lading which indicates that the goods will be transshipped, provided that the entire ocean carriage is covered by one and the same bill of lading.

(d)Clauses that the carrier reserves the right to transship shall be disregarded


Article 22-25 Other Transport Documents- Distinguishing Features

(a) Article 22 additionally introduces a “ charterer” or “a named agent on behalf of charterer” who may sign.

(b) In case of charter party Bill of lading, a Geographical range or a region is acceptable as a port of discharge if stated in the credit.

(c) Under Article 23, Flight date in a notation will always be taken as the date of shipment whether flight stamp is called for or not. No other information on the Airway Bill will be accepted as the flight date.


Article 22-25 Contd

(d) As per Article 24 A Road transport document must appear to be the original for the consignor or shipper or bear no marking indicating for whom the document has been prepared.

(e) A rail transport document marked “duplicate” will be accepted as an original.

(f) A rail or inland waterway transport document will be accepted as an original whether marked as an original or not.


Article 22-25 Contd

(g) As per Article 25, the courier receipt must indicate the name of the courier service or signed by the courier service at the place from which the credit states, the goods are to be shipped.

(h) Indicate the date of pickup or receipt or wording to this effect. This date will be deemed to be the date of shipment

(I) A requirement that courier charges are to be paid or prepaid may be satisfied by an evidence that courier charges are for the account of a party other than the consignee.


Article 26 ‘On Deck’, ‘Shipper’s load and count’, ‘Said by Shipper to Contain’

Unless otherwise stipulated will accept transport documents which

(i) does not indicate, that the goods are or will be loaded on deck. Nevertheless, banks will accept a transport document which contains a provision that the goods may be carried on deck and /or

(ii) bears a clause as "shipper's load and count" or "said

by shipper to contain" or words of similar effect, and/or(iii) bears reference to charges additional to the freight


Article 27: Clean Transport documents

(a) A clean transport document is one which bears no clause or notation which expressly declares a defective condition of the goods and/or the packaging.

The word clean need not appear on the transport document


Article 28 Insurance Documents

(a) Insurance documents must appear on their face to be issued and signed by insurance companies or underwriters or their agents or their proxies.

(e) banks will not accept an insurance document which bears a date of issuance later than the date of loading on board or dispatch or taking in charge as indicated in such transport document unless it is effective from a date not later than the date of shipment.


Article 28 Contd

The insurance document must indicate the amount of insurance coverage and be in the same currency as that of the credit

If there is no indication in the credit of the insurance coverage required, the coverage should be for 110% of the CIF or CIP value

An Insurance document may contain reference to any exclusion clause


Article 29 Extn. of Expiry Date

a) If the expiry date of the Credit and/or the last day of the period of time for presentation of documents stipulated by the Credit falls on a day on which the bank to which presentation has to be made is closed for reasons other than those referred to in Article 36, the stipulated expiry date and/or the last day of the period of time after the date of shipment for presentation of documents, as the case may be, shall be extended to the first following banking day.

b) The nominated bank will provide a statement on its covering schedule that the presentation was made in accordance with sub Article 29 (a)


Article 30: Tolerance in Credit Amount, Quantity & Unit Prices

The words ‘about or approximately indicate tolerance of 10% in amount quantity or unit price

Even when partial shipments are not allowed, a tolerance not to exceed 5% less than the amount of credit is allowed provided that the quantity (if stated) is shipped in full and the unit price (if stated) is not

reduced.


Article 31 Partial Drawings or shipments

(a) Partial drawings and/or shipments are allowed, unless the Credit stipulates other-wise.

(b) Transport documents which appear on their face to indicate that shipment has been made on the same means of conveyance and for the same journey, provided they indicate the same destination, will not be regarded as covering partial shipments, even if the transport documents indicate different dates of shipment and/or different ports of loading, places of taking in charge, or despatch.


Article 32: Instalment Drawings or Presentations

If drawing or shipment by instalments within given period is stipulated and the instalment is not drawn or shipped within the prescribed period, the credit ceases to be available for any subsequent instalment


Article 33: Hours of Presentation

A Bank has no obligation to accept a presentation outside Banking Hours


Article 34: Disclaimer on Effectiveness of Documents

A Bank assumes no liability or responsibility for the form sufficiency, accuracy, genuineness, falsification or legal effect of any document


Article 35: Disclaimer on Transmission Translation

A Bank assumes no liability or responsibility for the consequences arising out of delay, loss in transit, mutilation or other errors arising n the transmission.

An issuing bank must honour, negotiate or reimburse even when the documents have been lost in transit when forwarded by the nominated bank.


Article 36 Force Majeure

Banks assume no liability or responsibility for the consequences arising out of the interruption of their business by Acts of God, riots, civil commotions, insurrections, wars or any other causes beyond their control, or by any strikes or lockouts. Unless specifically authorized, banks will not, upon resumption of their business, pay, incur a deferred payment undertaking, accept Draft(s) or negotiate under Credits which expired during such interruption of their business.


Article 37 Disclaimer for Acts of An Instructed Party

(c) Where a Credit stipulates that charges are for the account of beneficiary other than the instructing party, and charges cannot be collected, the issuing bank remains ultimately liable for the payment thereof.


Article 38 Transferable credit 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 authorized 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.


Article 38 Transferable credit

Any request for transfer must indicate if and under what conditions amendments may be advised to the second beneficiary. The transferred credit must clearly indicate those conditions.

If a Credit is transferred to more than one Second Beneficiary(ies), refusal of an amendment by one or more Second Beneficiary(ies) does not invalidate the acceptance(s) by the other Second Beneficiary(ies) with respect to whom the Credit will be amended accordingly. With respect to the Second Beneficiary(ies) who rejected the amendment, the Credit will remain unamended

A transferred credit cannot be transferred at the request of a second beneficiary to any subsequent beneficiary. The first beneficiary is not considered to be a subsequent beneficiary.


Article 38 Contd..

(h) The Credit can be transferred only on the terms and conditions specified in the original Credit, including confirmation with the exception of:

the amount of the Credit, any unit price stated therein, the expiry date, the period for presentation of documents the last date of shipment, Any or all of which may be reduced or curtailed.


Article 38 Contd.. (i) The First Beneficiary has the right to substitute his own

invoice(s) (and Draft(s)) for those of the Second Beneficiary (ies), for amounts not in excess of the original amount stipulated in the Credit and for the original unit prices if stipulated in the Credit, and 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).

The percentage for which insurance cover must be effected may be increased to provide the amount of cover stipulated in the credit or these articles.

Presentation of documents by or on behalf of a second

beneficiary must be made to the transferring bank.


Article 39 Assignment of Proceeds

The fact that a Credit is not stated to be transferable shall not affect the Beneficiary's right to assign any proceeds to which he may be, or may become, entitled under such Credit, in accordance with the provisions of the applicable law. This Article relates only to the assignment of proceeds and not to the assignment of the right to perform under the Credit itself.


THANK YOU

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