UCP600(3)

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UCP600

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UCP 600

� "UCP" is the common reference for the

Uniform Customs and Practice for

Documentary Credits. The objective of the

UCP is to create a set of contractual rules that

would establish uniformity to conflicting

national regulations

� The UCP 600 has come into effect from July 1,

2007 onwards

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� The Uniform Customs and Practices (UCP) for

Documentary Credits were first issued in 1933

by the International Chamber of Commerce.

The purpose was to overcome conflicting

national laws on letters of credit as well as to

bring about uniformity in banking practices.

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� UCP 600 does not apply by default to letters of

credit issued after July 1st 2007. A statement

needs to be incorporated into the credit (LC),

and preferably also into the sales contract that

expressly states it is subject to these rules.

Article 1 of UCP 600 also leaves open the

possibility for either party to exclude theapplication of any part of UCP 600 as long as

the exclusion is stipulated in the credit.

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� Article 2 explicitly defines a credit as "anyarrangement, however named or described,that is irrevocable and thereby constitutes adefinite undertaking of the issuing bank tohonour a complying presentation."

� Article 3 states that "A credit is irrevocableeven if there is no indication to that effect."and Article 10 makes it clear that "a credit canneither be amended nor cancelled without

the agreement of the issuing bank, theconfirming bank, if any, and the beneficiary"(seller).

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UCP 600 ± Overview of Article 2

UCP 600 Article 2

Definitions

� Applicant the party on whose request the credit is issued.

� 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.

� Complying Presentation a presentation that is inaccordance with the terms and conditions of the credit, the

applicable provisions of these rules and international standard

banking practice.

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UCP 600 Article 2

Definitions

� Honour :

a. to pay at sight if the credit is available by sight payment.b. to incur a deferred payment undertaking and pay atmaturity if the credit is available by deferred payment.

c. to accept a bill of exchange (³draft´) drawn by thebeneficiary and pay at maturity if the credit is available byacceptance.

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UCP 600 Article 2

Definitions

� Negotiation:

the purchase by the nominated bank of drafts (drawn on a bankother than the nominated bank) and/or documents under acomplying presentation, by advancing or agreeing to advancefunds to the beneficiary on or before the banking day on whichreimbursement is due to the nominated bank.

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UCP 600 Article 2

Definitions

� Presentation either the delivery of documents under a credit to

the issuing bank or nominated bank or the documents sodelivered.

� Presenter a beneficiary, bank or other party that makes a

presentation.

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UCP 600 Article 2

Definitions

� Presentation either the delivery of documents under a credit to

the issuing bank or nominated bank or the documents sodelivered.

� Presenter a beneficiary, bank or other party that makes a

presentation.

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� Under UCP 600, Banks should disregard all non-documentary requirements. This means that any

requirement in the credit that is not specificallypart of a required document will be ignored bythe bank in determining conformity.

� An example:

� The buyer wants the product delivered and the LCpaid only if the product is shipped on a vesselcarrying a specific classification. It is not enough,under UCP 600, for the buyer to state therequirement in the LC. He must actually requirethat the bank receive a copy of the vessel'scertification certificate.

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Article-17� An original document will be any of the following:

� "any document bearing an apparently originalsignature, mark, stamp, or label of the issuer of the document, unless the document itself

indicates that it is not an original. OR anydocument that appears to be written, typed,perforated or stamped by the document issuer's.OR any document that appears to be on the

document issuer's original stationery OR anydocument that states it is original, unless thestatement appears not to apply to the documentpresented."

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Article 19-24

� The document must indicate the name of thecarrier and be signed by: (a) the carrier or namedagent for or on behalf of the carrier; or (b) themaster or named agent for or on behalf of themaster .

� Any signature by the carrier, master or agentmust be identified as that of the carrier, masteror agent.

� Any signature of an agent must indicate whetherthe agent has signed for or on behalf of thecarrier for or on behalf of the master.

� There is no need to name the master.

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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 beneficiaryto issue that document.

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Interpretations (from UCP 500 Articles 46 & 47):

� The expression "on or about" or similar will be interpreted as astipulation that an event is to occur during a period of fivecalendar days before until five calendar days after the specifieddate, both start and end dates included.

� The words "to", "until", "till", ³from´ and ³between´ when used todetermine a period of shipment include the date or datesmentioned, and the words ³before´ and "after" exclude the datementioned.

� The terms "first half" and "second half" of a month shall beconstrued respectively as the 1st to the 15th and the 16th to thelast day of the month, all dates inclusive.

� The terms "beginning", "middle" and "end" of a month shall beconstrued respectively as the 1st to the 10th, the 11th to the 20thand the 21st to the last day of the month, all dates inclusive.

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UCP 600 Article 20

Bill of Lading

Articles 20 (b), (c) and (d):

b. For the purpose of this article, transhipment means unloadingfrom one vessel and reloading to another vessel during thecarriage from the port of loading to the port of discharge stated inthe credit.

c. i. A bill of lading may indicate that the goods will or may betranshipped provided that the entire carriage is covered by oneand 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 thegoods have been shipped in a container, trailer or LASH barge asevidenced by the bill of lading.

d. Clauses in a bill of lading stating that the carrier reserves theright to tranship will be disregarded.

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UCP 600 Article 28

Insurance Document and Coverage

� Covered in Article 28 (e)

� New condition ± LC stating

³insurance for 110%´ =minimum amount of

insurance coverage

� Covered in Article 28 (f) (ii)

� Article 28 (f) (iii) insurance

must be covered at leastbetween the two

places/ports/airports stated

in the credit

UCP 500 Article 34e. Unless otherwise stipulated in the Credit, or unless

it appears from the insurance document that thecover is effective at the latest from the date of loading on board or dispatch or taking in charge of the goods, banks will not accept an insurancedocument which bears a date of issuance later thanthe date of loading on board or dispatch or taking incharge as indicated in such transport document.

f. i. Unless otherwise stipulated in the Credit,the insurance document must be expressed in thesame currency as the Credit.ii. Unless otherwise stipulated in the Credit,the minimum amount for which the insurancedocument must indicate the insurance cover tohave been effected is the CIF (cost, insurance andfreight (... "named port of destination")) or CIP(carriage and insurance paid to (..."named place of destination")) value of the goods, as the case maybe, plus 10%, but only when the CIF or CIP value

can be determined from the documents on their face. Otherwise, banks will accept as suchminimum amount 110% of the amount for whichpayment, acceptance or negotiation is requestedunder the Credit, or 110% of the gross amount of the invoice, whichever is the greater.

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UCP 600 Article 28

Insurance Document and Coverage

� Covered in Article 28 (e)

� New condition ± LC stating

³insurance for 110%´ =minimum amount of

insurance coverage

� Covered in Article 28 (f) (ii)

� Article 28 (f) (iii) insurance

must be covered at leastbetween the two

places/ports/airports stated

in the credit

UCP 500 Article 34e. Unless otherwise stipulated in the Credit, or unless

it appears from the insurance document that thecover is effective at the latest from the date of loading on board or dispatch or taking in charge of the goods, banks will not accept an insurancedocument which bears a date of issuance later thanthe date of loading on board or dispatch or taking incharge as indicated in such transport document.

f. i. Unless otherwise stipulated in the Credit,the insurance document must be expressed in thesame currency as the Credit.ii. Unless otherwise stipulated in the Credit,the minimum amount for which the insurancedocument must indicate the insurance cover tohave been effected is the CIF (cost, insurance andfreight (... "named port of destination")) or CIP(carriage and insurance paid to (..."named place of destination")) value of the goods, as the case maybe, plus 10%, but only when the CIF or CIP value

can be determined from the documents on their face. Otherwise, banks will accept as suchminimum amount 110% of the amount for whichpayment, acceptance or negotiation is requestedunder the Credit, or 110% of the gross amount of the invoice, whichever is the greater.

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� In the case of charterparty bills of lading :

� These no longer need to indicate the name of thecarrier.

� They may now also be signed by the charterer,although it is difficult to envisage a situation where anFOB buyer/ applicant would wish to rely on a bill of lading signed by the seller/beneficiary and vice versa inthe case of a CIF sale.

� Transport documents also no longer need to bear theclause 'clean' in order to comply with any credits thatrequire a document to be 'clean on board'.

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UCP 600 Article 38

Transferable Credits

Article 38 (b):

� Transferable credit means a credit that specifically states it is

³transferable´. A transferable credit may be made available in

whole or in part to another beneficiary (³second beneficiary´) at

the request of the beneficiary (³first 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 thattransfers 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.

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eUCP

� The eUCP was developed to accommodate the

electronic presentation of documents. At

present it features as a supplement, amended

to identify its relationship with UCP 600 on

the basis that many articles are not affected

by the presentation of the electronic

equivalent of paper documents.

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INCOTERMS

These are internationally accepted commercial

terms defining the respective roles and

responsibilities (including costs) of the buyer

and seller in the arrangement of

transportation and other obligations

I recommend the ICC Guide to Incoterms 2000 available at:

http://www.iccbooks.com/

South Carolina

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Incoterms� Group E - Departure:

± EXW. Ex Works (named place)

� Group F - Main Carriage Unpaid: ± FCA Free Carrier (named place)

± FAS Free Alongside Ship (named loading port)

± FOB Free On Board (named loading port)

� Group C - Main Carriage Paid: ± CFR Cost and Freight (named destination port)

± CIF Cost, Insurance and Freight (named destination port)

± CPT Carriage Paid To (named destination)

± CIP Carriage and Insurance Paid to (named destination)

� Group D - Arrival: ± DAF Delivered At Frontier (named place)

± DES Delivered Ex Ship (named port)

± DEQ Delivered Ex Quay (named port)

± DDU Delivered Duty Unpaid (named destination place)

± DDP Delivered Duty Paid (named destination place)

South Carolina

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South Carolina

EXW

Incoterms 2000

SELLER

BUYER

FCA

FAS

FOBCFR

CIF

CPT

CIP

DES

DEQ

DDU

DDP

DAF

FCA

CPTCIP

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South Carolina

EXW

Group E - Departure:

EXW. Ex Works (named place)

SELLER

BUYER

------ = Buyers COST & CONTROL

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South Carolina

The seller must render the buyer, at the latters request, risk and expense, every

assistance in obtaining, where applicable, any export license or other official

authorization necessary for the export of the goods.

Obligations

Section A/B 2 Licenses, Authorizations and Formalities

EXW Ex Works (.named place)

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Group F - Main Carriage Unpaid:

FCA Free Carrier (named place)

FAS Free Alongside Ship (named loading port)FOB Free On Board (named loading port)

South Carolina

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South Carolina

FCA

FAS

FOB

Group F - Main Carriage Unpaid:

FCA Free Carrier (named place) previously FRC

FAS Free Alongside Ship (named loading port)

FOB Free On Board (named loading port)

SELLER

BUYER

=Sellers COST & CONTROL


FCA

FCA

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South Carolina

The seller must obtain at his own risk and expense any export license or other

official authorization and carry out, where applicable, all customs formalities

necessary for the export of the goods.

Obligations



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South Carolina

Section A4 (Sellers Obligation)

Delivery

Obligations

A4 The seller must deliver the goods to the carrier or another

person nominated by the buyer,..at the named place.agreed for

delivery.


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South Carolina

The seller must obtain at his own risk and expense any export license or other

official authorization and carry out, where applicable, all customs formalities

necessary for the export of the goods.

Obligations


FAS Free AlongSide Ship (named port of shipment)

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South Carolina

Section A4 (Sellers Obligation)

Delivery

Obligations

A4 - The seller must place the goods alongside the vessel

nominated by the buyer at the loading place named by the

buyer at the named port of shipment

FAS Free AlongSide Ship (named port of shipment)

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South Carolina

CFR

CIF

CPT

CIP

Group C - Main Carriage Paid: (by the seller)

CFR Cost and Freight (named destination port)

CIF Cost, Insurance and Freight (named destination port)

CPT Carriage Paid To (named destination)

CIP Carriage and Insurance Paid to (named destination

SELLER

BUYER

=Sellers COST & CONTROL


CPT

CIP

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South Carolina

DES Delivered Ex Ship (named port)

the seller delivers when the goods are placed at the

disposal of the buyer on board the ship, not cleared

for import at the named port of destination BEFORE

discharging.

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South Carolina

DEQ Delivered Ex Quay (named port)

the seller delivers when the goods are placed at the disposal of the buyer, not cleared

for import on the quay (wharf) at the named port of destination.

The seller has to bear costs and risks involved in..discharging the goods on the quay(wharf).

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South Carolina

Port of destination

DES

DEQ

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South Carolina

DDU Delivered Duty Unpaid (named destination place)

the seller delivers the goods to the buyer, not cleared for import,

and not unloaded from any arriving means of transport at the named

place of destination

This term may be used irrespective of the mode of transport

Duty has to be borne by the Buyer.

The term Duty includes the responsibility for and risks of carrying out of

customs formalities, and the payment of formalities, customs duties, taxes

and other charges.

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South Carolina

DDP Delivered Duty Paid (named destination place)

The seller deliver the goods to the buyer, cleared for import, and not

unloaded from any arriving means of transport at the named place

of destination.

While the EXW term represents the minimum obligation for the

seller, DDP represents the maximum obligation.

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Group D - Arrival:

DAF Delivered At Frontier (named place)

DES Delivered Ex Ship (named port)

DEQ Delivered Ex Quay (named port)

DDU Delivered Duty Unpaid (named destination place)

DDP Delivered Duty Paid (named destination place)

South Carolina

Documents

UCP600(3)