Uniform Customs and Practice for Documentary Credits

8/14/2019 Uniform Customs and Practice for Documentary Credits

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An Overviewby

AMIT BHUSHAN


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Question No. 1

Can a letter of credit be issued subject to UCP500 after 01st July 2007?

Yes, UCP is a voluntary rule; there is no restriction on using

UCP500 after 01 July 2007. However it is advisable that

UCP600 is used.

An LC was issued on your behalf on 10th Jan 2007 subject to UCP 500. On

10th July 2007, you want to amend the credit to reflect a change in the

contract. What are the options available to you?

A. Ask your bank to issue the amendment under UCP 500

B. Ask your bank to issue the amendment under UCP 600

C. Amend the L/C to be subject to UCP 600 and issue amendment under

UCP 600

B. Although option C is possible, option B is advisable.


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Question No. 2

A documentary credit is available with ABC Bank, Hong Kong by negotiation at 30

days after shipment date. The beneficiary presents credit compliant documents toABC Bank.

Which of the following actions by ABC Bank constitute negotiation?

a) Forward documents to issuing bank for payment at maturity date

b) Pay the beneficiary and forward documents to issuing bank

c) Agree to pay the beneficiary, once the documents are accepted by the

issuing bank and forward the documents to issuing bank

B & C, mere checking and forwarding documents to the issuing bank is

not considered as negotiation.


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Question No. 3

Negotiation means the purchase by the nominated bank ofa) drafts drawn on itself

b) drafts drawn on a bank other than itself

B, a nominated bank cannot negotiate drafts drawn on itself.

Question No. 4Your bank is open on Saturdays to transact only in retail transactions (like cash

withdrawals and cheque book issuance.) Will Saturdays be considered as a

banking day for your bank under UCP600?

No, Saturdays will not be considered as banking day for your bank

since the bank is not open to transact in business relating to letters of

credit.


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Question No. 5

If a documentary credit requires presentation of a Phytosanitary Certificate issuedby a competent authority. The phytosanitary certificate must be issued by

a) Government authority

b) Department of Agriculture

c) Anyone except the beneficiary

C, If 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.

Question No. 6

If a credit requires shipment to be effected immediately upon receipt of L/C,when should the shipment be effected?

The term immediately will be disregarded. Hence shipment can be

effected anytime on or before expiry date


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Question No. 7

A letter of credit states Beneficiary to send one set of copy documents to theapplicant immediately after shipment. A certificate to this effect is required.

Beneficiary certificate presented states - :We hereby certify that one set of copy

documents have been sent to applicant within 1 day after shipment

Is this document acceptable,

As per UCP 500?As per UCP 600?

UCP500 Yes, as per UCP500 the term immediately will be disregarded.

UCP600 No, as per UCP600 the term immediately will be disregarded

unless it is required to be mentioned in a document


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Question No. 9

A credit states that shipment can be effected from 01st January until 10th January

2007. On which of the following dates can the shipment be effected?

a) 01 Jan 07 to 10 Jan 07 (both days inclusive)b) 02 Jan 07 to 09 Jan 07 (both days inclusive)

A. 01 January to 10 January both dates inclusive

Question No. 8

A credit states that the shipment must be effected on/about 10 January 2007.

On which of the following dates can the shipment be effected?

a) 05 Jan 07 b) 13 Jan 07

c) 10 Jan 07 d) 16 Jan 07

A, B & C. 05 January 2007 to 15 January 2007 both dates inclusive


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Question No. 10

The maturity date of a documentary credit with tenor 10 days after B/L date(B/L date is 01-Jan-2007) is _____________

11 Jan 07

Question No. 11

The maturity date of a documentary credit with tenor 10 days from B/L date(B/L date is 01-Jan-2007) is _____________

The maturity date will be 11 Jan 07, the words From and After used

in connection with the maturity date will be considered as to excludethe date mentioned


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Question No. 12

A Proforma Invoice is attached to the credit as an integral part of the credit. Is thisacceptable?

No, UCP600 discourages banks to issue L/C which include copies of the

underlying contract or proforma invoice as an integral part of the credit.

However if the same is included it will be considered at the time of checking

documents.


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Question No. 13

Is draft mandatory when a Credit is available by negotiation?

No, negotiation means giving value to drafts and / or documents. A L/C

available by negotiation need not call for drafts.


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Question No. 15

Can you negotiate documents under the L/C?

No, only the nominated bank can negotiate documents under a letter of

credit

Question No. 16

Is the issuing bank liable to pay even of documents are not presented by the

nominated bank?

Yes. By issuing a L/C the Issuing Bank has given an irrevocable

undertaking to honour upon receipt of credit compliant documents

Your customer receives a letter of credit issued by XYZ Bank, London. The L/C is

restricted to XYZ Bank, Hong Kong by negotiation. Your customer wants to presentdocuments to your counters since they do not have a banking relationship with XYZ

Bank, Hong Kong.

Question No. 14

Can your customer present documents to you, despite the L/C being restricted

to XYZ Bank, Hong Kong?

Yes, it is not mandatory for beneficiary to present documents to the

nominated bank


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Question No. 17

Your customer presents credit compliant documents under a L/C available

with your bank by negotiation. You negotiate and dispatch documents to the

issuing bank by courier. However the documents are lost in transit and do not

reach the issuing bank. Is the issuing bank responsible to reimburse your

bank?

Yes, the issuing bank is responsible to reimburse a nominated even ifthe documents are lost in transit between the issuing bank and the

nominated bank`

Question No. 18

Re: Question 17. If you have not negotiated documents, is the issuing bank

obliged to pay?

Yes, the issuing bank is liable to reimburse a nominated bank when

documents are lost in transit even if the nominated bank did not act

according to its nomination


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Question No. 20A letter of credit is restricted for negotiation with Bank X, Hong Kong.

Beneficiary presented documents to Bank Y, Hong Kong on the L/C expiry

date (22 Dec 2006). Documents were sent by Bank Y to issuing bank on 22

Dec 2006. The documents reached Issuing Bank on 24 Dec 2006. Issuing

bank refused to pay due to the discrepancy L/C expired. Is the issuing bank

correct?

Yes, documents must be presented to the nominated bank or issuing

bank within the latest presentation date

Question No. 19

Re: Question 17. If your bank is not the nominated bank, is the issuing bankobliged to pay?

No, issuing bank is not liable to pay if the documents are sent by a

bank other than the nominated bank is lost in transit


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Question No. 21

What happens if a credit is made available by drafts drawn on the applicant?

Should a draft also be drawn on the issuing bank?

UCP600 aims to discourage banks from calling for drafts drawn on

applicant. However, if there is such a requirement in the credit, we must

request the issuing bank to remove such requirement.


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XYZ Bank, London issued a letter of credit with the following terms:

Available with ABC Bank, Hong Kong by acceptanceDrafts at 60 days after bill of lading date

Drawn on ABC Bank, Hong Kong

ABC Bank, Hong Kong has not added its confirmation to the L/C.

Beneficiary presented credit compliant documents to ABC Bank, Hong

Kong along with a drafts drawn on ABC Bank, Hong Kong as per L/C

terms.

No, ABC Bank, Hong Kong should not accept drafts drawn on it unless

it has added its confirmation to the L/C. If it accepts the drafts it will be

liable to pay on maturity even if the issuing bank does not pay

Question No. 22

Is ABC Bank, Hong Kong obliged to accept the drafts?


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Yes, issuing bank is obliged to accept drafts drawn on itself, when the

drafts drawn on nominated bank are not accepted by the nominated

bank

Question No. 23Can ABC Bank, Hong Kong request that the drafts be replaced with a draft

drawn on XYZ Bank, London?


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Question No. 24

Credit compliant documents are presented to the Nominated Bank. The

Nominated Bank does not honour or negotiate the documents. The

beneficiary sends the documents to the Confirming Bank. Is the Confirming

Bank required to honour the document?

Yes, a confirming bank is irrevocable bound to honour even if the

nominated bank refuses to do so.


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Yes, having added its confirmation, ABC Bank must act according to its

nomination and negotiation credit compliant documents.

Question No. 25

ABC Bank advised a letter of credit available by negotiation after adding it

confirmation. Subsequently the beneficiary presented credit compliant

documents and requested ABC Bank to negotiate documents and pay

immediately.

a) Is ABC Bank obliged to negotiate documents?

Yes, negotiation / honour by a confirming bank is without recourse

b) Will this payment be without recourse to the beneficiary?


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Question No. 26

Can an LC be sent by the issuing bank directly to the beneficiary without theuse of an advising bank?

No. It is advisable to take the beneficiary's consent as they may have

made special arrangements for processing with their own bankers.

Question No. 27A bank has received an LC to be advised to the beneficiary through another

bank. Can it choose to advise the LC directly to the beneficiary without taking

the beneficiary's consent?

Yes, but it is in the beneficiary's interest to have it advised through a

reliable bank in order to ensure it is authenticated.


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Question No. 30

A beneficiary received an amendment stating This amendment shall bedeemed to have been accepted by the beneficiary, if rejection is not sent to us

within 7 working days from the Date of Issue of this amendment.

The beneficiary does not revert with his acceptance or rejection within 7

working days. Does the amendment become effective?

No, such clauses in an amendment will be disregarded.


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Question No. 31

A Credit issued under UCP 600 is available with Bank N by DeferredPayment. The beneficiary presents credit compliant documents to Bank N and

requests for immediate payment. Can Bank N prepay?

Yes, prepayment of deferred payment undertakings is allowed in

UCP600. However the payment will be without recourse even if the

nominated bank has not added its confirmation to the L/C.

Question No. 32

Would your opinion change, if the L/C is issued under UCP 500?

As per UCP500 deferred payment credits are payable only on maturity.Prepayment of a deferred payment undertaking is not allowed


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Question No. 33

Will an L/C (subject to UCP) containing instructions for bank-to-bank

reimbursements automatically be subject to latest version of the URR?

No. It must be explicitly mentioned. (Note that SWIFT usage rules have

been changed taking this into consideration.)

Question No. 34

An LC stated, "Claim reimbursement from reimbursing bank certifying all

terms and conditions have been complied with." The claiming bank sent a

claim without the certification. Is the claim valid?

Yes, there is no requirement for the nominated bank to provide a

certificate of compliance to the reimbursing bank


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Question No. 35

The latest presentation date for a set of documents falls on 14th January

2007(Sunday). The documents presented on 15th January 2007 contain a

draft dated 16th January 2007. All other documents are dated on 12th

January 2007. Is this acceptable?

No, a document cannot be dated later than the date of its presentation.

Question No. 36The Address of the beneficiary as per L/C is ABC Ltd, 17 Main Street, Adam

Square, Country ZZZ.

The beneficiary presented an Invoice evidencing Beneficiary as ABC Ltd, 18

McNault Park, Mellonic Town, Country ZZZ.

Is this acceptable?

Yes, documents evidencing address of the beneficiary / applicant

different from the address mentioned in the L/C is acceptable as long

as the address is within the same country as in the credit.


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Question No. 37

The address of the Applicant as per L/C is PQR Ltd, 23 Clark Street, Eves

Park, Country YYY. The Credit called for bill of lading consigned to the

applicant.

The beneficiary presented a Bill of Lading evidencing Consignee as PQR Ltd,

Belleville Road, Marshal Square, Country YYY.

Is this acceptable?

No, when the address and contact details of the applicant appear as

part of the consignee or notify party details on a transport document,

they must be as stated in the credit.


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Question No. 38

The L/C calls for Copy Transport Document, without stipulating thepresentation period. What is the latest presentation date under the L/C?

a) 15 days after shipment date

b) 21 days after shipment date

c) L/C expiry date

L/C expiry date, presentation period of 21 days after shipment date willapply only if the L/C requires presentation of original transport

documents


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Question No. 39

The L/C calls for a Certificate of Quality. A Document titled Certificate of

Quality evidences the following:The Gross Weight and Net Weight of the goods are 1000 Kilos.

Is this document acceptable?

No, if the L/C does not stipulate the data content in a document banks

will accept the document only if its content appear to fulfill the function

of the required document. In this case the document presented is notacceptable because there is no certification regarding quality of goods.

Question No. 40

A letter of credit requires a Certificate of inspection. The certificate of

inspection issued by the beneficiary was presented. Is this acceptable?

Yes, unless the issuer is stipulated in the L/C any party can issue a

document


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Question No. 41

A letter of credit requires a Certificate of inspection issued by XYZ Inspection

Company. A certificate of inspection issued by XYZ Inspection Companywas presented and it was mentioned that the goods did not pass inspection.

Is this acceptable?

Yes, unless the content is stipulated in the L/C a document can show

any content as long as it fulfils the function of the document.

Question No. 42A Bill of lading presented under a letter of credit evidences beneficiary as

shipper, while all other documents evidence another party as shipper. Is this

acceptable?

Yes, consigner / shipper in any document need not be beneficiary of

the credit

Question No. 43

Can a beneficiary issue a bill of lading in the capacity of a carrier?

Yes, as long as the bill of lading complies with all the requirements of

article 20.


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Question No. 44

A refusal message was sent by the issuing bank as follows:

We are holding documents at your disposal. Meanwhile we are contactingthe applicant for waiver of discrepancies. If we obtain waiver from the

applicant prior to the receipt of your instructions to the contrary, we will

release the documents to the applicant.

Is the refusal valid?

Yes, UCP600 allows banks to release documents to the applicant uponreceipt of a waiver acceptable to them.

Question No. 45

Re: Question 44: Would your opinion change if the LC is issued under

UCP500?

As per UCP500 issuing bank cannot release documents to the applicant

prior to presenters consent. (even if the discrepancies are accepted by

the applicant)


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Question No. 47Documents are received by the Issuing Bank on 04 Dec 2006 (Monday).

What is the Latest Date for the Issuing Bank to communicate its acceptance

or rejection of documents,

a) As per UCP 500?

b) As per UCP 600?

(Assume that there are no Bank Holidays except for Saturday and Sunday)

As per UCP 500, 13 Dec 2006

As per UCP 600, 11 Dec 2006

Question No. 46

An issuing bank that refused documents under an L/C referred the same to

the applicant who accepted the discrepancies. Is the issuing bank obliged tomake payment?

No, issuing bank the right to reject discrepant documents even if the

discrepancies are accepted by the applicant


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Question No. 49

A letter of credit calls for a Certificate of Origin in one copy. Can a copy of

the certificate of origin be presented?

No, unless otherwise specified at least one original of each stipulated

document must be presented.

Question No. 48

A credit calls for an Original Invoice. The invoice presented is issued on the

original stationery of the beneficiary without any signature or original stamp. Is

this acceptable?

Yes, a document issued on original stationery will be considered as an

original.


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Question No. 51

A multimodal transport documents is signed by an agent on behalf of the

master without identifying the name of the master. Is this documentacceptable?

Yes, there is no requirement to identify the name of the master when

the documents issued by the master or by an agent on behalf of the

master.

Question No. 50

A Transport Document as per Article 19 of UCP 600 is signed as PQR Ltd as

Agents for the Multimodal Transport Operator XYZ Ltd. Is this acceptable?

No

Question No. 52Re: Question 51. Would your opinion change if you are checking the

documents under UCP 500?

The document will not be acceptable under UCP500 since Masters

name is not identified.


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Question No. 54

Is it necessary for a Bill of Lading to be issued from the same place as the

Port of Loading?

No, a bill of lading can be issued at a place different from port of

loading

Question No. 53

A Bill of Lading contains an indication Intended Port of Loading. What

should be evidenced in the On-Board Notation?

Port of loading, vessel name and on board date


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Question No. 56

A letter of credit requires presentation of a charter party bill of ladingevidencing shipment from Hong Kong to Any European Port. Which of the

following ports of discharge mentioned in a charter party bill of lading is

acceptable?

a) Rotterdam, European Port

b) Rotterdam and Amsterdam Ports

c) Any European ports

All three. A charter party bill of lading can show a geographical area

stated in the credit as the port of discharge

Question No. 55

Can a beneficiary of the L/C issue a charter party bill of lading, if he is also the

charterer of the vessel?

Yes, UCP600 allows charterers of the vessel to issue charter party bills

of lading in their capacity of charterers.


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Question No. 58

Re: Question 57. Would you answer change, if the documents are checkedunder UCP 500?

As per UCP500, 22 December 2006 will be considered as shipment date.

Question No. 57

A Credit calls for AWB consigned to the Applicant marked Freight Prepaidwithout calling for actual flight date. The AWB presented evidences Date of

Issue as 22nd December 2006 and Flight date as 25th December 2006.

Which of these dates will be taken as the Shipment Date?

25 December 2006. As per UCP600 actual flight date shown on the AWB

will be considered as shipment date. However if the AWB does notshow the actual flight date, issue date will be considered as shipment

date


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Question No. 60

Can we accept a rail transport document marked "duplicate" as an original?

Yes, as per UCP600 a rail transport document marked duplicate will

be accepted as an original.

Question No. 59

Can Rail Transport Documents be issued and signed by a Railway Company?

Yes, UCP600 allows for railway bills to be issued by railway companies

Question No. 61

A letter of credit requires the presentation of a road transport document. The

road transport document presented by the beneficiary is marked Original for

Consignee. Is this acceptable?

No, 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


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Question No. 63

A Credit requires Insurance Certificate to cover Institute Cargo Clauses (A).

Beneficiary presents an Insurance Certificate evidencing Covering Institute

Cargo Clauses (A) excluding risks of rust and oxidation. Is this acceptable?

Yes, as per UCP600 an insurance document may contain reference toany exclusion clause.

Question No. 62

A credit calls for an Insurance Certificate. The Insurance Certificate presented

is signed by ABC Ltd as Proxy for PQR Insurance Co Ltd., as Insurer. Is this

acceptable?

Yes, as per UCP600 proxies of insurance companies can issue

insurance document on behalf of insurance companies or underwriters.


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Question No. 65

A Credit requires an Insurance Policy in Duplicate endorsed in blank for 110

percent of the Invoice Value.. The beneficiary presents an Insurance Policy

for 150 percent of the Invoice Value. Is this acceptable?

Yes, a requirement in credit for insurance coverage will be considered

as the minimum coverage required.

Question No. 64

An Insurance Policy presented under a credit evidences that it is subject to

30% franchise. Is this acceptable?

Yes, an insurance document indicating the cover is subject to franchise

is acceptable


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Question No. 67

ABC Bank has received documents from its customer under a transferred

letter of credit. The customer instructs ABC Bank to send documents directly

to the issuing bank bypassing the transferring bank. Can ABC Bank senddocuments directly to the issuing bank?

No, unless expressly agreed to by the transferring bank second

beneficiarys documents must be sent to the transferring bank only.

Question No. 66

A transferable credit is available with Any Bank by Negotiation? Who is

authorized to transfer the LC?a) Issuing Bank

b) Advising Bank

c) Any Bank

d) Bank specifically authorised in the LC

A & D. In a freely available L/C, only a bank specifically designated inthe L/C or issuing bank can transfer


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Question No. 68

Documents presented by the Second Beneficiary are Credit Compliant. The

invoice substituted by First Beneficiary is discrepant. What is the course ofaction for the Transferring Bank?

a) Forward discrepant documents to issuing bank.

b) Request first beneficiary to rectify documents. If first beneficiary

doesnt rectify on first demand, send second beneficiarys documents

to issuing bank.c) Request first beneficiary to rectify documents. If first beneficiary

doesnt rectify till latest presentation date, send second beneficiarys

documents to issuing bank.

Transferring bank must request the first beneficiary to rectify his

invoice, however if the first beneficiary fails to do so on first demand.The transferring bank must send second beneficiarys documents

directly to the issuing bank.


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Question No. 69

A transferring bank confirms the master LC. Will the confirmation hold goods

for the transferred credit?

Yes, confirmation added to the master L/C will also hold good for the

transferred L/C


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Question No. 70

Any assignment of proceeds by the beneficiary must be in accordance with

a) Applicable law?

b) UCP?

c) ISBP?

Applicable Law