UCP 700 – on the table?


The latest DCWorld (January 2015) includes a number of articles pointing towards a potential UCP 700 revision.

 

I am not aware of this, but would in fact welcome such initiative – of course given that it is a “real” revision. To me that means a real effort in taking the UCP out of the 18th century gaslight and into the twenty first century. 

 

Of course it is always great fun diving back into old versions of the UCP; but reading the first version from 1933 is an almost scary experience. The basic structure is the same as UCP 600 (from 2007) – some of the provisions are almost worded the same way – in some cases only a bit better!

 

Therefore it is vital that the articles of the UCP are carefully evaluated – in order to make sure that todays rules and practice are synchronized. See this blog post for more regarding this issue:

http://lcviews.com/index.php?page_id296

 

In this blog post I will walk through the UCP 600 articles – indicating what should/could be changed – and why:

 

General:

The rules should not encourage practices that date back many hundred years – and for that reason does not make sense today. So references to drafts and negotiation should be getting rid of once and for all. Further the UCP should cater for an electronic handling of the LC as such. I.e. this would require some specific articles on this issue – some based on the eUCP.

 

Further – there should be a more “clean” split between the UCP and the ISBP; i.e. the UCP should address the “overall” issues – such as the what kind of instrument the LC is and the obligations and roles of the involved parties, whereas the ISBP should cover the practice for examining the documents.

 

Article 1 – Application of UCP

It should be acknowledged that the UCP 600 is NOT well suited for standby letters of credit. See for example this SingleWindow Q&A:

http://lcviews.com/index.php?page_id06&qa_id247

 

The ICC should clearly separate between commercial LCs – subject to UCP – and standby LC – subject to ISP!

 

For that reason that reference to standbys should be taken out of the rules. I.e. article 1 could be worded as follows:

 

Application of UCP

The Uniform Customs and Practice for Documentary Credits, XXX Revision, ICC Publication No. 700 (“UCP”) are rules that apply to any documentary credit (“credit”) when the text of the credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded by the credit.

 

 

Article 2 – Definitions

The concept of negotiating – as well as drafts should be taken out of the UCP. Honour will do just fine. This means that the definition of negotiation will be fully removed. Honour should the be defined as follows:

 

Honour means:

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.

 

In addition the article should be split into sub-articles – which would make it easier to refer to them.

 


Article 3 – Interpretations

The following interpretations must be carefully considered:

 

Signed:

In the UCP the definition of signed should be made more generic – and then it will be for the ISBP to describe the practical application of that, i.e.:

 

A requirement for a document to be signed will be satisfied by any signing (manual or electronic) that appears to satisfy that requirement.

 

 

 

legalized, visaed, certified:

In this definition there should be made room for electronic certifications, i.e.:

 

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 that appears to satisfy that requirement, whether added manual or electronic.

 

In addition the article should be split into sub-articles – which would make it easier to refer to them.

 


Article 4 – Credits v. Contracts

Seems to be working.


 

Article 5 - Documents v. Goods, Services or Performance

Seems to be working.


 

Article 6 – Availability, Expiry Date and Place for Presentation

For article 6 the references to drafts and negotiation must be taken out. In addition it must be catered for that the place for presentation need not be a physical place; but may constitute an upload of the presentation to a system or website. The article could be drafted as follows:

 

Availability, Expiry Date and Place for Presentation

a. A credit must state the bank or banks with which it is available. A credit available with a nominated bank is also available with the issuing bank.

 

b. A credit must state whether it is available by sight payment or deferred payment.

 

c. The availability of a credit must not include the use of a draft.

 

d.

i. A credit must state an expiry date for presentation. An expiry date stated for honour will be deemed to be an expiry date for presentation.

ii. The place of the bank or banks with which the credit is available is the place for presentation. iii. The place for presentation may be an electronic or physical place.

iv. A place for presentation other than that of the issuing bank is in addition to the place of the issuing bank.

 

e. Except as provided in sub-article xxx, a presentation by or on behalf of the beneficiary must be made on or before the expiry date.

 

 

Article 7 – Issuing Bank Undertaking

Article 8 – Confirming Bank Undertaking

Article 7 and 8 need be reworked in order to remove the references to negotiation, and making sure that an electronic presentation will trigger the obligation according to the documentary credit.

 


Article 9 – Advising of Credits and Amendments

Seems to be working.


 

Article 10 – Amendments 

Seems to be working.


 

Article 11 – Teletransmitted and Pre-Advised Credits and Amendments

This article is from a time where the issuing bank would issue a pre-advise (via telex) – and then issue the LC is such in letterform. Of course this is a fully out-dated practice, for what reason the article should be ^^Delete^^d.

 


Article 12 – Nomination

The article should be reworked so that all references to negotiation and drafts be taken out, e.g.:

 

Nomination

a. Unless a nominated bank is the confirming bank, an authorization to honour does not impose any obligation on that nominated bank, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

 

b. By nominating a bank to incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay a deferred payment undertaking incurred by that nominated bank.

 

c. Receipt or examination and forwarding of documents by a nominated bank that is not a confirming bank does not make that nominated bank liable to honour and it does not constitute honour.

 


Article 13 – Bank-to-Bank Reimbursement Arrangements

Seems to be working.

 


Article 14 – Standard for Examination of Documents

Article 14 should be limited to offering the principles of document examination; i.e. the practice should be in the ISBP. This means that the following sub-paragraphs should be taken out of the UCP:

 

14(e) Goods description

14(j) Addresses and contact details of the beneficiary and the applicant

14(k) Shipper or consignor of the goods

 

In addition article 14(l) is redundant – and should also be taken out.

 


Article 15 – Complying Presentation

The article should be reworked so that all references to negotiation be taken out, e.g.:

 

Complying Presentation

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 and forward the documents to the issuing bank.

 

c. When a nominated bank determines that a presentation is complying and honours, it must forward the documents to the confirming bank or issuing bank.

 


Article 16 – Discrepant Documents, Waiver and Notice

The article should be reworked so that all references to negotiation be taken out.


 

Article 17 – Original Documents and Copies

This article should be reworked so that it also caters for electronic documents. Further there should be a more straightforward approach for determining originality.

No example to offer at this point in time.

 


Article 18 – Commercial Invoice

This article should be taken out and “merged” with Section C in ISBP (Invoices).


 

Article 19 –Transport Document Covering at Least Two Different Modes of Transport

This article should be taken out and “merged” with Section D in ISBP (Transport document covering at least two different modes of transport (“multimodal or combined transport document”))


 

Article 20 – Bill of Lading

This article should be taken out and “merged” with Section E in ISBP (Bill of Lading).


 

Article 21 – Non-Negotiable Sea Waybill

This article should be taken out and “merged” with Section F in ISBP (Non-Negotiable Sea Waybill).


 

Article 22 – Charter Party Bill of Lading

This article should be taken out and “merged” with Section G in ISBP (Charter Party Bill of Lading).


 

Article 23 – Air Transport Document

This article should be taken out and “merged” with Section H in ISBP (Air Transport Document).

 


Article 24 – Road, Rail or Inland Waterway Transport Documents

This article should be taken out and “merged” with Section J in ISBP (Road, Rail or Inland Waterway Transport Documents).


 

Article 25 – Courier Receipt, Post Receipt or Certificate of Posting

This article should be taken out and inserted into ISBP.


 

Article 26 – “On Deck”, “Shipper’s Load and Count”, “Said by Shipper to Contain” and Charges Additional to Freight

This article should be taken out and inserted into ISBP.


 

Article 27 – Clean Transport Document

This article should be taken out and inserted into ISBP.


 

Article 28 – Insurance Document and Coverage

This article should be taken out and “merged” with Section K in ISBP (Insurance Document and Coverage).


 

Article 29 – Extension of Expiry Date or Last Day for Presentation

Seems to be working.

 


Article 30 – Tolerance in Credit Amount, Quantity and Unit Prices

This article should be taken out and “merged” with paragraphs C13 and C14 ISBP 745.


 

Article 31 – Partial Drawings or Shipments

Seems to be working.


 

Article 32 – Instalment Drawings or Shipments

As argued a number of times – this article is “deadly,” and the approach must be changed. The following is suggested:

 

If shipment by instalments within given periods is specified, each instalment shall be treated as a separate transaction. An instalment not shipped within a given period cannot be added to subsequent shipments. The issuing bank may, at the time of rejecting the presentation, inform the presenter that the credit ceases to be available for that and any subsequent instalment. In case the issuing bank has not informed the presenter that the Credit ceases to be available, the Credit is still available for subsequent shipments provided they are made within the given periods.

 


Article 33 – Hours of Presentation

Seems to be working.


 

Article 34 – Disclaimer on Effectiveness of Documents

Seems to be working.


 

Article 35 – Disclaimer on Transmission and Translation

The article should be reworked so that all references to negotiation be taken out (and it should be split into sub paragraphs), e.g.:

 

a. A bank assumes no liability or responsibility for the consequences arising out of delay, loss in transit, mutilation or other errors arising in the transmission of any messages or delivery of letters or documents, when such messages, letters or documents are transmitted or sent according to the requirements stated in the credit, or when the bank may have taken the initiative in the choice of the delivery service in the absence of such instructions in the credit.

 

b. 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, an issuing bank or confirming bank must honour 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.

 

c. A bank assumes no liability or responsibility for errors in translation or interpretation of technical terms and may transmit credit terms without translating them.

 


Article 36 – Force Majeure

The last couple of years has proven that this article is not complete – and a full re-working is required. It is suggested that it is based on URDG 758.

 


Article 37 – Disclaimer for Acts of an Instructed Party

Seems to be working.

 


Article 38 – Transferable Credits

Seems to be working.

 


Article 39 – Assignment of Proceeds

Seems to be working.

 

 

 

As indicated above – there is quite a work in revising the UCP 600 …. Also because the revision of UCP 600 must be “linked” to a revision of ISBP 745.

 

Further it is my hope that – after such process the ISBP will not be a book! But rather be available on-line – free of charge …. Or very cheap!

 

In other words: I am ready … you can let the revision begin …

 

Take care of each other and the LC!

 

Best regards

Kim

 

 



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