The UCP 600 Gatekeeper

Just recently I recieved the commnet that these days I love ISBP more than I love UCP.


That comment surprised me a lot – and made me think … (and for that alone I offered my heartfelt thank you to the wonderful person making that statement!)


As such, I can see where this comes from: I have written so much about ISBP 745 since (or even before) it was approved in Lisbon April this year. I have defended. I have argued. I have shouted. I have used the maximum of my sales skills to persuade anyone who care to listen that ISBP 745 is the seventh wonder of the world!


So – do I really love the ISBP more than UCP? My conclusion is – no – I do not. To me the two are interlinked. The one must have the other. The other must have the one. If one is missing the other is not complete. And visa versa. And visa versa.


Let me explain:


Of course without UCP there would be no ISBP. ISBP describes the practice of UCP – so UCP must be there. But conceptually what is the role of the ISBP – really? At its core?


The way I see it ISBP is gatekeeper to the UCP. ISBP is there to protect UCP!


Let me further explain.


UCP 600 provides the basis for an LC. It defines the roles of the parties – and regulates its obligations. It offers the LC framework. However – as anyone working with LCs on a daily basis know, the devil lies in the detail. UCP 600 includes a black and white approach to the LC: The documents are complying or discrepant. The bank is obligated or not. You are precluded or you are not. The document is signed correct or it is not. There is no middle ground!


However; when handling the LC transaction there are many shades of grey!


I edit the LCM Newsletter Trade Services Update, and have the pleasure of managing the discussions amongst the editorial board. When one follow that, it becomes clear that often there is at least two convincing answers to any LC related question or dispute …


As far as I can see ISBP 745 is the best “tool” so far for protecting the UCP 600 against disputes on issues not dealt with in the UCP 600.


It does so in (at least) two different (yet interrelated) ways:


FIRST; In the preliminary Conditions the following is stated:



Paragraph iv:

Many of the problems that arise at the document examination stage could be avoided or resolved by the respective parties through careful attention to detail in the credit or amendment application and issuance of the credit or any amendment thereto. The applicant and beneficiary should carefully consider the documents required for presentation, by whom they are to be issued, their data content and the time frame in which they are to be presented.


Paragraph v:

The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. An issuing bank may, unless the applicant expressly instructs to the contrary, supplement or develop those instructions in a manner necessary or desirable to permit the use of the credit or any amendment thereto. An issuing bank should ensure that any credit or amendment it issues is not ambiguous or conflicting in its terms and conditions.



I.e. it urges that great care is observed when the LC is issued … and it places the risk of ambiguities at the applicant.


SECOND, in a number of paragraphs where it “punishes” the issuing bank if it is not clear in its terms and conditions. The best example to that effect can be found in paragraph A19: Expressions not defined in UCP 600. This paragraph opens as follows:



The expressions “shipping documents”, “stale documents acceptable”, “third party documents acceptable”, “third party documents not acceptable”, “exporting country”, “shipping company” and “documents acceptable as presented” should not be used in a credit, as they are not defined in UCP 600. If, nevertheless, they are used, and their meaning is not defined in the credit, they shall have the following meaning under international standard banking practice:



Note the words: “should not be used in a credit.” These are expressions where no universal definition exist(ed) – and therefore the issuing bank should not use those. Rather they should say clearly what is the intention. If however they choose to use any of those expressions, they will meet definitions that are not in their favour. For example:


Third party documents acceptable. This now excludes

1. the documents where UCP 600 indicates an issuer. So such expression has no effect on the requirements to the invoice, transport document and insurance document.

2. documents where the LC indicates an issuer. For the rest of the documents (where no issuer is indicated in the LC) any issuer is allowed (UCP 600 article 14(f)).

So in reality this expression gives you nothing! It has no effect whatsoever.


Documents acceptable as presented. If an issuing bank uses this expression, they may end up with only a copy of a packing list!



Most of the problems that arise under LC are not related to issues in UCP 600 – but related to badly drafted LCs.


ISBP 745 goes as far as possible to solve such issues.

I.e. ISBP 745 is the gatekeeper of UCP 600.


Both have their natural place and role in the LC transaction.


So the answer is that you cannot love one above the other. They are one.


Take care of each other and the LC and UCP and ISBP – and do not forget to enjoy summer.



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