The blind angle(s) of the UCP 600
I do not know of any set of rules that have been discussed, analysed, scrutinized as much as the UCP 600.
Take for example:
- The definition of negotiation in article 2
- Confirming bank definition in article 2 and 8 (is a confirming bank a nominated bank?)
- The issue of availability and expiry in article in article 6
- The nominated banks role in article 12
Just to mention a few … which has been the subject or endless discussions. Some of these perhaps primarily academic (which I do not mind by the way).
What struck me during my summer vacation was that there is no end to the extremely detailed information that can be found in the UCP 600 (for example on on-board notations) – but there are some fundamental LC principles that are not there – and no one seems to miss them.
Let me mention some of those here:
1: The whole idea of the LC is for the beneficiary to get paid!
Yes, the beneficiary is the “party in whose favour a credit is issued” and yes the presenter may be the beneficiary – but the whole idea with having the LC issuing in its favour and making a presentation is to get paid!
Nowhere in the UCP 600 have I been able to find that principle reflected.
I can find articles that tells me that:
* The issuing bank must honour, and
* The confirming bank honour or negotiate, and
* The nominated bank may expressly agree to honour or negotiate.
But not to who this honour or negotiation must be made.
2. Payment must be made to the “correct” party
Following the above I also have a hard time finding an article that tells me to who the payment must be made in order to release the party making the payment of its payment obligations.
For example the confirming bank must pay to the beneficiary – but more often than not some payment instructions have been passed on to the confirming bank (for example when presenting the documents), and any payment not following those instructions does not release the confirming bank of its payment obligation towards the beneficiary.
3. The advising bank is not without responsibility
Still following the above train of thought, I find it hard to believe that the ONLY responsibility of the advising bank is that it must signifies that it has satisfied itself as to the apparent authenticity of the LC or amendment and that the advice accurately reflects the terms and conditions of the LC or amendment received.
If the beneficiary makes a presentation to the advising bank, and it chooses to accept it; i.e. examine it and/or forward it to the confirming or issuing bank and/or handling the payment when received then it is responsible (towards the beneficiary) for its acts in that respect. For example if payment is not made to the correct party the advising bank cannot just say “sorry guys – we are not responsible.” Or if payment is never received because of a really bad document examination by the advising bank, then surely the advising bank cannot simply say “so sorry!”
I wonder why this is so .... is this the price that are paid for the UCP 600 being made by primarily bankers - with practically no beneficiary/applicant involvement? Or is this simply so clear and obvious that it need not be stated?
I do not know - but the more I think about this - the more I find it strange that it is missing.
In any case; there are a few other examples – you are most welcome to add your own examples here as a comment – so we have a “catalogue” when time is right!
All for now – I hope you have been enjoying summer, and do not forget to take care of each other and the LC.
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