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