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.
Best
regards
Kim