INTERPRETING UCP 600 & LETTER OF CREDIT TERMS

By Abbas Kamran
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UCP 600 Article 1 The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication no. 600 ("UCP") are rules that apply to any documentary credit ("credit") (including, to the extent to which they may be applicable, any standby letter of 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.

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Deletion of UCP 600 Articles from L/C Based on UCP Article 1 issuing banks often delete various UCP Articles from the L/C. Almost always articles are deleted without providing replacement instructions. Deletions or changes of UCP Articles can appear as follows:
1. 2. UCP Article 26 does not apply/is deleted. Documents must be presented within 10 days from the date of shipment.

The following grid reflects how to proceed when articles are either deleted or changed.
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UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

c.

NO

None

Cannot be deleted

MT730: We regret that we are unable to advise this LC until we receive an amendment reinstating UCP Article 7 c. ensuring that a nominated bank who has honoured/negotiated is entitled to receive reimbursement. MT730 to confirmer: We are unable to advise this LC until we receive an amendment reinstating UCP Article 8 c. ensuring that a nominated bank who has honoured/negotiated is entitled to receive reimb. None

NO

None

Cannot be deleted

Yes Deleting "without delay"

None

Yes

None

None

INTERPRETING L/C TERMS

UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

Yes

None

None

10

NO

None

Mt730: We regret that we are unable to advise this LC/amend. Please either amend the LC to either: a) reinstate 10b. or b.) inform us when amendments will become effective. If "available with any Bank" or Restricted to SCB: "We regret that we are unable to advise this amendment. Please reinstate as we are not in a position to track beneficiary acceptance/rejection of amendments within restricted time frames. If "available with any bank" or restricted to SCB: " We regret that we are unable to advise this amendment. Please reinstate as we are Not in a position to track beneficiary acceptance/rejection of amendments within restricted time frames" 5

10

NO

None

10

NO

None

INTERPRETING L/C TERMS

UCP60 Article No.
12

Article SubSection
b

Acceptable/ Advisable Comments

Yes

Beneficiary Action/ Warning

As the issuer has deleted Article 12b. we regret that we will not be in a position to prepay/purchase/discount your time drawing.

Issuer Action

14

Depends if LC has full doc. details then OK. If not then follow this. Yes

None

Mt730: We regret that we are unable to advise this LC/amend due to deletion of 14f. Please urgently amend the LC to either: a) reinstate 14f or b.) provide us the full issuer name and content needed for each LC document required. MT730: Deletion of Article 14 i. now allows documents to be dated 'after' the date of document presentation. Please be guided accordingly.

14

None

14

Yes

The LC deleted Article 14 j. The name and address of the beneficiary and the applicant, on any document, must be stated exactly as stated in the LC

INTERPRETING L/C TERMS

UCP60 Article No. *16 Article SubSection c. iii d. Acceptable / Advisable Not Comment s Beneficiary Action/ Warning None Issuer Action Mt730: We regret that we are unable to advise this LC. Please either: a) reinstate Article 16 c. iii. d. or b) explain your reason for deleting this article. None

17

Yes

Article 17 d. has been deleted. Your documentary presentations must conform to the number of originals and copies required by the LC. Article 18 b.has been deleted. Invoices cannot bear a reference to any amount(s) in excess of the LC amount even if you are not drawing for said excess amount(s).

18

Yes

None

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UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

19

c. i.

Yes

Article 19 c. i. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 19 c. ii. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 20 c. i. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place.

None

19

c. ii.

Yes

20

c. i.

Yes

INTERPRETING L/C TERMS

UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

20

c. ii.

Yes

Article 20 c. ii. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 20 d. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 21 c. i. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place.

20

d.

Yes

21

c. i.

Yes

INTERPRETING L/C TERMS

UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

23

c. i.

Yes

Article 23 c. i. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 23 c. ii. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. Article 24 e. i. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. 10

23

c. ii.

Yes

24

e. i.

Yes

INTERPRETING L/C TERMS

UCP60 Article No. Article SubSection Acceptable/ Advisable Comments Beneficiary Action/ Warning Issuer Action

24

e. ii.

Yes

Article 124 e. ii. has been deleted. Any transport document presented cannot bear reference that transshipment will or may take place. None Mt 730: You've deleted Article 26 a. As such, you have allowed transport documents to state "on deck". Please confirm. L/C is being held at our counters awaiting your response. None

26

NO

26

Yes

Article 26 c. has been deleted. Any required transport document cannot bear any reference whatsoever to charges other than freight including terms such as "free out".

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UCP60 Article No. 28 Article SubSection i Acceptable / Advisable NO Beneficiary Action/ Warning Comments None Mt730: We regret that we are unable to advise this LC. Please reinstate Article 28 i.and inform what exclusions are unacceptable to yourselves. All insurance documents will bear reference to exclusions. Mt730: We regret that we are unable to advise this LC. Please reinstate Article 28h. and inform what exclusions are unacceptable to yourselves. All insurance documents will bear reference to exclusions. Mt730: You have deleted article 35 which is not acceptable to us. Please reinstate this article to enable us to advise the L/C to the beneficiary. L/C is being withheld awaiting your response. None MT730. You have deleted article 37 c, which is not acceptable to us. Please reinstate this article to enable us to advise this L/C to the beneficiary. Meanwhile L/C is being withheld awaiting your response. 12 Issuer Action

28

h.

NO

None

35

NO

37

NO

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L/C Workability Terms - Advising/Confirming

DO NOT PROCESS/DO NOT ADVISE/ NON-WORKABLE L/C TERMS NON-

NOTE: ITEMS LISTED BELOW ARE SOME AND NOT ALL OF THE NON-WORKABLE TERMS NON

      

 

Swift states seq. of total 1/3 all pages not received. OR all pages are received and states mail to follow or signatures to follow. L/C states Revocable. L/C is received but cannot be authenticated. Missing Place of Expiry; Expiry Date; Shipment date later than the expiry date L/C must be subject to UCP600 or ISP98 (ICC590) Applicant or Beneficiary is a defense, military or nuclear entity. Goods description: is not clear; is dual use; must not say only Stores; goods as per contract no or goods as per P.O. No. L/C contains prohibited anti-boycott language. antiL/C is revolving but does not state revolving on a cumulative or nonnoncumulative basis. Beneficiarys business does NOT relate to goods being shipped.
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L/C Workability Terms - Advising/Confirming

DO NOT PROCESS/DO NOT ADVISE/ NON-WORKABLE L/C TERMS NON-

NOTE: ITEMS LISTED BELOW ARE SOME AND NOT ALL OF THE NON-WORKABLE TERMS NON

 

 

Missing available by: payment; negotiation; acceptance; deferred payment; Contains statements that turn the L/C in to a collection (URC522) Contains a requirement such as: negotiating bank to provide a satisfactory credit report on the beneficiary or its like. Merchandise unit price and quantity dont add up to L/C value. Contradicting reimbursement instructions L/C states claim from xyz bank and also states that documents must be presented to issuing bank who will remit proceeds as per instructions. Contains a requirement such as: negotiating bank to provide a satisfactory credit report on the beneficiary or its like. L/C is not issued in English.

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L/C Workability Terms - Advising/Confirming

EXERCISE CAUTION PROCESSING L/C THAT CONTAIN FOLLOWING TERMS.

NOTE:ITEMS LISTED BELOW ARE SOME AND NOT ALL OF THE TERMS


L/C is subject to Incoterms without stating year ie: CIF Incoterms__ (Advise only and request amendment from Issuing Bank). Any Red Clause/Advance Payment conditions that require payment in excess of 25% of the L/C value. (Refer to NY for further instructions). L/C is not operative and will be made operative upon ----. (Advise only. Do not confirm till ----. L/C is made operative). Exercise caution where the merchandise being shipped is Sugar, Cigarettes, Honey, Cement etc. (Verify that price is in line with market price. Beneficiary is not a middleman. L/C is not transferable. Etc. Refer to NY for guidance.) Ensure that the L/C unit prices and quantity add up. L/Cs that do not contain method of determining unit price clarify with issuing bank). Ensure that information in swift fields 44A, 44E, 44F and 44B is consistent with the required transport document. Clarify ambiguous statement in the L/C ex: Field 46A states: Shipment not made via vessel older than 20 years is required. L/C does not call for a certificate. Clarify with issuing bank. Conflicting terms: Stale documents acceptable and documents must be presented within 21 days after shipment. Clarify with issuing bank.

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