The explanatory notes accompanying the recent ICC Banking Commission decision not to proceed with a revision of UCP 600 contained a number of answers to questions raised by practitioners in different parts of the world.
We have addressed a few of these queries below (and in the next few blogs) by stating the issue and the response from the ICC.
Identify whether Courts in important trade centres are still taking the UCP as guidance or ignoring it as irrelevant.
- UCP is not law and courts are free to disregard the rules if they so wish.
- Obviously this is bad practice but is a very rare occurrence. Over decades, innumerable examples exist around the world where courts have taken cognisance of UCP, ISBP and ICC Opinions in formulating their response to the facts of a case.
- Both UCP & ISBP are fit for purpose and the related benefits have been proved time and time again.
- The actions of courts are not controllable by the ICC or its rules.
Transferable credits are too risky for second beneficiaries and can lead to lengthy discussions between all involved parties.
- Transferable credits are an integral part of trade finance and are in demand all around the world. Deletion would not prove to be acceptable to many practitioners, and would not stop the practice of issuing transferable credits.
- The fact that there have been less than 30 ICC Opinions issued since 1995 on the subject of transferred credits, the vast majority of which did not relate to a problem with UCP 600 article 38, demonstrates that, overall, this type of credit performs well.
It might be prudent to look back to the 1980s and revisit UCP 400's approach to bills of lading. UCP 400 contained a hierarchy of marine documents and a default rule: Multimodal unless another type of B/L clearly mandated. UCP 500, followed by UCP 600, changed that arrangement.
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- Rules do not dictate the type of transport document to be presented, the credit does. UCP 600 article 1 allows for any rule to be modified or excluded by the terms and conditions of the credit. The problem of the correct choice of transport document lies with banks not offering, in their application forms, the full range of transport documents that could be applicable to a transaction. Applicants and beneficiaries further exacerbate this by not identifying the appropriate Incoterm, which would, in turn, highlight the point of delivery, and, therefore, the appropriate transport document. |
- It should be noted that UCP 400 also prompted many opinion requests related to transport documents.
Ban copies of the contract etc., from credits: refer to UCP 600 sub-article 4 (b).
- The current wording of UCP 600 discourages any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like.
- As stated in the ‘Commentary on UCP 600', it was recognised that there was nothing that could be stated in the rules that would prohibit a credit from being issued with one or more of the abovementioned attachments. In any event, an advising bank can elect not to advise a credit if they find this unacceptable.
- As the above publication highlights, it should also be noted by applicants that incorporation of such an attachment offers limited protection with regard to the goods and their standard or quality: such issues are resolved by requiring the appropriate documents and the data that is to appear therein.