Rules

UCP 600 e-Books That Every Exporter and Importer Should Read

Ozgur Eker (CDCS) Commercial Letter of Credit Rules, Letter of Credit Rules, Rules
ucp 600 ebooks

UCP 600 is the latest version of the letter of credit rules. It is drafted by ICC Banking Commission and published by ICC Services.

Its full name is 2007 Revision of Uniform Customs and Practice for Documentary Credits, UCP 600, and (ICC Publication No. 600).

All copyrights of UCP 600 belong to the ICC, therefore it is not legal to share it online without permission.

I strongly recommend all letter of credit practitioners to buy an original UCP 600 copy from ICC’s online store.

If you do not know how to buy an UCP 600 copy online, please read my related article: “How to Buy UCP 600 Online“.

On this page I would like to mention Top 4 UCP 600 e-books that has been published by banks for educational purposes.

UCP 600 : Understanding & Application

UCP 600 Understanding & Application

Written by: Victor Pena
Published by: Citigroup Inc in 2006

This is one of the best UCP 600 e-book that you can find online. UCP 600 : Understanding & Application is written by Victor Pena who was Vice President of Americas Regional Trade Advisor at that time.

This e-book published in 2 parts.

Introduction to UCP 600 – the new rules on documentary credits

 

Introduction to UCP 600 – the new rules on documentary credits

Written by: Trade and Export Finance Team
Published by: Danske Bank in 2007

Very short e-book published by Danske Bank covering the most important changes in UCP 600.

FAQs on documentary credits

FAQs on documentary credits

Written by:Transcript of Question and Answer Sessions of a Seminar called ‘Leveraging Documentary Credits to Grow Your Trade Business’
Published by:HSBC Bank Middle East Limited, in 2009

Another very important UCP 600 e-book. Gary Collyer, who was the Technical Adviser to the ICC Banking Commission at that time, answered questions raised by delegates delegates attending HSBC’s trade finance seminar.

First 86 questions are related to UCP 600 article by article and remaining 58 questions are general questions regarding the usage of letters of credit.

What is UCP 600?

what is ucp 600

Written by: ABN AMRO Bank N.V
Published by: ABN AMRO Bank N.V, in 2007

Another short UCP 600 explanatory e-book. Prepared by Abn Amro Bank, which is one of the biggest banks in Holland.

This e-book focuses on important revisions of latest version of the letter of credit rules.

Related Articles:




ICC Uniform Rules for Forfaiting (URF 800)

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ICC Uniform Rules for Forfaiting (URF 800)

Forfaiting means the sale by the seller and the purchase by the buyer of the payment claim on a without recourse basis.

In other words, forfaiting is discounting of trade‐related receivables secured with trade finance instruments such as bills of exchange, promissionary notes or deferred payment letters of credit.

In the U.S., forfaiting is known as “structured trade finance”, and every year more than USD 300 billion of world trade takes place using forfaiting.

ICC Uniform Rules for Forfaiting which is called URF 800 is the first set of rules which governs both international and domestic forfaiting transactions.

These rules went into effect on January 1, 2013.

URF 800 is created by the experts from ICC (International Chamber of Commerce) and ITFA (International Trade and Forfaiting Association) with a spread of expertise – marketing, operational and legal – and geographical location.

What are the Headings of URF 800?

You can find table of contents of Uniform Rules for Forfaiting below. Uniform Rules for Forfaiting consists of total 14 articles and 4 annexes.

Table of Contents of URF 800 Rules

FOREWORDS
INTRODUCTION
Article 1 Application of URF
Article 2 Definitions
Article 3 Interpretations
Article 4 Without recourse
Article 5 Forfaiting agreements in the primary market
Article 6 Conditions in the primary market
Article 7 Satisfactory documents in the primary market
Article 8 Forfaiting confirmations in the secondary market
Article 9 Conditions in the secondary market
Article 10 Satisfactory documents in the secondary market
Article 11 Payment
Article 12 Payment under reserve
Article 13 Liabilities of the parties
Article 14 Notices

ANNEXES
Annex 1 Master Forfaiting Agreement
Annex 2 Forfaiting Agreement
Annex 3 Forfaiting Agreement in SWIFT format
Annex 4 Forfaiting Confirmation

ICC Uniform Rules for Forfaiting URF 800 English Version

How URF 800 Can be Applied to Forfaiting Transactions ?

All ICC rules which are related to international trade require express incorporation into the agreements.

For example, the UCP 600 rules will apply to the letters of credit when the text of the credit expressly indicates that it is subject to the UCP 600.

The Uniform Rules for Forfaiting (URF 800) are no exception.

URF 800 rules apply to a forfaiting transaction when the parties expressly indicate that their agreement is subject to these rules.

They are binding on all parties thereto except so far as modified or excluded by agreement.

Some Important Benefits of ICC Forfaiting Rules:

According to Silja Calac, who was the chair of the task force that gathered from both ICC and ITFA to create URF rules, what the UCP (Uniform Customs & Practice for Documentary Credits, ICC publication 600) has achieved for the management of risk in international trade, the URF (ICC publication 800) will hopefully bring to the funded side of trade – not only international trade, but also even domestic receivables financing.

She also believes that “the URF will be highly beneficial for exporters intending to sell down their claims related to their trade finance transactions.

Referring to clear rules in the documentation will save corporates high legal costs, improve certainty and enhance business because each party will know exactly what to expect.”

Where to Buy the URF 800 Book?

You can buy ICC Uniform Rules for Forfaiting (URF 800) Including Model Agreements ICC Publication No. 800 , 2013 Edition from this link:

URBPO – ICC Uniform Rules for Bank Payment Obligations – ICC Publication No. 750

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URBPO - ICC Uniform Rules for Bank Payment Obligations

What Does URBPO Mean?

The URBPO are the Uniform Rules for Bank Payment Obligations ICC publication No. 750.

URBPO were approved by the ICC national committees and entered into force on 1 July 2013.

Bank Payment Obligations (BPO) is a new payment option for international trade finance. It will be located somewhere between an open account and letter of credit.

Banks play a key role on the Bank Payment Obligation transactions.

The ICC has set itself an ambitious goal to introduce an innovative way for trading counterparties to secure and finance their open account trade transactions via their banking partners.

The new instrument called “Uniform Rules for Bank Payment Obligations” (URBPO; also referred to as ICC URBPO or ICC BPO rules) will enable importers and exporters to involve their preferred banking partners in their trade transactions and get flexible risk and financing services.

Based on standardized messaging and advanced transaction matching operated by SWIFT, this new instrument will accelerate the financial supply chain in support of ever accelerating physical supply chains.

URBPO - ICC Uniform Rules for Bank Payment Obligations

What are the Headings of URBPO?

URBPO consists of total 17 articles.

  • URBPO – Article 1 Scope
  • URBPO – Article 2 Application
  • URBPO – Article 3 General Definitions
  • URBPO – Article 4 Message Definitions
  • URBPO – Article 5 Interpretations
  • URBPO – Article 6 Bank Payment Obligations (BPO) vs. Contracts
  • URBPO – Article 7 Data vs. Documents, Goods, Services or Performance
  • URBPO – Article 8 Expiry Date and Submission
  • URBPO – Article 9 Role of an Involved Bank
  • URBPO – Article 10 Undertaking of an Obligor Bank
  • URBPO – Article 11 Amendments
  • URBPO – Article 12 Charges
  • URBPO – Article 13 Disclaimer on Effectiveness of Data
  • URBPO – Article 14 Force Majeure
  • URBPO – Article 15 Unavailability of a Transaction Matching Application
  • URBPO – Article 16 Applicable
  • URBPO – Article 17 Assignment and Transfer

How URBPO 750 Can be Applied to the Bank Payment Obligations ?

The BPO is an irrevocable undertaking given by a bank to another bank that payment will be made on a specified date after successful electronic matching of data according to an industry-wide set of ICC rules known as Uniform Rules for Bank Payment Obligations (URBPO 750).

Match report will be generated by SWIFT’s Trade Services Utility (TSU) or any equivalent transaction matching application.

One of the key features of the BPO is that it supports interoperability between participating banks, because it makes use of a standard set of ISO 20022 messages.

Some important definitions from URBPO 750:

  • “Obligor bank” means buyer’s bank under Bank Payment Obligations. Obligor bank issues the legally binding, valid, irrevocable but conditional and enforceable payment undertaking to Recipient Bank. Obligor bank is an equivalent term of issuing bank under letters of credit definitions.
  • “Recipient Bank” means seller’s bank under Bank Payment Obligations.
  • “Trade Services Utility” (TSU) means a centralized matching and workflow engine providing timely and accurate comparison of data taken from underlying corporate purchase agreements and related documents, such as commercial invoices, transport and insurance.

URC 522 – ICC Uniform Rules for Collections

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URC 522 - ICC Uniform Rules for Collections

Documentary collection, which is also known as Cash Against Documents (CAD), is a payment method in international trade.

ICC Uniform Rules for Collections is the title of the book that is published by ICC to govern the documentary collections.

The ICC Uniform Rules for Collections were first published by the ICC in 1956. Revised
versions were issued in 1967 and 1978.

This present revision was adopted by the Council of the ICC in June 1995, for issue as
ICC Publication No: 522, URC 522.

URC 522 consists of 32 pages in total.

Full details of URC 522 for ordering considerations is as follows : ICC Uniform Rules for Collections URC 522 ICC Publication No. 522, 1995 Edition.

URC 522 is in force as of January 1, 1996.

urc 522

URC 522 underlines the need for the principal and/or the remitting bank to attach a separate document, the collection instruction, to every collection subject to the Rules.

URC 522 makes it very clear that banks will not examine documents, particularly not to look for instructions.

URC 522 addresses problems banks experience in respect of documents against acceptance (D/A) and documents against payment (D/P)

URC 522 clearly indicates that banks have no obligation to store and insure goods when instructed.

 

Contents of the URC 522:

A. General Provisions and Definitions

  • Application of URC 522
  • Definition of Collection
  • Parties to a Collection

B. Form and Structure of Collections

  • Collection Instruction

C. Form of Presentation

  • Presentation
  • Sight / Acceptance
  • Release of Commercial Documents
    • Documents Against Acceptance (D/A) vs. Documents Against Payment (D/P)
  • Creation of Documents

D. Liabilities and Responsibilities

  • Good Faith and Reasonable Care
  • Documents vs. Goods / Services Performances
  • Disclaimer for Acts of an Instructed Party
  • Disclaimer on Documents Received
  • Disclaimer on Effectiveness of Documents
  • Disclaimer on Delays, Loss in Transit and Translation
  • Force Majeure

E. Payment

  • Payment Without Delay
  • Payment in Local Currency
  • Payment in Foreign Currency
  • Partial Payments

F. Interest, Charges and Expenses

  • Interest
  • Charges and Expenses

G. Other Provisions

  • Acceptance
  • Promissory Notes and other Instruments
  • Protest
  • Case-of-Need
  • Advices

Incoterms

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incoterms

What Does Incoterms Mean? 

INCOTERMS (International Commercial Terms) have been created by the International Chamber of Commerce in order to reach an uniform set of international rules for the interpretation of trade terms in a global scale.

Pre-Incoterms Era: From Local Practices to Worldwide Trade Rules

Trade, -not only domestic, but also international -, has always been played a key role in development of the civilizations.

Traders follow the local practices, which have been created through hundreds of years.

But these practices have limited sphere of influence, so vital trade customs vary from one place to another.

As international trade emerged it was observed that different practices have been creating ambiguity for the traders.

Frequently, parties to a trade transaction are unaware of the different trading practices in their respective countries.

This can give rise to misunderstandings, disputes and litigation, with all the waste of time and money that this entails.

Buyers and sellers should know exactly what their obligations and rights are in a foreign trade transaction without leaving a possible source of uncertainty.

For example, the place of the delivery, the party who is responsible for making the contract of carriage and insurance, arranging the export and import procedures and paying the loading and unloading costs etc must have been precisely determined.

Additionally, the points indicated above are the core elements of a sales contract, which means that every sales contract must cover these point.

As a result they have to be re-written for every foreign trade transaction.

In order to prevent unnecessary repetitions, trade terms, which contain almost all of the vital parts regarding the obligations of the parties on a sales contract, have been created by various organizations.

But these initial trade terms had different interpretations in different countries, so they could not create an uniformity in practice.

Incoterms Era: Publication of First Incoterms and Revised Versions

INCOTERMS (International Commercial Terms) have been created by the International Chamber of Commerce in order to reach an uniform set of international rules for the interpretation of trade terms in a global scale.

First version of INCOTERMS published in 1936. These first rules were known as “Incoterms 1936”.

International trade terms have been revised regularly by ICC as follows:

  • Incoterms 1953,
  • Incoterms 1967,
  • Incoterms 1976,
  • Incoterms 1980,
  • Incoterms 1990,
  • Incoterms 2000,
  • Incoterms 2010.

Incoterms 2010 is the latest publication.

Incoterms 2010 published in September 2010 and came into effect on 1 January 2011.

Incoterms 2000

Incoterms 2000 have been released in September 1999 under ICC publication number 560 and have entered into force on 1 January 2000.

Incoterms 2000 defines 13 rules.

Group E

  • EXW EX WORKS (… named place)

Group F

  • FCA FREE CARRIER (… named place)
  • FAS FREE ALONGSIDE SHIP (… named port of shipment)
  • FOB FREE ON BOARD (… named port of shipment)

Group C

  • CFR COST AND FREIGHT (… named port of destination)
  • CIF COST, INSURANCE AND FREIGHT (… named port of destination)
  • CPT CARRIAGE PAID TO (… named place of destination)
  • CIP CARRIAGE AND INSURANCE PAID TO (… named place of destination)

Group D

  • DAF DELIVERED AT FRONTIER (… named place)
  • DES DELIVERED EX SHIP (… named port of destination)
  • DEQ DELIVERED EX QUAY (… named port of destination)
  • DDU DELIVERED DUTY UNPAID (… named place of destination)
  • DDP DELIVERED DUTY PAID (… named place of destination)

Incoterms 2010

Incoterms 2010 is the latest publication.

Incoterms 2010 published in September 2010 and came into effect on 1 January 2011.

There are 11 rules defined in Incoterms 2010 and they are all trademarked of ICC.

It is possible to purchase both hard copy and online version of Incoterms 2010 rules from ICC’s website.

Explanations of Incoterms 2010 Trade Terms: 

The trade terms under Incoterms 2010 have been classified based on modes of transport.

Under Incoterms 2010, 7 trade terms can be used for any mode or modes of transport. These are:

  • ex works, exw
  • free carrier, fca
  • carriage paid to, cpt
  • carriage and insurance paid to, cip
  • delivered at terminal, dat
  • delivered at place, dap
  • delivered duty paid, ddp

Whereas 4 trade terms under Incoterms 2010 can be used only for sea and inland waterway transport. These are:

  • free alongside ship, fas
  • free on board, fob
  • cost and freight, cfr
  • cost insurance and freight, cif

On this section I will be explaining the trade terms, which have been defined in Incoterms 2010 rules.

RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW – Ex Works: “Ex Works” means that the exporter delivers the goods to the importer when exporter places the goods at the disposal of the importer at the exporter’s premises or at another named place such as exporter’s warehouse etc.

  • The exporter does not need to load the goods on any collecting vehicle.
  • The exporter does not need to clear the goods for export, where such clearance is applicable.

FCA – Free Carrier: “Free Carrier” means that the exporter delivers the goods to the carrier or another person nominated by the importer at the exporter’s premises or another named place.

If the named place is the exporter’s premises, delivery is completed when the goods have been loaded on the means of transport provided by the buyer.

In any other case, delivery is completed when the goods are placed at the disposal of the carrier or another person nominated by the buyer on the seller’s means of transport ready for unloading.

FCA requires the exporter to clear the goods for export, where applicable.

CPT – Carriage Paid to: “Carriage Paid To” means that the exporter delivers the goods to the carrier or another person nominated by the exporter at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

When CPT is used, the exporter fulfills its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination.

CPT requires the seller to clear the goods for export, where applicable.

CIP – Carriage and Insurance Paid to: “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

When CIP is used, the seller fulfills its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination.

DAT – Delivered at Terminal: “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination.

“Terminal” includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.

DAT requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

DAP – Delivered at Place: “Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.

The seller bears all risks involved in bringing the goods to the named place.

DAP requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

DDP – Delivered Duty Paid: “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.

DDP requires the seller to clear the goods for export, where applicable.

Seller has to clear the goods for import, pay any import duty or carry out any import customs formalities.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS – Free Alongside Ship: “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.

FAS requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

FOB – Free on Board: “Free on Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.

FOB requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

CFR – Cost and Freight: “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel.

CFR requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

CIF – Cost, Insurance and Freight: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered.

The risk of loss of or damage to the goods passes when the goods are on board the vessel.

The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

What are the Main Differences Between Incoterms 2010 and Incoterms 2000?

There are 4 main differences exist in Incoterms 2010 comparing to Incoterms 2000. These amendments are:

Addition of New Incoterms Rules: Two new incoterms rules have been put into use with the Incoterms 2010 rules. These new rules are DAT and DAP.

Deleted Incoterms Rules: Four incoterms rules have been removed from the usage with the publication of Incoterms 2010. These no longer valid incoterms are DAF, DES, DEQ and DDU.

Changing the Classification of Rules: Incoterms 2010 divides incoterms into two main categories: Rules for any mode or modes of transport (ex works, free carrier, carriage paid to, carriage and insurance paid to, delivered at terminal, delivered at place, delivered duty paid) and rules for sea and inland waterway transport (free alongside ship, free on board, cost and freight, cost insurance and freight)

Definition of New Delivery Place for Incoterms FOB, CFR and CIF: According to Incoterms 2010, the goods will be delivered by exporter to importer only when they will be shipped on board a named vessel at the port of loading. In the previous version of the rules, Incoterms 2000, the goods have been considered as delivered once they have passed the ship’s rail.

How to Use Incoterms 2010 in Letters of Credit?

Incoterms are incorporated into sales contracts or proforma invoices, which are related to the sale of tangible goods.

In letters of credit, issuing banks generally use trade terms under field 45A – Description of Goods and Services.

If an issuing bank adds incoterms into the field 45-A Description of Goods and Services, then the beneficiary must include this exact incoterms phrase in to the commercial invoice.

Otherwise the issuing raises a discrepancy, which is known as incoterms discrepancy.

Example: Usage of Incoterms 2010 in a letter of credit

Field 45A: Description of Goods and Services
HYDROLIC PET BOTTLE BALING AND EQUIPMENT. CONFORM TO PROFORMA INVOICE NUMBER ADG-001 DTD 08.11.2012 CFR ALGIERS PORT-ALGERIA,INCOTERMS 2010 THIS MENTION SHOULD APPEAR ON COMMERCIAL INVOICE.

Commercial Invoice: Includes description of goods including the corresponding incoterms as stated in the letter of credit. (CFR ALGIERS PORT-ALGERIA, INCOTERMS 2010)

Sources:

  1. Incoterms® 2010 English Edition By the International Chamber of Commerce (ICC)
    ICC Publication No. 715E, 2010 Edition
  2. Incoterms 2010 Complete Guide, www.advancedontrade.com

URR 725 – The Uniform Rules for Bank-to-Bank Reimbursements

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URR 725 - The Uniform Rules for Bank-to-Bank Reimbursements

What Does URR 725 Mean?

The URR 725 are the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits ICC publication No. 725.

URR 725 was approved by the ICC national committees at the ICC Banking Commission in April 2008. URR 725 has been effective since 01 October 2008.

URR 725 is an updated version of previous rules for bank-to-bank reimbursements known as URR 525.

The revision was necessary to bring these long-standing rules into conformity with UCP 600, ICC’s universally used rules on letters of credit.

What is the Scope of URR 725?

The Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, ICC Publication No. 725, shall apply to any bank-to-bank reimbursement under documentary credits, when the reimbursement authorization expressly indicates that it is subject to these rules.

The rules are binding on all parties thereto, unless expressly modified or excluded by the reimbursement authorization.

How URR 725 Can be Applied to Bank to Bank Reimbursements under Documentary Credits?

URR 725 – The Uniform Rules for Bank-to-Bank ReimbursementsThe issuing bank is responsible for indicating in the documentary credit that the reimbursement is subject to URR 725.

As a result, both MT700 – Issue of a Documentary Credit and MT740 – Authorization to Reimburse swift messages must indicate the applicable rules.

Under MT700 swift message URR LATEST VERSION or NOTURR are the options regarding reimbursements.

  • URR LATEST VERSION means that URR rules will apply to the bank to bank reimbursements.
  • NOTURR means that not URR rules but UCP 600 article 13 will apply to the bank to bank reimbursements..

Table of Contents of URR 725

URR 725 consists of total 17 articles.

  • URR 725 – Article 1 Application of URR
  • URR 725 – Article 2 Definitions
  • URR 725 – Article 3 Reimbursement Authorizations Versus Credits
  • URR 725 – Article 4 Honour of a Reimbursement Claim
  • URR 725 – Article 5 Responsibility of the Issuing Bank
  • URR 725 – Article 6 Issuance and Receipt of a Reimbursement Authorization or Reimbursement Amendment
  • URR 725 – Article 7 Expiry of a Reimbursement Authorization
  • URR 725 – Article 8 Amendment or Cancellation of a Reimbursement Authorization
  • URR 725 – Article 9 Reimbursement Undertaking
  • URR 725 – Article 10 Standards for a Reimbursement Claim
  • URR 725 – Article 11 Processing a Reimbursement Claim
  • URR 725 – Article 12 Duplication of a Reimbursement Authorization
  • URR 725 – Article 13 Foreign Laws and Usages
  • URR 725 – Article 14 Disclaimer on the Transmission of Messages
  • URR 725 – Article 15 Force Majeure
  • URR 725 – Article 16 Charges
  • URR 725 – Article 17 Interest Claims/Loss of Value

Definitions from URR 725:

  • “Reimbursing bank” means the bank instructed or authorized to provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank
  • “Reimbursement authorization” means an instruction or authorization, independent of the credit, issued by an issuing bank to a reimbursing bank to reimburse a claiming bank or, if so requested by the issuing bank, to accept and pay a time draft drawn on the reimbursing bank.
  • “Reimbursement undertaking” means a separate irrevocable undertaking of the reimbursing bank, issued upon the authorization or request of the issuing bank, to the claiming bank named in the reimbursement authorization, to honour that bank’s reimbursement claim, provided the terms and conditions of the reimbursement undertaking have been complied with.
  • “Claiming bank” means a bank that honours or negotiates a credit and presents a reimbursement claim to the reimbursing bank. “Claiming bank” includes a bank authorized to present a reimbursement claim to the reimbursing bank on behalf of the bank that honours or negotiates.

ISBP: International Standard Banking Practices

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ISBP – International Standard Banking Practices

UCP Rules and Daily Practice: Need for Additional Publication Due to Problems in Daily Practice

UCP 600 is the latest version of the rules that govern letters of credit transactions worldwide.

UCP 600 is prepared by International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice.

One problem with the UCP rules is that they are written in a general manner, which means that they are not detailed enough to cover the day-to-day practice.

International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice determined that another publication is need, in addition to UCP, to close the gap between general principals of UCP and the daily practice.

So ISBP was born.

ISBP – International Standard Banking Practices: First Edition

ISBP is the short and well-known name of the ICC publication No:645; International Standard Banking Practice for the Examination of Documents under Documentary Letters of Credit.

ISBP was approved by ICC banking commission in October 2002. After this approval, ISBP became an official ICC document.

isbp 645ISBP was prepared in order to fill the gap between general principals of UCP and the daily practice.

UCP 500 was the latest version of the rules, which were governing the documentary letters of credit, at the time of ISBP was being prepared.

So first ISBP were constituted with the aim of explaining UCP 500 rules more explicitly.

Another aim of the drafting commission of the ISBP was to achieve internationally accepted standards for examination of documents under documentary letters of credit.

In order to succeed on this aim commission asked various ICC national committees and members to send checklists on how documents were examined in their organizations.

After 14 meetings and 4 different drafts, the ISBP was finally put into its final shape.

ISBP 2007: First Revision

UCP 500 is revised in 2007. UCP 600 replaced the previous rules. With the revision of the UCP, it has become necessary to renew the ISBP to bring it in line with the new letters of credit rules.

isbp 2007Full name of the second version of the ISBP is International Standard Banking Practice for the Examination of Documents under Documentary Credits, 2007 revision for UCP 600.

ICC publication number is 681.

ISBP 2007 consists of 10 chapters and consecutive 185 paragraphs. Headings of the ISBP 2007 chapters are given below.

Under each chapter, very detailed explanations can be found relating to the specific subject.

  • PRELIMINARY CONSIDERATIONS
  • GENERAL PRINCIPLES
  • DRAFTS AND CALCULATION OF MATURITY DATE
  • INVOICES
  • TRANSPORT DOCUMENT COVERING AT LEAST TWO DIFFERENT MODES OF TRANSPORT
  • BILL OF LADING
  • CHARTER PARTY BILL OF LADING
  • AIR TRANSPORT DOCUMENT
  • ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS
  • INSURANCE DOCUMENT AND COVERAGE
  • CERTIFICATES OF ORIGIN

ISBP 2013: Second Revision

As of July 2013 ISBP revised once again.

International Standard Banking Practice – ISBP 2013 is the latest and the most comprehensive guide to handling and examining trade documents under letters of credit.

ISBP 2013 published by ICC with the ICC Publication No. 745.

ICC defines the importance of new International Standard Banking Practice edition with these words

“An invaluable source of practical information for trade finance professionals and academics, this revised edition of ISBP provides readers with the latest ICC approved guidelines for all parties to documentary credits.”

ICC emphasize that ISBP is the best reference book in banking practices for international letters of credit documents subject to UCP 600.

Use of ISBP has significantly reduced international discrepancies for documentary credits and is regularly used by banking, logistics, insurance, legal and corporate professionals and academics worldwide.

It is a great companion book with UCP 600.

isbp 2013Who Can Use International Standard Banking Practice – ISBP 2013 in Documentary Credit Transactions?

All professionals, banking, logistics, insurance, legal and corporate professionals and academics worldwide, who deal with documentary credits can use International Standard Banking Practice – ISBP 2013 as a 1st reference book on their daily routine.

What is new with the International Standard Banking Practice – ISBP 2013 ?

Previous International Standard Banking Practice which is called ISBP 2007 published in year 2007 by ICC was covering below trade documents:

  • DRAFTS
  • INVOICES
  • TRANSPORT DOCUMENT COVERING AT LEAST TWO DIFFERENT MODES OF TRANSPORT
  • BILL OF LADING
  • CHARTER PARTY BILL OF LADING
  • AIR TRANSPORT DOCUMENT
  • ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS
  • INSURANCE DOCUMENT AND COVERAGE
  • CERTIFICATES OF ORIGIN

In addition to above stated documents International Standard Banking Practice – ISBP 2013 also covers following documents;

  • PACKING LIST
  • WEIGHT LIST
  • BENEFICIARY CERTIFICATE
  • NON-NEGOTIABLE SEA WAYBILLS
  • ANALYSIS, INSPECTION, HEALTH, QUANTITY AND QUALITY CERTIFICATE

Latest Version of UCP: What are the Differences Between UCP 400, UCP 500 and UCP 600

Ozgur Eker (CDCS) Commercial Letter of Credit Rules, Rules ,
Latest Version of UCP: What are the Differences Between UCP 400, UCP 500 and UCP 600

Almost all of the letters of credit issued in swift format having a clause under field “40E: Applicable Rules” telling us that the letter of credit subject to “UCP Latest Version“.

In this post, I explain the meaning of UCP and its latest version.

What Does UCP Mean?

UCP is the short form of Uniform Customs and Practice for Documentary Credits.

UCP is the set of international rules that govern the letter of credit transactions throughout the world.

It would be necessary to state that some professionals mistakenly use UCPDC abbreviation instead of UCP. Correct usage should be UCP for the Uniform Customs and Practice for Documentary Credits not UCPDC.

What is the Latest Version of UCP?

First international letter of credit rules published nearly 80 years ago in year 1933. Since then letter of credit rules have been revised regularly by ICC ( International Chamber of Commerce).

Let us have a look at the UCP history below,

  • 1933 – Uniform Customs and Practice for Commercial Documentary Credits
  • 1951 Revision – Uniform Customs and Practice for Commercial Documentary Credits
  • 1962 Revision – Uniform Customs and Practice for Documentary Credits
  • 1974 Revision – Uniform Customs and Practice for Documentary Credits
  • 1983 Revision – Uniform Customs and Practice for Documentary Credits (UCP 400)
  • 1993 Revision – Uniform Customs and Practice for Documentary Credits (UCP 500)
  • 2007 Revision – Uniform Customs and Practice for Documentary Credits (UCP 600)

As indicated above 2007 Revision of the letter of credit rules are the latest version of the Uniform Customs and Practice for Documentary Credits.

Why Banks Give Reference to the Latest Version of UCP in Letters of Credit?

Banks, who do not want to create any ambiguity when issuing letters of credit, should always mention that letters of credit that they have issued is subject to “UCP Latest Version“.

If issuing banks would not act as explained above, by not giving express reference to the exact version of letter of credit rules when issuing letters of credit, then one of the letter of credit parties may indicate that they would like to use other version of Uniform Customs and Practice for Documentary Credits when fulfilling their obligations.

How to Buy UCP 600 Online?

Ozgur Eker (CDCS) Commercial Letter of Credit Rules, Rules ,
How to Buy UCP 600 Online?

It is vital importance for each professional, who deals with letters of credit, to work with right sources and reference publications.

UCP 600 and ISBP 2013 are the only official rule books that govern commercial letter of credit transactions. They are published by ICC Banking Commission.

Standby letter of credit rules are known as ISP 98.

All other publications, even published by ICC, will not be regarded as an official letter of credit rules books.

I have just received a message from one of my followers. She would like to know more about UCP 600 and she wants to know where to buy UCP 600 from internet.

Here is her message:

Dear team from “Letter of Credit.biz”

I would like to first of all introduce myself as a person who is constantly looking for more information on letters of credit. I am always interested on those issues and for me, LC´s are very important tools in my work.

I always looked for UCP 600 rules on internet, but I just found some website with many commentaries. But Is there an neutral book just with the rules as they are? And where can I buy it?

In case this book is not on sale, where can I download it from internet?

Thanks a lot!

Laura

Dear Laura,

Please select your reference books from ICC publications, because the more you walk away from official ICC publications, the closer you get to the confusion.

For commercial letters of credit you should buy UCP 600 and ISBP 2013 as a reference books.

These two publications are the only official ICC publications that govern the letters of credit rules.

You can buy UCP 600 e-book version from this link : UCP 600 e-book and you can buy ISBP 2013 e-book version from this link : ISBP 2013 e-book

For standby letters of credit you should buy ISP 98. You can buy ISP 98 e-book version from this link : ISP 98 e-book

UCP 600 and ISP 98 are neutral rule books. ISBP 2013 is more like an explanation book of UCP 600 supported with examples.

UCP 600

Ozgur Eker (CDCS) Commercial Letter of Credit Rules, Rules ,
UCP 600

What is UCP 600?

UCP 600 is the latest version of the rules that govern letters of credit transactions worldwide.

UCP 600 is prepared by International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice.

Its full name is 2007 Revision of Uniform Customs and Practice for Documentary Credits, UCP 600, and (ICC Publication No. 600).

The ICC Commission on Banking Technique and Practice approved UCP 600 on 25 October 2006. The rules have been effective since 1 July 2007.

UCP 500 was the rules that had been in implementation before UCP 600.

There are several significant differences exist between UCP 600 and UCP 500. Some of these differences are as follows;

  • The number of articles reduced from 49 to 39 in UCP 600;
  • In order to reach a standard meaning of terms used in the rules and prevent unnecessary repetitions two new articles have been added to the UCP 600. These newly added articles are Article 2 “Definitions” and Article 3 “Interpretations”. These articles bring more clarity and precision in the rules;
  • A definitive description of negotiation as “purchase” of drafts of documents;
  • New provisions, which allow for the discounting of deferred payment credits;
    The replacement of the phrase “reasonable time” for acceptance or refusal of documents by a maximum period of five banking days.

History of UCP

First uniform rules published by ICC in 1933. Revised versions were issued in 1951, 1962, 1974, 1983 and 1993.

  • 1933 – Uniform Customs and Practice for Commercial Documentary Credits
  • 1951 Revision – Uniform Customs and Practice for Commercial Documentary Credits
  • 1962 Revision – Uniform Customs and Practice for Documentary Credits
  • 1974 Revision – Uniform Customs and Practice for Documentary Credits
  • 1983 Revision – Uniform Customs and Practice for Documentary Credits
  • 1993 Revision – Uniform Customs and Practice for Documentary Credits

Currently majority of letters of credit issued everyday is subject to latest version of the UCP.

This widely acceptance is the key sign that shows the importance of the UCP, which are the most successful private rules for trade ever developed.

eUCP

Most of the presentations are being made in paper or traditional format still in today’s letters of credit environment.

However, as telecommunication technology is expanding its borders, it is highly expected that in the very near future traditional processes will be substituted with the electronic paperless transactions.

In order to establish set of rules that governs electronic presentations the ICC Banking Commission established a Working Group consisting of experts in the UCP, electronic trade, legal issues and related industries, such as transport, to prepare the appropriate rules for electronic and mixed presentations.

Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation or “eUCP” is the result of the efforts of this committee.

The eUCP is not a revision of the UCP.

The UCP will continue to provide the industry with rules for paper letters of credit for many years.

The eUCP is a supplement to the UCP that, when used in conjunction with the UCP, will provide the necessary rules for the presentation of the electronic equivalents of paper documents under letters of credit.