The Community Speaks: The UCP700 Wish List

At the 2015 Americas Annual Survey conference in Tampa earlier this month, participants began compiling a list of items to consider for the next UCP revision. Ideas include: removal of standbys; dealing with the absence in UCP600 Art. 7 of reference to documents presented to the confirming bank; clearer treatment of original LCs; incorporation of eUCP into UCP; modification of UCP600's "must not conflict with" requirement; and adoption of a UCP400-styled default rule for transport documents.

In light of ICC draft opinion TA816, another issue has been added to the list. Some bankers reckon that when UCP600 is revised it should revert back to the wording of UCP500 Article 39(c) (Allowances in Credit Amount, Quantity and Unit Price) which could help reduce "short shipment and short drawing" refusals under LCs that permit partial drawings or shipments.

The list will continue to grow at the upcoming Annual Surveys taking place around the world. To see what is in your region, view the Events Calendar.


14 Responses

  1. THE BURDEN OF DEROGATORY TERMS AND CONDITIONS APPEARING IN DOCUMENTARY CREDITS SUBJECT TO UCP 600 AND THE NEED OF UNIFORMITY AND CONFORMITY WITH THE PROCEDURE ARTICLES SET UP IN UCP 600

    BECAUSE THE ARTICLE 1 INCLUDES A PROVISION STATING THAT: ‘’ They are binding on all parties thereto unless expressly modified or excluded by the credit.’’ A SUBSTANTIAL NUMBER OF BANKS WOLDWIDE FEEL FREE TO INSERT OR ENCOURAGE THE APPLICANT OF CREDIT TO LET THEM INSERT IN THE CREDIT DEROGATORY OR SPECIAL CONDITIONS AMENDING STRUCTURAL ARTICLES SUCH AS, INLUDING BUT NOT LIMITED TO, THE ARTICLE 16 CONCERNING THE ‘’ Discrepant Documents, Waiver and Notice’’ , ARTICLE 15 REGARDING COMPLYING CONDITIONS AND TIME OF PAYMENT, ARTICLE 14 IN CONNECTION WITH THE NUMBER OF DAYS FOR EXAMINATION OF DOCUMENTS AND SO ON.
    BANKS SEEM NOT TO BE AWARE OR AT LEAST MAY INTEND INTENTIONALLY OR UNINTENTIONAL.LY TO WEAKEN THE IRREVOCABLE CHARACTER OF THE CREDIT AND THE ADDITION OF THE CONFIRMATION TO A CREDIT.
    MY REQUEST IS THAT THE NEXT UCP 700 SPLIT THE ARTICLES IN TWO CATEGORIES NAMELY NON DEROGARORY AND DEROGATORY ONES AND INCLUDE A PROVISION THAT THE CLAUSE ‘’They are binding on all parties thereto unless expressly modified or excl by the credit.’’ DOES NOT APPLY TO NON DEROGATORY ARTICLES .
    DOCUMENTARY CREDITS PROCEDURE ARTICLES MUST BE SAFE AND UNTOUCHABLE.
    JACQUES SABOUNGI

  2. Article 38(k)
    “Presentation of documents by or on behalf of a second beneficiary must be made to the transferring bank.”
    In case of the L/C is transferred to second beneficiary in full/partial without substitution of documents, this article still required the documents from 2nd beneficiary via transferring bank to issuing bank. It is not reasonable because it cannot see the needs and any benefits to the second beneficiary. Instead, the risk of documents disposal is comparatively high due to postal the documents two times for forwarding to issuing bank.

    Hence, suggested to change the article 38(k) as below:-
    “If the L/C transferred required document substitution from first beneficiary, presentation of documents by or on behalf of a second beneficiary must be made to the transferring bank.
    If the L/C transferred without required document substitution from first beneficiary, Presentation of documents by or on behalf of a second beneficiary may be made to the transferring bank or issuing bank directly.”

  3. As per article 6, if the L/C is available with issuing bank. The presenting bank is unable to provide the finance to beneficiary due to lack of the capacity. Expected the the coming UCP 700 to add a new article that

    ”EVEN THOUGH THE CREDIT IS AVAILABLE WITH ISSUING BANK, PRESENTING BANK MAY PREPAY OR PURCHASE THE BILL UPON RECEIPT OF THE MATURITY ACCEPTANCE FROM ISSUING BANK PROVIDING THE PRESENTING BANK’S INTENTION TO PREPAY OR PURCHASE THE BILL HAS BEEN WELL INFORMED TO ISSUING BANK. ISSUING BANK HAS OBLIGATION TO PAY PRESENTING BANK AT MATURITY.”

  4. It is strongly recommended to drop out any reference to the ” Stand by letter” from UCP rules and particularly from the article number 1.
    UCP is crafted to fit the documentary credit and not the stand by letter of credit. In fact, many articles of UCP 600 are not
    appropriate for stand by letters of credit . UCP 600 is lacking many features specially intended for stand by letters
    of credit.
    Since ISP 98 is perfectly replying and giving all necessary details for issuing stand by letters of credit, examining documents,
    dealing in counter-standby letters of credit, describing documents required ususally in various stand by letters of credit, and introducing the stand by pay order, and many other points not dealt with in UCP , etc…… I find no need to have stand by letter of credit discipline in UCP rules.
    This will be a peace in mind solution for all bankers avoiding unecessary amendments and alterations when stand by letters of credit are issued subject to UCP rules.
    Beside, the strict independent and documentary character of stand by letters of credit subject to ISP 98 protects the banks from being exposed to dispute and controversy when an applicant under a stand by letter of credit refers to UCP rules as if the stand by letter of credit issued under UCP is a dependent guarantee?.

  5. thanks your reply to my question in connection of the ”Nomination”.
    I regret not to share your thinking on this issue since you start your reply saying : ” If the nominated bank has agreed (outside the UCP) to act on the nomination, then its position regarding amendments will be governed by its agreement”.

    In fact article 12 a opens the way for a nominated to act on its nomination by stating : ” …..except when expressly agreed to by that nominated bank and so communicated to the beneficiary. ” The agreement is then inside UCP and not outside UCP” .

    Therefore it will be safe to add under article 10 the expression ” ……, the nominated bank acting on its nomination ”’ as being a party involved by the amendment.

    Thanks for your undertstanding

  6. My concern is the article 2 regarding the definition of NEGOTIATION
    Although the intent is clear, I was always troubled by the insertion of the word ” PURCHASE” in the definition . The reason of my trouble is that the implication of the word ”purchase” may legally be understood as going beyond the intent of purchasing the debt of the issuing bank. Some lawyers do consider that the negotiating bank is purchasing not only the documents and drafts or the debt on the issuing bank, but also the negotiating bank becomes a substitute of the seller in the commercial contract and may be sued by the buyer if and and when after negotiating documents complying with credit terms, the goods revealed to be in complete non complicance with the commercial contract between initial seller and buyer.

    The case is that if the initial seller went bankruptcy and is unable to reply to the complaints of the buyer , then the negotiating bank in its quality as purchaser of the documents and the drafts is compelled by the buyer to indemnify
    the loss caused.

    The articles 4 and 5 do not help so much the negotiating and many Courts do consider that the word ”Purchase” goes beyond the articles 4 and 5 and condemn the negotiating bank in its quality as purchaser of documents and the underlying contract to indemnify the buyer.

    Just for memory, the word purchase has been introduced in UCP 222 in the year 1962 and then dropped out from the rules for the above reasons. As a consequence the UCP 290 , 400 did not include purchase.

    I believe that the solution is either find out a word which replaces ”Purchase” and gives the same intent without going so
    far or add a clarification in this article 2 by stating that the negotiating bank’s obligation is limited to purchasie the debt of
    the issuing bank by taking up the documents and the relative drafts if any.

    It must be clarified in this article that the purchase of the documents and drafts is limited to the debt arising on the issuing bank and its intent is not to go beyond this .

  7. To IIBLP

    Thanks your reply to my question to article 12 a (nominated bank).

    I do not share your opinion since a nominated bank who expressly agreed to act on its nomination and informed the beneficiary accordingly has an engagement deriving from such acceptancet The nominated who agree to act on its nomination is liable to pay or negotiate or enter a deferred payment undertaking or accept a draft if the documents are complying presentation.

    Such a nominated bank looks as if he has somehow added his confirmation to the credit and has therefore an interest
    in any amendment received under the credit thereafter . If the amendment is not in line with his agreement to act as a nominated bank, then the nominated bank must have the capacity to refuse such an amendment if the contents are not convenient to him or retracts from acting as a nominated bank?.

    • IIBLP

      Perhaps we misunderstood your question.

      If the nominated bank has agreed (outside the UCP) to act on the nomination, then its position regarding amendments will be governed by its agreement. As a general rule, however, one would think that such a bank could refuse to consent to a proposed amendment in the same manner as provided under UCP600 Article 10 for a confirming bank. Assuming, as would be prudent, that the nominated bank is also the advising bank, it would be expected that any advice of the proposed amendment would expressly state that the advising bank does not consent to the proposed amendment which would mean that its liability was limited to the unamended undertaking.

  8. I wish to see UCP 700 introducing the ” Transfer by operation of law” in the same way described in ISP 98.
    Some of ISBP 745 articles need to be introduced in UCP 700 to give them a rule provision rather than being a standard
    of practice:
    -The language of documents A21
    -The singatures A35
    -The transport document treated as combined transport D1 ( c )

  9. JACQUES SABOUNGI -BEIRUT (LEBANON)

    Your comment*

  10. There is only one item on my wish list: as I warned in vain at the draft committee meeting in Dublin in June 2005, former Article 23 of UCP 500 was badly amended as Article 22 in UCP 600 to include “charterer” as a signatory of an original bill of lading ! I warned that this should be changed to “time charterer” (or “disponent owner” or “ship operator”) to avoid potential fraud by unscrupulous traders acting as voyage charterers who could perpetrate ~ and since July 2007 have perpetrated ~ many frauds as “charterers”, i.e. as voyage charterers. My warning was ignored. Fraud has ensued.

    PLEASE therefore add the word “time” in Article 23 (or whichever number in UCP 700) to read “time charterer” as one of the three signatories or their agents, who may of course only sign with WRITTEN authority…

    Jeffrey Blum
    Fellow of Institute of Chartered Shipbrokers
    Fellow of Chartered Institute of Arbitrators
    Visiting Professor at World Maritime and Shanghai Maritime Universities
    Principal lecturer at Maritime Education & Training Ltd, London
    Visiting lecturer at several UK universities
    Frequent speaker at worldwide conferences

  11. Article 12 a of UCP 600 provides for a nominated bank to act on its nomination if he elects to do so and inform expressly the beneficiaries. Then, articles 14 a and b grant the nominated bank acting on its nomination an authority to examine documents and determine if they are complying presentation and to honor or negotiate. However, article 10 a does omit
    to insert the ” nominated bank acting on its nomination ” as a party allowed to accept or refuse any further amendment?

    Thanks and regards

    Jacques SABOUNGI
    Beirut – LEBANON

    • IIBLP

      It is an open question whether a nominated bank that is not a confirmer has the right to object to a proposed amendment. Since the non-confirming nominated bank has made no engagement, it can be argued that it has no basis to object. However, it behooves the bank to be sure whether the undertaking has been amended.

      • Hi,
        Do not forget UCP 600 sub-art. 9 (e): “If a bank is requested to advise a credit OR AMENDMENT but elects not to do so, it must so inform, without delay, the bank from which the credit, amendment or advice has been received” (emphasis added).
        This implies that any bank, even if it is “mere” advising bank without any further nominations or authorisations under the credit, may refuse advising an amendment (and it even need not state reasons). In fact, such refusal to advise an amendment has even deeper impact on the parties involved – the beneficiary even does not know that any amendment exists (unless he had been informed by the applicant, but that does not count too much).
        In any case, the non-confirming bank that “elected to act upon its nomination” (taking for granted that this means “before presentation of documents”) had surely very well worded its promise to act upon its nomination and informed the beneficiary that its decision is only valid on the terms and conditions of the credit applicable at the time it decided to grant such a promise (although some may not like the words, this is a perfect “silent confirmation”). Hence as soon as the credit is amended, the “silent confirmer” has the right to warn the beneficiary that it did not extend its “silent confirmation” to the amended terms, anyway. N.B. the terms of the “promise to act upon a nomination” (i.e. the terms of “silent confirmation”) are outside the UCP and the bank is free to draft these terms as it considers appropriate.
        So, after all, why change UCP in this respect? In my view UCP provide perfect remedy.
        Radek

Leave a comment