Coastline newsletter / 2006 edition

ISSUE 5 Dec2006

UCP 600 seminars and workshops begin in earnest

By Gary Collyer

 

As a result of the 94-0 vote by the countries represented at the ICC Banking Commission to adopt the final draft of the UCP 600, there has been considerable interest and demand around the world for events to explain the background, interpretation and application of these new rules.

Whilst some countries and organisations are scheduling and waiting until later in the first half of 2007 to commence with their teaching - based on the implementation date of July 1, 2007 - others have grasped the opportunity immediately following the approval.

It is clear that many organisations and individuals are conducting seminars around the world. Coastline Solutions and I were involved in 5 events during the course of November alone. These included ICC hosted seminars in Thailand (Bangkok), China (Zhuhai), Hong Kong and Pakistan (Karachi) and a specific event for the clients of ABN AMRO Bank in Dubai.

ICC UK also hosted a seminar in early December. Each of these seminars attracted between 150 and 220 people demonstrating the high level of interest that remains in the letter of credit product and a desire to learn the changes made in the new rules.

Photographs from the sessions

Two day seminars held in Bangkok and Zhuhai afforded the attendees additional time to absorb the changes and consider a whole variety of questions to table. (That is not to say that there were not lively debates in each of the other locations.)

Topical questions and issues raised in Bangkok can be summarised as follows:

  • Reference to 'international standard banking practice' in relation to the definition of Complying Presentation. Was it just the ISBP publication? Was it the articles of UCP 600? Is it wider and all encompassing?
  • Where UCP 600 refers to 'Bank' would this include non-bank issuers?
  • After July 1, 2007 are all LCs automatically subject to UCP 600 or should we amend our existing LCs to be subject to UCP 600?
  • Negotiation - is reference to 'advance or agree to advance' a different position to that under UCP 500 of 'giving of value'?
  • Need addresses of the applicant and beneficiary appear on all documents?
  • Application of the 4 options now available with regard to the status of documents where they are found to be discrepant - article 16.

Topical questions and issues raised in Zhuhai can be summarised as follows:

  • Presentation of documents to an issuing bank where the beneficiary elects not to present to the nominated bank.
  • Amendments - how to determine if the beneficiary has accepted or rejected an amendment where one or more other drawings are possible under a credit and no prior notice has been given.
  • If a credit is available with the issuing bank, can the beneficiary request the issuing bank to discount an accepted draft or deferred payment undertaking incurred by that issuing bank?
  • Questions, with various scenarios, in relation to bills of lading that indicate places of receipt and/or place of final destination and need for an on board notation or notation.
  • Does sub-article 38(k) apply where there is a full transfer and no substitution is to occur?
  • Why a nominated bank acting under its nomination is not precluded in the same way as an issuing or confirming bank under sub-article 16(f).

In Karachi, one of the main issues discussed was the ability of a freight forwarder to issue a transport document. An article that appeared in a local newspaper was apparently implying that a freight forwarder issued document should not be acceptable under a LC and UCP (500 or 600). UCP 500 contains article 30 covering this issue and UCP 600 makes reference to a transport document being issued by any party in sub-article 14(k). This issue now seems to have been settled locally with a transport document issued subject to the appropriate article of UCP being (quite rightly) acceptable.

Countless other events will be held throughout the first half of 2007. If you are going to attend one of these events I would suggest that you:

  • get hold of a copy of UCP 600 and read thoroughly, remembering that the answers may lie in a combination of articles and not necessarily one single article;
  • highlight areas therein where you have some doubt as to its intent or usage;
  • go to the session prepared with your question(s) - in writing if you do not wish to speak out in front of the audience;
  • test the speaker, look for answers as to why an article is phrased in such a way. It is the answers to questions that begin 'why', 'where', 'how', 'can', 'what' and 'please explain' that will hopefully get you the response that you are looking for. Do not waste the opportunity for which you or your organisation has paid good money for you to attend. 

Wishing you all a Happy Christmas, a Safe and Prosperous 2007 and a smooth and error free implementation of UCP 600!!

 

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