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UCP 600 and Its Legal Aspects

UCP 600 and Its Legal Aspects. Dr. Ramlan Ginting 2013. Letter of Credit. bank obligation to pay. agency contract. Correspondent Bank. Issuing Bank. L/C. contract to issue L/C. L/C advice. sales contract. Buyer. Seller. shipment. Status o f the UCP 600.

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UCP 600 and Its Legal Aspects

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  1. UCP 600 and Its Legal Aspects Dr. Ramlan Ginting 2013

  2. Letter of Credit bank obligation to pay agency contract Correspondent Bank Issuing Bank L/C contract to issue L/C L/C advice sales contract Buyer Seller shipment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  3. Statusof the UCP 600 • A set of contractual rules • Universal acceptance by practitioners (uniformity in practice) • The most successful set of private rules for trade • The sixth revision UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  4. Application of UCPunder 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 issubject tothese rules. They are binding on all parties thereto unless expressly modified or excluded by the credit Credit = L/C UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  5. Meaning of Honourunder UCP 600, Article 2 • To pay at sight • To incur a deferred payment undertaking and pay at maturity • To accept a bill of exchange drawn by the beneficiary and pay at maturity • Payment on deferred payment undertaking could be based on the Law on Promissory Note • Payment by acceptance is in compliance with the Law on Bill of Exchange, not the UCP UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  6. Meaning of Negotiationunder UCP 600, Article 2,cont… • The purchase by the nominated bank of draft (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advancefunds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank • The purchase of a draft is in compliance with the Law on Bill of Exchange, not the UCP UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  7. Independent Contracts Rule under UCP 600, Article 4 • L/C is a separate transaction from the sale or other contract • The undertaking of a bank to honour, to negotiate or to fulfill any other obligation under the L/C is not subject to claims or defenses by the applicant resulting from its relationships with the issuing bank or the beneficiary UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  8. Independent Contracts RuleunderUCP 600, Article 4, cont… • A beneficiarycan in no case avail itself of the contractual relationships existing betweenbanks or between the applicant and the issuing bank • The Independent Contracts Rule is also in compliance with the Law on Letter of Credit UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  9. Document Compliance Ruleunder UCP 600, Article 5 Banksdeal withdocuments and not with goods, services or performance to which the documents may relate • Doctrine of Not In Contradiction (the UCP 600) • Doctrine of In Compliance (the UCP 500) • Doctrine of Strict Compliance (the Law on Letter of Credit) UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  10. Availability of L/Cunder UCP 600, Article 6 • L/C must state the bank with which it is available, or L/C may be available withany bank • L/C available with a nominated bankis also available with the issuing bank UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  11. Expiry Date for Presentationunder UCP 600, Article 6,cont… • L/C must state an expiry date for presentation • An expiry date stated for honour or negotiationwill be deemed to be an expiry date for presentation UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  12. Place for Presentationunder UCP 600, Article 6, cont… • The place of the bank with which the L/C is available is the place for presentation • The place for presentation under L/C available with any bank is that of any bank • The place of presentation is also the place of the issuing bank UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  13. Issuing Bank Undertakingunder UCP 600, Article 7 • The issuing bank must honour a complying presentation if the credit is available by sight payment, deferred payment or acceptance with the issuing bank • The issuing bank must honour if the credit is available by sight payment, deferred payment, acceptance or negotiation with a nominated bank and that nominated bank does not perform its nomination UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  14. Issuing Bank Undertakingunder UCP 600, Article 7,cont… • Issuing bank is irrevocably bound to honour as of the time it issues the L/C • Issuing bank undertakes to reimburse a nominated bank that has honouredor negotiated a complying presentation and forwarded the documents to the issuing bank UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  15. Issuing Bank Undertakingunder UCP 600, Article 7,cont… • Reimbursement under the L/C available by acceptance or deferred payment is due at maturity, whether or not the nominated bank prepaidor purchased before maturity • Issuing bank’s undertaking to reimburse a nominated bank is independentof the issuing bank’s undertaking to the beneficiary UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  16. Confirming Bank Undertakingunder UCP 600, Article 8 • Confirming bank must honour a complying presentation if L/C is available by sight payment, deferred payment or acceptance with the confirming bank • Confirming bank must honour a complying presentation if L/C is available by sight payment, deferred payment, acceptance or negotiationwith another nominated bank and that nominated bankdoes not perform its nomination UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  17. Confirming Bank Undertakingunder UCP 600, Article 8,cont… • Confirming bank mustnegotiatea complying presentation, without recourse, if the L/C is available by negotiation with the confirming bank • Confirming bank is irrevocably bound to honour or negotiateas of the time it adds its confirmation to the L/C • Confirming bank undertakes toreimburseanother nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the confirming bank UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  18. Confirming Bank Undertakingunder UCP 600, Article 8,cont… • Reimbursement under the L/C available by acceptance or deferred payment is due at maturity, whether or not another nominated bank prepaidor purchased before maturity • Confirming bank’s undertaking to reimburse another nominated bank isindependentof the confirming bank’s undertaking to the beneficiary UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  19. Advising of L/C and Amendmentunder UCP 600, Article 9 • L/C and its amendment may be advised to a beneficiary through an advising bank • Advising bank advises the L/C and its amendment without any undertaking to honour or negotiate • Advising bank could be as confirming bank • Advising bank signifies that it has satisfied itself as to the apparent authenticityof the L/C or amendment and that the advice accurately reflects the terms and conditions of the L/C or amendment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  20. Advising of L/C and Amendmentunder UCP 600, Article 9, cont… • Advising bankmayutilize the services of second advisingbank to advise the L/C and any amendment to the beneficiary • The second advising bank signifies that it has satisfied itself as to the apparent authenticityof the advice it has received and that the advice accurately reflects the terms and conditions of the L/C or amendment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  21. Advising of L/C and Amendmentunder UCP 600, Article 9, cont… • The advising bank that cannot satisfy itself as to the apparent authenticity of the L/C, the amendment or the advice, must so inform, without delay, the bank from which the instructions appear to have been received. If the advising bankelects to advise the L/C or amendment, it must inform the beneficiary (or second advising bank) that it has not been able to satisfy itself.

  22. Amendments under UCP 600, Article 10 • L/C can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, and the beneficiary • A confirming bank may extend its confirmation to an amendment • The beneficiary is required to communicateits acceptance of the amendment to the bank that advised such amendment by notification of acceptance or rejection • A bank that advises an amendment should inform the bank from which it received the amendment of any notification of acceptance or rejection UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  23. Teletransmitted and Pre-Advised Credits and Amendmentsunder UCP 600, Article 11 • An authenticated teletransmission of L/C or amendment will be deemed to be the operative L/C or amendment, except the teletransmission states others • A pre-advice of L/C or amendment shall only be sent if the issuing bank is prepared to issue the operative L/C or amendment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  24. Nominationunder UCP 600, Article 12 • Nominated bank may honour or negotiate a complying presentation, but confirming bank as a nominated bank musthonour or negotiate • By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bankauthorizes that nominated bank to prepay or purchasea draft accepted or a deferred payment undertaking incurred by that nominated bank • Banco Santander SA vs Banque Paribas is the basis of rule for discounting the deferred payment undertaking UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  25. Bank-to-Bank Reimbursementunder UCP 600, Article 13 • L/Cmay state that reimbursement is to be obtained by a nominated bank claiming on reimbursing bank. In this regard, the L/C must state if the reimbursement is subject to the ICC Rules for Bank-to-Bank Reimbursements in effect on the date of issuance of the L/C • If the L/C does not state that reimbursement is subject to the ICC Rules for Bank-to-Bank Reimbursements, then Article 13bof the UCP 600 that stipulates reimbursement shall apply UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  26. Bank-to-Bank Reimbursementunder UCP 600, Article 13, cont… • Issuing bank is not relieved of any of its obligations to provide reimbursement if reimbursement is not made by a reimbursing bank on first demand

  27. Standard for Examination of Documentsunder UCP 600, Article 14 • Nominated bank, confirming bank, and issuing bank must examine a presentation to determine a complying presentation under ‘on their face’ rule. • Nominated bank, confirming bank, and issuing bank shall each have a maximum of five banking days following the day of presentation to determine a complying presentation. This period is not curtailed or otherwise affected by the occurrence on or after the date of presentation of any expiry date or last day for presentation. UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  28. Standard for Examination of Documentsunder UCP 600, Article 14, cont… • Presentation must be made by or on behalf of the beneficiary not later than 21 calendar days after the date of shipment, but not later than the expiry date of the L/C UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  29. Standard for Examination of Documentsunder UCP 600, Article 14,cont… • Data in a document, when read in context with the L/C, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the L/C • In documents other than the commercial invoice, the description of the goods, services or performance may be in general termsnot conflicting withtheir description in the L/C UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  30. Standard for Examination of Documentsunder UCP 600, Article 14,cont… • A document may bedatedprior to the issuance date of the L/C, but must not be dated later than its presentation date UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  31. Standard for Examination of Documentsunder UCP 600, Article 14,cont… • The addresses of the beneficiary and the applicant in any document need not be the same as those in the L/C or other document, but must be within the same country as the respective addresses in the L/C • The shipper or consignor of the goods need not be the beneficiary UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  32. Complying Presentationunder UCP 600, Article 15 • Issuing bankmusthonoura complying presentation • Confirming bank musthonour or negotiate a complying presentation and forward the documents to the issuing bank • Nominated bank that honours or negotiates a complying presentationmust forward the documents to the confirming bank or issuing bank UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  33. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16 • Nominated bank, confirming bank, or issuing bank mayrefuse to honour or negotiate a non-complying presentation • Issuing bank may, in its sole judgment, approach the applicant for a waiver of discrepancy UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  34. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16, cont… • Nominated bank, confirming bank or issuing bank that decidesto refuseto honourornegotiate a non-complying presentationmust give a single notice to that effect to the presenter no later than the close of the fifth banking day following the day of presentation UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  35. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16, cont… • Single notice, must state: a. a bank is refusing to honour or negotiate, and b. discrepancy as the basis of the refusal of the bank, and UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  36. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16, cont… c. a bank is holding the documents pending further instructions from the presenter; or the issuing bank is holding the documents untill receiving a waiver from the applicant and agreeing to accept it, or receiving further instructions from the presenter prior to agreeing to accept a waiver; or the bankis returning the documents; or the bank is acting in accordance with instructions previously received from the presenter UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  37. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16,cont… • Issuing bank or confirming bank that fails to act in accordance with the provisions of Article 16 of the UCP 600, shall be precluded from claiming that the documents do not constitute a complying presentation UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  38. Discrepant Documents, Waiver and Noticeunder UCP 600, Article 16,cont… • Issuing bank that refusesto honour or confirming bank that refuses to honouror negotiate and has given notice to that effect in accordance with the provision of Article 16 of the UCP 600, shall be entitled to claim a refund, with interest, of any reimbursement made UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  39. Original Documents and Copiesunder UCP 600, Article 17 • At leastone original of each document must be presented • Requirement of the copy of documents is fulfilled by presentation of either originalsor copies • Requirement of multiple documents (in duplicate, in two fold, in two copies) is fulfilled by the presentation of at least one original and the remaining number in copies, exceptwhen the document itself indicates otherwise. UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  40. Commercial Invoiceunder UCP 600, Article 18 • Commercial invoicemust appear to have been issued by the beneficiary (except in case of transferable L/C), must be made out in the name of the applicant (except in case of transferable L/C), must be made out in the same currency as the L/C, and need notbe signed UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  41. Commercial Invoiceunder UCP 600, Article 18, cont… • Nominated bank, confirming bank, or issuing bank mayaccept a commercial invoice issued for an amount in excess of the amount permitted by the L/C, provided the bank in question has nothonoured or negotiated for an amount in excess of that permitted by the L/C • Description of the goods, services or performance in a commercial invoice must correspond with that appearing in the L/C UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  42. Transport Documentunder UCP 600, Articles 19, 20, and 21 • Indication of the name of the carrier • Be signed by the carrier, master, or agent • Signature must be identified • No name of master needed when the agent signed • Sole original transport document, or full set • No indication subject to a charter party • Indication of transhipment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  43. Transport Documentunder UCP 600, Articles 22 • Indication of a charter party • Be signed by the master, owner, charterer, or agent • Signature must be identified • Indication of the name of the owner or charterer needed when the agent signed • Sole original charter party bill of lading, or full set UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  44. Transport Documentunder UCP 600, Articles 23 • Indication of the name of the carrier • Be signed by the carrier or agent • Signature must be identified • Sole original transport document, or full set • The original for consignor or shipper • Indication of transhipment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  45. Transport Documentunder UCP 600, Articles 24 • Indication of the name of the carrier • Be signed by the carrier or agent • Signature must be identified • Sole original transport document, or full set • Indication of transhipment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  46. Transport Documentunder UCP 600, Articles 25 Courier receipt • Indication of the name of the courier service • Be stamped or signed by the named courier service Post receipt or certificate of posting • Be stamped or signed UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  47. “On Deck”, “Shipper’s Load and Count”, “Said by Shipper to Contain” and Charges Additional to Freightunder UCP 600, Articles 26 • A transport document must not indicate that the goods are or will be loaded on deck • A transport document bearing a clause such as “shipper’s load and count” and “said by shipper to contain” is acceptable • A transport document may bear a reference, by stamp or otherwise, to charges additional to the freight UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  48. Insurance Documentand Coverageunder UCP 600, Article 28 • Insurance document, such as an insurance policy, an insurance certificate or a declaration under open cover, must appear to be issued and signed by an insurance company, an underwriter or their agents or their proxies • When the insurance document indicates that it has been issued in more than one original, all originalsmust be presented UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  49. Insurance Documentand Coverageunder UCP 600, Article 28, cont… • Cover note will not be accepted • The date of the insurance document must beno later than the date of shipment UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

  50. Insurance Documentand Coverageunder UCP 600, Article 28, cont… • The insurance document must indicate the amount of insurance coverage and be in the same currency as the L/C • If there is no indication in the L/C of the insurance coverage, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods UCP 600 and Its Legal Aspects, Dr. Ramlan Ginting, 2007

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