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Guidance Paper – The use of drafts (bills of exchange) under documentary credits

07/03/2019

The paper has now been added to the ICC website:

https://iccwbo.org/publication/guidance-paper-use-drafts-bills-exchange-documentary-credits-executive-summary/


Ordinarily, a UCP 600 documentary credit need not require a draft to be presented together with the stipulated documents. Accordingly:
1. It is recommended that the habit of requiring a draft for a documentary credit available at sight be curtailed, particularly sight drafts drawn on an issuing bank, confirming bank, or a bank nominated to pay, unless required for a specific commercial, regulatory or legal reason.
2. UCP 600 article 2 allows for negotiation to occur under a documentary credit available by negotiation with or without a presentation of a draft It is recommended that the habit of requiring a sight draft for a documentary credit available by negotiation be reviewed and that negotiating banks be encouraged to rely, not on negotiable instruments' law, but instead on specific agreements with beneficiaries evidencing negotiation and their respective recourse and other rights and remedies.
3. It is recommended that banks issue usance documentary credits available by deferred payment as an alternative to availability by acceptance of a draft, unless there is a specific commercial, regulatory or legal reason to create a banker's acceptance.
4. All banks should review their UCP 600 documentary credit forms, whether in paper format and/or online, to indicate that a draft is not a standard requirement of the issuing bank and to indicate their requirements for another form of demand.
It is recommended that banks arrange for this Guidance Paper to be distributed throughout their network, and particularly to their legal departments. It can also be circulated to clients and, if considered appropriate, to courts and regulatory authorities. Sharing this Guidance Paper on a wider basis will help ensure amelioration of any problems.


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