The instalment article in UCP


UCP 600 article 32 states that when an instalment is not drawn or shipped within the allowable period, then the credit ceases to be available for that and any subsequent instalment.

Comment has been made that extending the cessation of availability to subsequent instalments is not logical and that the beneficiary should be allowed to ship further instalments.

The fact is that the intent of this article is the same as in UCP 500.

However, the UCP 600 drafting group did consider allowing a credit to be still valid for future instalments.

Despite this, the prevailing view of the majority of ICC National Committees was that by including a specific schedule in the credit, there is a definite requirement for either a drawing to be made or goods to be shipped within a specific period.

Failure on the part of the beneficiary to do so could result in a financial or other risk to the applicant.

Therefore, there was a need for a penalty if the beneficiary does not comply with the instalment schedule.

The penalty also focuses the applicant and beneficiary on what will be the status of the goods not shipped within the instalment i.e., lost or carried forward to the next or a future shipment.

The credit would need to be amended accordingly. Removing the penalty leaves a gap as to what happens regarding those goods.

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