UCP comparison Part 3 - Examination of documents, compliance and discrepancies


Article 14 - Examination of documents

UCP 82, article 10, contained a very simple rule regarding the examination of documents - 'Banks must examine all documents and papers with care so as to ascertain that on their face they appear to be in order.'

Article 24 of the same publication indicated 'Banks have the right to require that the name of the beneficiary of the credit appear on the Bill of Lading as shipper or endorser.'

Reference to "on their face" first appeared in UCP 222, article 7: 'Banks must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit.'

UCP 290, article 7, added reference to the concept of "inconsistency": 'Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit.'

UCP 400, article 23, introduced the wording that is now the basis for UCP 600 sub-article 14 (f).

UCP 500, article 13, saw the first reference to a sub-heading in UCP described as 'Standard for Examination of Documents'.

It is fair to state that UCP 600 article 14 is the most substantive change to date and brings many articles and sub-articles related to the examination of documents into one specific article.

More detail can be found in our previous blog, ‘Standard for examination of documents'.

Relationship between UCP 600 article 14 and ISBP 745

Whereas UCP 600, article 13, (Bank-to-Bank Reimbursement Arrangements) offers alternative rules to those in ICC publication URR 725 (ICC Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits), when considering UCP 600 article 14 and ISBP 745 it is not a case of applying one or the other.

Article 14 contains some key rules in respect of the standards to be adopted when examining documents presented under a documentary credit. These are supplemented and enhanced by the content of ISBP 745.

Some practitioners have argued that UCP and ISBP should be merged. When considering such a move, one needs to consider and appreciate that the success of UCP, for over 80 years, is down to its conciseness in being a set of rules instead of a 'how to', 'what if you do this' or 'what if this happens' publication. 

Apart from an obvious fact of making a much larger publication, there is a very strong case for keeping rules separate from a series of descriptions of practice. For example, a practice may be contested on the grounds that it is not applicable in a given situation or to a trade transaction involving parties from two or more specific countries, where other practices are the standard; however, rules will remain applicable to all parties unless the terms and conditions of the credit state otherwise (UCP 600 article 1). 


Article 15 - Compliance

This article, in a consolidated format, made its first appearance in UCP 600.

The article was deemed necessary, especially from the viewpoint of a bank acting in the capacity of an issuing bank, where it was considered that certain nominated banks were keeping hold of the documents until they had been reimbursed by the reimbursing bank or issuing bank (sight transactions), or until they had knowledge that the goods had been released to the applicant against the issuance of a shipping guarantee or delivery order i.e., after the issuing bank will have taken an instruction from the applicant to accept the documents as presented, in return for issuing the shipping guarantee or delivery order.

Earlier versions of UCP included various aspects and formats of this new article:

UCP 82 article 10, UCP 151 article 10, UCP 22 article 8, UCP 290 article 8 - banks are bound to pay against credit complying documents.

UCP 400 article 16 - authorising party bound to reimburse against credit complying documents.

UCP 500 article 14 - issuing and confirming banks bound to reimburse against credit complying documents.


Article 16 - Non-compliance


UCP 82, articles 36 and 43, contained two rules that would be interesting to apply today:

Article 36 stated "Banks may refuse to pay for partial shipments if they think it advisable." Whilst article 43 stated "Banks may refuse the documents if presented to them too late, in other words at a date not justified by the usual time taken to cover the distance between the place of dispatch and the place where payment is made."

UCP 151, article 10, only spoke of the issuing bank making a determination of compliance or non-compliance.

The same theme followed in UCP 222, 290 and 400.

UCP 500 was the first publication to provide extensive rules relating to the handling of discrepant documents. Article 14 introduced the concept that an issuing bank could approach the applicant for a waiver of discrepancies.

Of even greater import was the fact that any discrepancy notice was to be provided within seven days following the date of presentation of the documents.

In line with previous ICC opinions, it was also stated that any related discrepancy notice must list all discrepancies - banks have only one opportunity to refuse a presentation.

With UCP 600, the period to provide a discrepancy notice was curtailed to five days.


Article 17 - Originality

In recent years, much discussion has been provoked on this issue.

In fact, due to certain courts misinterpreting the requirements for determining that a document is an original, the ICC issued a Decision Document to provide clarity and direction.

The first mention of original documents was introduced in UCP 600, article 22. 

Within UCP 500, article 20 substantially replicated the text of UCP 400.

UCP 600, article 17, concentrated more on the definition of an original rather than on what made a copy.

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