As explained in our previous blog, the explanatory notes accompanying the recent ICC Banking Commission decision not to proceed with a revision of UCP 600 contained a number of answers to questions raised by practitioners in different parts of the world.
We have addressed more of these queries below by stating the issue and the response from the ICC.
Prohibit the possibility to link the effectiveness of amendments from any kind of cost compensation of the beneficiary towards the issuing bank: if the applicant asks for an amendment, the applicant has to bear the costs; cost for amendment very often is not transparent for beneficiary.
- UCP 600 sub-article 37 (c) clearly states that an amendment should not stipulate that the advising to a beneficiary is conditional upon the receipt of charges.
- Furthermore, sub-article 37 (c) provides for the instructing bank to be liable for any commissions, fees, costs or expenses. This includes the issuing bank. Even if charges are for the account of the beneficiary, the issuing bank (and hence, the applicant) remains liable for payment of the charges if they cannot be collected.
- If applicable, banks should clearly state their fee structure in any correspondence. However, UCP cannot force banks to do so.
Modify sub-article 14 (h), as this stipulation in practice often leads to rather poor wording from the issuing bank and discussions about discrepancies during presentation of documents.
- The position under UCP 600 is that if a credit stipulates a condition without indicating the document required for compliance, the bank should simply treat the condition as if it did not exist and disregard it. However, the data in documents will still be subject to review under sub-article 14 (d) to ensure that any data is not conflicting.
- As mentioned in the ‘Commentary on UCP 600', the issue covered by sub-article (h) can be easily resolved by issuing banks and applicants ensuring that any term or condition stated in the credit is clearly linked to a stipulated document.
Ban any kind of sanctions-related wording from credits.
- Reference is made to the ICC Guidance Paper on the use of sanctions clauses.
- This states, inter alia, that the need for sanctions is a political matter outside the realm of the ICC. The enforceability of sanctions is a question to be decided by courts, national regulators or administrative agencies; it is not an issue that can be addressed by rules of banking practice such as ICC rules.
- Accordingly, ICC rules do not address how sanctions should be interpreted or their impact on the trade finance-related instrument in which they are incorporated. ?The paper recommends that banks should refrain from issuing trade finance-related instruments that include sanctions clauses that purport to impose restrictions beyond, or conflict with, the applicable statutory or regulatory requirements.
Insert a new sub-article 14 (m): "Third party documents are generally acceptable if not otherwise stipulated in the credit."
- ISBP 745 paragraph A19(c) states that the expression ‘third party documents acceptable' means all documents for which the credit or UCP 600 do not indicate an issuer, except drafts, may be issued by a named person or entity other than the beneficiary.
- ISBP 745 paragraph A19 (d) states that the expression ‘third party documents not acceptable' has no meaning and is to be disregarded.
- It should not be forgotten that UCP already covers the issue of third party documents - third party shipper in sub-article 14 (k) and third party issuer in sub-article 14 (f).