UCP 600 Article 2: Definitions

 In Documentary Letter of Credit

Article 2 UCP 600 1) DEFINITIONS

For the purpose of the rules:

Advising bank means the bank that advises the credit at the request of the issuing bank.

Applicant means the party on whose request the credit is issued.

Banking day means a day on which a bank is regularly open at the place at which an act subject to these rules is to be performed.

Beneficiary means the party in whose favour a credit is issued.

Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice.

Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation.

Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank`s authorization or request.

Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.

Honour means:

  1. to pay at sight if the credit is available by sight payment.
  2. to incur a deferred payment undertaking and pay at maturity if the credit is available by  deferred payment.
  3. to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

Issuing bank means the bank that issues a credit at the request of an applicant or on its own behalf.

Negotiation means the purchase by the nominated bank of drafts (drawn on bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.

Nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.

Presentation means either the delivery of documents under a credit to the issuing bank or nominated bank or the documents so delivered.

Presenter means a beneficiary, bank or other party that makes a presentation.

Overview of UCP 600 Article 2

This article is new in the UCP context and in particular in comparison to the content Article 2 UCP 500 version of 1993.

The difference lies in the fact that Article 2 UCP 500 only defines the meaning of letter of credit but does not specify the definitions and terms used in the UCP. It should be added that the concept of credits given in this article complements the general definition set forth in the commentary on Article 1 of the UCP 600.

Article 2 UCP 500 2) Meaning of Credit

For the purposes of these Articles, the expressions “Documentary Credit(s)” and “Standby Letter(s) of Credit (hereinafter referred to as “Credit(s)”, mean any arrangement, however named or described, whereby a bank (the “issuing Bank”) acting at the request and on the instructions of a customer (the “Applicant”) or on its own behalf,

  1. is to make a payment to or to the order of a third party (the “Beneficiary”), or is to accept and pay bills of exchange (Draft(s)) drawn by the Beneficiary, or
  2. authorises another bank to effect such payment, or to accept and pay such bills of exchange (Draft(s)), or
  3. authorises another bank to negotiate,

against stipulated document(s), provided that terms and conditions of the Credit are complied with.

For the purposes of these Articles, branches of a bank in different countries are considered another bank.

It is however necessary to note that Article 2 of UCP 600 refers partly to the content of the following articles of UCP 500 : 2, 7, 9, and 10.

The UCP 600 Drafting Group of ICC Banking Commission decided that “as part of the process of simplification of the rules it would be desirable to create one article that contained definitions of the principal terms used in the UCP. Article 2 is this article, and it includes all of the significant terms utilized in UCP 600”.3) As you can see the idea of the UCP 600 Drafting Group behind it is to create an article that defines the terms and parties often used in an letter of credit transaction.

So although the UCP 600 Article 2 is new-most of its content is not, for example, if someone wants to examine the full concept of a confirmed credit it must read Article 8 (Confirming Bank Undertaking), as well as the definitions of “confirmation” and “confirming ban” from Article 2.4)

It should be noted that the last twenty years the problem referred to is regulated in a similar way in American Uniform Commercial Code (U.C.C.) – Article 5: Letters of Credit in § 5 – 102 (Definitions).5)

U.C.C. – Article 5: Letters of Credit (revised in 1995)
5 – 102. Definitions

(a) In this article:

  1. “Adviser” means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended.
  2. “Applicant” means a person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.
  3. “Beneficiary” means a person who under the terms of a letter of credit is entitled to have its complying presentation honoured. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.
  4. “Confirmer” means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.
  5. “Dishonor” of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft that may be required by the letter of credit.
  6. “Document” means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion (i) which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in Section 5-108(e) and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.
  7. “Good faith” means honesty in fact in the conduct or transaction concerned.
  8. “Honor” of a letter of credit means performance of the issuer`s undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, “honor” occurs (i) upon payment, (ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or (iii) if letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
  9. “Issuer” means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.
  10. “Letter of credit” means a definite undertaking that satisfies the requirements of Section   5-104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.
  11. “Nominated person” means a person whom the issuer (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.
  12. “Presentation” means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.
  13. “Presenter” means a person making a presentation as or on behalf of a beneficiary or nominated person.
  14. “Record” means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.
  15. “Successor of a beneficiary” means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.

(b) Definitions in other Articles applying to this article and the sections in which they appear ar:
“Accept” or “Acceptance” Section 3-409
“Value” Sections 3-303, 4-211

(c) Article 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this article.

So you make a comparison of the definitions contained in UCP 600 and in § 5 – 102 of U.C.C. – Article 5. The terms and parties are defined as follows (see table below):

2

Assessing the above list of the terms and parties, it should be noted that U.C.C. Article 5     (§ 5 – 102) provides more definitions of the terms letters of credit although it lacks three terms, which were included in latest version of UCP. However it should be added that United States banks fully respect the UCP regulations and they are using them in their international practice.

Commentary

At the beginning it is clear that the new Article 2 includes all of the significant terms utilized in UCP 600. Should be noted, however, that the exception to this the terms applicable to transferable letters of credit. Therefore those specific terms are contained in Article 38 of UCP 600.

In addition to the transferable credit terms, there are further definitions contained in  Article 9 (second advising bank), Article 11 (pre-advice), Article 13 (claiming bank and reimbursing bank) and Article 37 (charges).

These definitions were retained in the specific articles due to their unique relationship with the article.6)

It should be added that the most definitions early existed in UCP 500 and do not materially differ from the definitions found in the UCP 600, but these definitions have been restructured or clarified for the current version of UCP. While the new definitions were added to aid in the simplification of the articles UCP as a whole.

Therefore we will now analyze specific definitions with a commentary.

Advising bank

According to UCP 600 advising bank means the bank that advises the documentary letter of credit at the request of the issuing bank, but this definition was found in UCP 500 in sub – article 7(a) and was simply defined by its usage:

“A Credit may be advised to a Beneficiary through another bank (the “Advising Bank”) without engagement on the part of the Advising Bank, but that bank, if it elects to advise the Credit, shall take reasonable care to check the apparent authenticity of the Credit which it advises. If the bank elects not to advise the Credit, it must so inform the Issuing Bank without delay”.

Applicant

Applicant is a well known concept defined in Article 2 UCP 500 in terms of the bank`s customer, however, for the purpose of UCP 600 rules one should not the new definition which reads:

“… the party on whose request the documentary credit is issued”.

Read in context with sub – article 18 (a) (II) for example, which reads that the invoice:

“must be made out in the name of the applicant”, it may create an unexpected result as there may in fact be a difference between who is the “formal” applicant (that is, the party who request that the letter of credit be issued) and the applicant stated in the documentary credit.

It should be noted that the reference to the party does not impose any greater role for the applicant under UCP 600 but this definition has been broadened slightly to include a party on whose request the documentary credit is issued. It is merely to signify that it may encompass one of any number of different entitles i.e. a bank, a customer, a customer of another bank (outsourced processing) etc. In today`s practice, the applicant is often the customer of a correspondent bank or a subsidiary of the bank`s customer. In other words, the use of the term “party” in the definition is not intended to include the applicant as party to the documentary credit. However in line with the view expressed by ICC Drafting Group, the concept that the applicant can mean an entity other than the bank`s actual customer.7)

According to the U.C.C. – Article 5 (Letters of credit) this term “includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer”.

It is worth noting that for the purpose of the International Standby Practices (ISP 98) according to ISP 98 Rule 1.09 (Defined Terms) “Applicant” is a person who applies for issuance of a standby or for whose account it is issued, and includes:

  • a person applying in its own name but for the account o another person

or

  • an issuer acting for its own account.8)

Generally speaking when the applicant agrees or consents to the issuance of the standby subject to ISP 98, its obligation is affected by these Rules as indicated in ISP 98 Rule 1.04 (VI) – Effect of the Rules.

  • In some situations, the person who applies for issuance of a standby letter of credit is not the same person noted on the face of standby L/C (i.e. for the account of …). Where those two persons are different, the term “applicant” includes not only the person listed on the letter of credit but also the person applying if it is someone else.
  • This Rule also applies to the situation where an issuer issues a standby letter of credit for its own account. It should be noted that a bank, to assure its own performance, may be required by a governmental authority to provide a standby letter of credit. If the beneficiary would accept such a standby letter of credit then ISP 98 rules permit its issuance for the issuing bank`s own account. The question is not whether an issuing bank can issue a standby letter of credit for its own account, but whether such a standby would be acceptable to the beneficiary and whether it comports with regulatory guidelines regarding safety and soundness. It should be added that these questions are beyond the scope of rule of practice.
  • It is worth noting that under ISP 98 Rule 1.11 (c)(I) – interpretation of these Rules – the issuing bank assumes the role of the applicant with respect to a nominated confirmation bank. 9)

Banking day

According to the opinion of Drafting Group ICC Banking Commission that drafted the current version of UCP, the definition of “Banking day” includes two distinct principles:

“first, it includes the days on which the bank is regularly open, which, depending on the country, will not necessarily be the same days that are considered to be a weekend or a bank public holiday;

Second, the bank must be open to perform an act subject to the UPC”.10)

It follows that the banking day means a day on which a bank is regularly open at the place at which an act subject to these rules is to be performed. A bank may be regularly open Mondays to Saturdays but its trade department is only open Mondays to Fridays.

According to the ICC TA 635 (October 2007), it should be noted that appeared the following question:

“Under Article 2, from definitions of “Banking Day” and “Presentation” we understand that presentation is an act to be performed on a day when a bank is regularly open (as above mentioned). We also note from sub-article 14(b) that the examination period commences on the day following the “day of presentation” as opposed to UCP 500`s “day of receipt of documents”. Therefore it is our understanding that the day of presentation is be a banking day even documents are received by a bank`s mail receiving unit which may be open on a non-banking day. Are we correct?”

Answer to this problem is as follows. The day of presentation may or may not be a banking day. By accepting a presentation of documents outside the bank`s normal banking hours would mean that, in this case, Saturday would count as the day of receipt of the documents for the purposes UCP 600 Article 33. 11)

Beneficiary

Article 2 UCP 600 briefly defines beneficiary as the party in whose favour a documentary letter of credit is issued, while § 5 – 102 U.C.C. Article 5 gives it a broader scope. According to this definition “Beneficiary” means a person who is entitled to have its complying presentation honoured. Moreover, this term includes also a person to whom drawing rights have transferred under transferable letter of credit.

Complying presentation

Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice. The reference in this definition to international standard banking practice does not relate solely to the ICC publication of the same name. There a number of practices that are carried out by banks globally that are not encompassed within the publication (No. 681) and revised version ICC publication No. 745 (2013).

This expression in Article 2 is really a modification of what UCP says “in compliance with the terms and conditions of the credit” (in Article 8(b)(I).

The alternative formulation “complying presentation” is defined to mean a presentation that is, as already mentioned, in accordance with the terms and conditions of the credit, the applicable provisions of the rules and international standard banking practice. So one can see that the new language is easier to grasp.

Complying presentation is a new concept in the UCP context. It provides the hierarchy by which a document checker is to determine whether or not the presented documents are complying, namely the following:

  • the terms and conditions of the documentary credit,
  • the applicable provisions of the UCP 600 rules,
  • international standard banking practice (not limited to ISBP)12)

From the point of view of the Drafting Group ICC Banking Commission this definition is very important as it is the “backbone” for a number of other UCP 600 provision. For example the undertaking of the issuing and confirming bank is dependent on a complying presentation being made. It should be added that the UCP 500 defined, in broad terms, a presentation that complied with a documentary letter of credit in sub-article 13(a) as:

“Compliance of the stipulated documents on their face with the terms and conditions of the Credit shall be determined by international standard banking practice as reflected in these Articles”.

The UCP 600 definition of “Complying presentation” should be read in context with       Article 15 (Complying presentation), which explains what issuing, confirming, and nominated banks must do when they are determining whether a presentation complies or not.

Confirmation

According to the previous rules of ICC i.e. UCP 500, these rules contained the definition of the undertaking of a confirming bank in sub-article 9(b). Whereas, the definition used in UCP 600 states the same principles while tying this definition to the UCP 600 defined terms for “complying presentation” (see above), “honour” and “negotiation”.

Confirming bank

A confirming bank in UCP 600 is simply defined as the bank that adds its confirmation to a documentary credit upon the issuing bank`s authorization or request. In turn, UCP 500 defined the confirming bank in sub-article 9(b). While in accordance with the U.C.C. Article 5 “confirmer” means a nominated person who undertakes, at the request or with the consent of the issuer (issuing bank), to honour a presentation under a letter of credit issued by another (§ 5 – 102 (4)).

Under ISP 98 Rules the essential attribute of a confirmer, which distinguished it from any other nominated person, is that it “adds to the issuer`s undertaking its own undertaking to honour a standby letter of credit”, (see Rule 1.09.a and Rule 1.11.c (I)).

Credit

Article 2 of UCP 500 contained as mentioned the definition of documentary letter of credit in terms of the obligation and the basic parties to the documentary credit. It is worthwhile mentioning here that although the UCP 600 combines the two parts of this definition and states that a documentary letter of credit is any arrangement, however named or described that is irrevocable and thereby and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.

The UCP 600 definition (see above) includes the general principle that all documentary credits under these rules are considered to be irrevocable because the concept of revocable credits has been removed from the current version of the UCP. It should be added that this definition links the undertaking to the definitions of “honour” and “complying presentation.13)

In turn, in the accordance with the § 5 – 102(10) of U.C.C. Article 5, this term as letter of credit means a definite undertaking by an issuing to a beneficiary to honour a documentary presentation by payment or delivery of an item of value. Whilst in the ISP 98 Rules, the phrase “documentary letter of credit” is avoided, because it applies equally to standby letters of credit which are both “documentary” and traditional “letters of credit” and to which the UCP also applies, it is ambiguous.

Honour

It is worth noting that the previous version of UCP i.e. UCP 500 defined the undertaking under a documentary letter of credit by stating the three methods of fulfilling that undertaking:

  1. paying at sight;
  2. paying a deferred payment at maturity;
  3. accepting a draft and paying it at maturity.

The current version of ICC rules UCP 600 has used a drafting technique to employ a single term “honour”, for these three types of availability in order not to repeat them each time they appear in the rules. A documentary letter of credit, when issued, will state the method of availability, which is one of the three options, or use a combination of the options (termed “mixed payment”) included in the term “honour” or by indicating that the documentary credit is available by negotiation.14)

Under the U.C.C. Article 5 § 5 – 102(8) “honour” of the letter of credit means performance of the issuing bank`s undertaking in the documentary credit to pay or deliver an item of value. Unless the documentary credit otherwise provides, honour occurs:

  1. upon payment,
  2. if the documentary letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or
  3. if the documentary letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, maturity, its performance.

This technique allows the use of the term “honour” to simplify the text.

It is worth noting the difference between concept of “standby” and “standby letter of credit”. According to Rule 1.11. of ISP 98 and as indicated in ISP 98 Rule 1.01.(d), a “standby” is “a(n) undertaking subject to these rules. Whilst the standby letter of credit is not defined in ISP 98 but is a letter of credit which is not a commercial letter of credit. In this sense the standby letter of credit is generally accepted in commerce as such. Where the rules of ISP 98 use the term “standby” they do not invite an inquiry into whether or not the undertaking is a, standby letter of credit. On the other hand, where they use the phrase “standby letter of credit” such as in ISP 98 Rule 1.02.(b), they apply to standby letter of credit. Under mentioned rule, ISP 98 supercedes conflicting rules on by for standby letter of credit and not for other types of undertakings which may be subject to these rules and so are “standby” for purposes of ISP 98 (but not “standby letter of credit”).

Issuing bank

According to the UCP 600 (Article 2) issuing bank means the bank that issues a documentary letter of credit at the request of an applicant (buyer or importer) or on its own behalf. In turn, the U.C.C. Article 5 (§ 5 – 102(9)) “issuer” means the bank or other persons that issues a letter of credit, but does not include an individual who makes an engagement “for personal, family, or house hold purposes”.

Under ISP 98 rules issuers are not in position to detect or judge the accuracy of claims or accusations against the beneficiary. They do not have the power to compel the production of evidence or testimony nor the authority to sit in judgement upon it. Therefore, knowledge of breach or performance of transactions other then the obligation to present documents under the standby letter of credit does not affect the issuing bank`s obligation.

This issue is reflected in ICC opinion (TA 537) published in October 2002.15) In the context of this opinion UCP 600 Drafting Group provided the following conclusion:

  1. It does not “violate” the UCP for a non-bank to issue a credit subject to the UCP, even though such issuance is not contemplated in the rules. The UCP does not specifically provide for bank advice should accurately identify the issuer and indicate the advising bank`s limited role. If the form of advice refers to the “issuer” as “issuing bank” or otherwise gives the impression that it is a bank, it is recommended that the advice affirmatively disclose the non-bank status of the issuer in order to correct any mistaken impression caused by such reference.
  2. The consequences of insolvency are a matter for local law, whether the insolvency is that of a bank or non-bank issuer. In either case, however, the beneficiary assumes the risk of the creditworthiness of the issuer unless it is offset by obtaining confirmation or credit insurance.16)

Negotiation

In the accordance with the Article 2 of UCP 600 negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. In turn, according to Article 12(c) of UCP 600: “receipt or examination and forwarding documents by a nominated bank that is not a confirming bank does not make that nominated bank liable to honour or negotiate, nor does it constitute honour or negotiation. In previous version of UCP i.e. UCP 500 in sub-article 10(b) II “negotiation means the giving of value for draft(s) and/or document(s) by the bank authorized to negotiate. Mere examination of the documents without giving of value does not constitute a negotiation”.

It should be noted, that the language of new definition is clear and specific as against the old one. This is a kind of prepayment by the nominated bank if the credit is available by negotiation.

Comparing the version of UCP rules with previous, it should be remembered, however, that the UCP 500 10(b) (II) defines “negotiation” as the giving of value (see above) and distinguished it from mere examination of documents. ISP 98 rules do no attempt to define negotiation. The UCP provision was intended to address a sharp practice rather than to provide a comprehensive treatment of negotiation. Since negotiation occurs more commonly under commercial credits, it was decided to defer a comprehensive definition to a future revision of the UCP (UCP 600) rather than to attempt a systematic treatment in the ISP. Although not complete, the definition given in UCP 500 (Art. 10(b) (I)) would also be applicable to negotiation under ISP standbys since it states standard letter of credit practice.17)

UCP 500 stipulated only the bank that is authorized by the issuing bank to negotiate, may negotiate18). That means that negotiation may only be constituted under a negotiation credit that is a credit available with negotiation. According to the definition of “negotiation” in Article 2 UCP 600, there is no restriction whether the credit is a negotiation credit or not. When reviewing the process of the revision, we may find that in the draft 3`s art. 1-19, the definition of negotiation includes a qualifier that the credit should be available by negotiation. However, in the later revision draft, such qualifier was deleted.19) According to the current definition, the pre payment of a nominated bank may be deemed as negotiation. And according to the definition of nominated bank, a bank with which the credit is available is a nominated bank.

It should be noted that the term “nominated bank” was first incorporated in UCP 400 (1983)20) by providing a parenthetical definition in article 11(b), expressly:

“All credits must nominate the bank (nominated bank) which is authorized to pay (paying bank), or to accept drafts (accepting bank) or to negotiate (negotiating bank), unless credit allows negotiation by any bank (negotiating bank)”.

This idea is to underline that the classic documentary letter of credit by negotiation is one that requires the bill of exchange (draft) to be drawn on the issuing bank. This type of letter of credit will, invariably, state that reimbursement is to be provided by the issuing bank upon its receipt of documents. That is, the documentary letter of credit does not provide access to the funds (in contrast to a letter of credit available by payment).

Nominated bank means the bank with which the credit is available, or any bank in the case freely available credit.

Stated differently:

  1. Documentary credit available with any bank – any bank is a nominated bank;
  2. Restricted letter of credit – bank named in L/C.

With reference to above sub-article, it was revealed that the name of the nominated bank keep changing with the availability of the credit, i.e. paying bank, accepting bank negotiating bank, etc.

The concept of changing nominated bank`s name on the basis of availability of credit has still been going to either in an explicit or oblique manner. The word “nominated bank” was used more extensively in UCP 500 (1993) that nominated bank was defined in sub-article 10(b)(I). As a result of continual development, the nominated bank has now been defined, as above mentioned at Article 2 of UCP 600 (so that a common understanding on it can achieve) followed by a special Article 12 entitled “nomination” in UCP 600. It is should add however that appears the important problem: can an issuing bank be a nominated bank?

If we try to analyze this core question form UCP history also from “availability” (of credit) point of view, we can conclude that article 2, definition of nominated bank under UCP 600 should read as follows:

“Nominated bank means the bank (other than issuing bank) with which is available or any bank (other than issuing bank) in the case of a credit available with any bank.”21)

However, according to previously mentioned definition of nominated bank that is a bank with which the credit is available, seems that an issuing bank may be a nominated bank when a credit stipulates that it is available with the issuing bank by acceptance. If such issuing bank prepays, it negotiates. However, in UCP 600 we always find that an issuing bank honours. Additionally, according to Article 12(b) of UCP 600, under an acceptance or deferred payment credit there is a nomination from the issuing bank to allow the nominated bank to prepay or purchase their promised undertaking.

It signifies an acceptance of deferred payment credit may be also a negotiation credit. If so, why not UCP 600 simply states that “prepayment or purchase by the nominated bank is allowed under the credit”, because then negotiation credit will be not needed any more.

Conclusions:

Nominated bank:

  1. In nominating a bank to pay, incur a deferred payment undertaking, accept a draft or negotiate, an issuing bank authorizes that nominated bank to honour or negotiate upon receipt of a complying presentation.
  2. A nominated bank is under no obligation to honour or negotiate unless it has added its confirmation to the credit or it has expressly communicated to the beneficiary its agreement to honour or negotiate.
  3. Where a nominated bank honours or negotiates under a complying, an issuing bank undertakes to reimburse them.
  4. The bank with which the credit is available or any bank in the case of a freely available credit.

Presentation

According to the current UCP 600 definition of “presentation” it should be noted that this term contemplates two different uses of the interpretation because this term must be read in the context in which it is used. The first use of the term refers to the actually delivery of the documents (physical presentation) to the bank. The second use references the documents that have already been delivered to the bank and are in the bank`s possession.

Under U.C.C. Article 5 (Letter of Credit) this term means “delivery of a document to an issuer or nominated person for honor or giving of value under letter of credit” (see § 5-102 (12)).

Presenter

This term has been introduced into UCP 600 to “better define the party that presents the documents”.22) The presenter may be either the beneficiary of the documentary credit, another bank or another party acting on behalf of the beneficiary. This definition is particularly relevant under UCP 600 article 16 in relation to the sending of notices of refusal. In accordance with the U.C.C. Article 5 (§ 5-102(13)) “presenter” means a person making a presentation as or on behalf of a beneficiary or nominated person. It is arguable that interpretation of the concept this term is very similar.

Footnotes:

  1. Citation in accordance with the “ICC Uniform Customs and Practice for Documentary Credit – 2007 Revision”, ICC Publication No. 600E, International Chamber of Commerce, Paris (France) 2007, see Article 2.
  2. Quote accordance with the “ICC Uniform Customs and Practice for Documentary Credit”, ICC Publication No. 500, International Chamber of Commerce, Paris (France) 1993, see Article 2.
  3. “Commentary on UCP 600. Article-by-Article Analysis by the UCP 600 Drafting Group”, ICC Publication No. 680, International Chamber of Commerce, Paris (France) 2007, p. 14.
  4. LC Monitor Trade Services Update-Newsletter, Issue 2-February 2008, p. 2.
  5. S. Uniform Commercial Code – Article 5: Letters of Credit with the amendments for the particular States.
  6. “Commentary on UCP 600 …” op., cit., p. 14.
  7. Ibidem, p. 15.
  8. E. Byrne, “ISP 98. The Official Commentary on the International Standby Practices”, The Institute of International Banking Law & Practice, Inc. Montgomery Village, MD (USA) 1998, p. 37.
  9. Ibidem, pp. 37-38.
  10. “Commentary on UCP 600 …”, op., cit., p. 15.
  1. See A. Blajer, “Documentary Credits in International Trade Transactions Under New ICC Rules (UCP 600)”, Oficyna Wydawnicza Branta, Bydgoszcz-Łódź (Poland) 2009,   p. 157.
  2. LC Monitor Trade Services Update – Newsletter, op., cit., p. 3.
  3. “Commentary on UCP 600 …” op., cit., p. 16.
  4. Ibidem, p. 17.
  5. Ibidem, TA 537, op., cit., pp. 17-21.
  6. Ibidem, p. 21.
  7. See J. E. B. Byrne, “ISP 98 & UCP 500 Compared”, Institute of International Banking Law & Practice Inc., Montgomery Village, MD, USA, 2000, p. 231.
  8. See R. Rosenblith, “To negotiate or not to negotiate …” op., cit., pp. 150-151.
  9. Commission on Banking Technique and Practice, Meeting on 27-28 June 2005 in Dublin and Meeting on 24-25 October 2005 in Paris.
  10. It should be remember that, de facto, the term “nomination” was first introduce in reference to a bank in UCP 290 (1974) – General Provisions and Definitions, point (e) “… A bank is authorized to pay or accept under a credit either
  11. By being specifically nominated in the credit, or
  12. By the credit being freely negotiable by any bank”.

These references were developed in UCP 400 (1983), which introduced and defined the term “nominated bank”.

  1. See J. E. Byrne, “Negotiation in Letter of Credit Practice and Law: The Evolution of the Doctrine”, op., cit., pp. 585-594.
  2. See “Commentary on UCP 600”, op., cit., p. 23.

 

 

Andrzej Blajer Ph.D.
© Copyright by Andrzej Blajer

Recommended Posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Napisz do nas!

Napisz do nas a skontaktujemy się z Tobą najszybciej jak to możliwe.

Start typing and press Enter to search