Update 25 October 2006.
   UCP 600 approved by ICC Banking Commission

   More ....

The story so far

Regular readers may recall that my first report on the UCP revision was back in October 2004,
when the Drafting Group had already been at work for about a year.  

An important recent meeting took place in Vienna in May.  We have been told that the participants
had a good deal to say about the draft before them - comments from the National Committees ran
to more than 150 pages. A further draft was issued in June, and although feedback is invited, the Drafting Group considers that "the articles as now closed for general comment" unless the National Committees have very serious concerns.

The plan is now for a further draft to be issued in September, and for this this draft to be subject to
a straight "yes or no" vote at the meeting of the Banking Commission on October 24-25 in Paris.

The general feeling is that notwithstanding misgivings by some parties, the draft will be approved
this October.

So it seems that the current draft is more or less what the UCP 600 revision will look like, and that
this revision is likely to be approved in October, to become operational at the beginning of July 2007

What is in the new UCP?

Here is how the ICC website summarises the new revision:

• a leaner set of rules, with 39 articles rather than UCP 500's 49
  
  
• a new section of "definitions", containing terms such as "honour" and "negotiation"
  
  
• a replacement of the term "reasonable time" with a definite number of days for examining and determining compliance of documents
  
  
• a new provision concerning addresses of the beneficiary and the applicant
  
  
• an expanded discussion of "original documents"
  
  
• re-drafted transport articles aimed as resolving confusion over the identification of carriers and agents

As to the detail, readers of our October newsletter will recall that I identified ten specific areas that were under consideration by the Drafting Group.

Follow this link to see these ten areas revisited. You will see a number of reversals of earlier positions,
and also what some may see as a scaling down of the ambitions of the drafting group.

The big picture

Is there a single theme that runs through this revision? Here is a comment by Gary Collyer, Chair of
the Drafting Group, which I regard as highly significant:

The rules will force banks to be more diligent in the manner in which
they word or construct their letters of credit, as silence will invoke
some principles that have not been clarified or covered previously.

And a senior member of a bank that is active in the Middle East puts it this way:

Many banks may decide they need to protect their positions,
either by adding additional clauses to their letters of credit or
by excluding specific UCP articles

So there is much that banks and letter of credit users will need to think about.

What happens next?

Although nothing can be 100% certain, there is now a likely timetable for the approval of UCP 600
and its implementation. There is also a draft which will probably not be changed much.

So all the banks must be thinking seriously about their responses in respect of (among other things) drafting of their letters of credit, business processes and training of document examiners.

The text of the UCP 600 revision remains confidential. However we are sure that many people will
be starting discussions about its implications, and to this end we have added a UCP 600 section to
the Mantissa Trade Tutor Forum, where we will post news and opinions that may be helpful to
our visitors and customers.

Roger Kreitman
Principal Consultant
Mantissa Limited.

(C) Mantissa Limited 2006

The above report is not endorsed by the ICC or any of its officers: any errors or omissions are the sole
responsibility of the author.