Now that there is a draft that is quite likely to be close to the final text, it is instructive to
revisit these areas and see how the Drafting Group's thinking has evolved.

Roger Kreitman
Principal Consultant
Mantissa Limited

1. "On their face". There was a view that this expression, when applied to examination of documents, was a cause of confusion; it could be taken to mean the front of the document. However this phrase has been retained. Article 14a "Standards for document examination" reads "whether the documents appear, on their face, to constitute a complying presentation."
   
   
2. Time limits for examination of documents. As predicted, the phrase "a reasonable time" has been removed, and all the banks now "each have a maximum of five banking days following the day of presentation" to determine compliance. This is a reduction from the earlier limit of seven banking days
   
   
3. The issue of letters of credit by non-banks, e.g. importers. There was extensive discussion about whether UCP should refer to "banks" or to "parties". At one stage it was agreed that UCP should continue to refer to "banks", but that there should be a statement that banks could be taken to include other parties. However in the latest draft, this statement has been removed; so UCP is now silent on the matter!
   
   Does this mean that the ICC no longer approves of importers issuing their own credits? Certainly not. As far as I know, the ICC's position remains that credits issued by importers are fine.
   
   
4. Deferred payments. This had to be dealt with after the controversial Santander case. Article 12b (Nomination) now makes it clear that a bank nominated to incur a deferred payment undertaking is authorised both to incur such an undertaking and to make a prepayment.
   
   
5. Obligations of the advising bank. These have now been expanded. Not only must the advising bank be satisfied that the credit is authentic; it must be satisfied that the advice that it transmits to the beneficiary is accurate (e.g. no pages missing!)
   
   
6. Amendments. The problem here has been that the beneficiary does not have to explicitly accept an amendment, but can simply present documents that comply with the original credit. So the examiner has to determine whether the documents comply with the original credit or the amended credit
   
   We understand that consideration was given as to whether there was a way in which the beneficiary could be required to give a definite response to an amendment. However it appears that no satisfactory solution was found, because UCP 600 still contains the statement that the beneficiary "should give notification" of acceptance or rejection of an amendment. However as with UCP 500, the beneficiary retains the right to present under the original credit.
   
   Furthermore if the issuing bank tries to force a response from the beneficiary by putting wording in the credit to the effect that the amendment will be deemed accepted unless rejected within a time limit, the banks must disregard this.
   
   
7. The issue of data consistency within documents is important, because this is a common source
   of annoying discrepancies.   The new formulation is somewhat less radical than some people had hoped for.
   
   Within Article 14 "Standard for Examination of Documents", there is a paragraph: "Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in (i) that document
   (ii) any other stipulated document or (iii) the credit."
   
   Note that "international standard banking practice" is not capitalised, so it is not apparent that
   ISBP 645 is being referred to.
   
   Note also that the requirement for consistency between all the stipulated documents is retained. There was a view that this was a common pretext for the unwarranted rejection of documents, and
   therefore that part (ii) could be discarded without harm; but the matter was put to the vote,
   and a majority was in favour of retaining it.
   
   
8. Fate of documents following notice of refusal. The current UCP only gives the examining bank the options of holding them at the disposal of the presenter or returning them.
   
   However in practice many banks seek a waiver of discrepancies from the applicant - and if they
   obtain one, the bank may want to release the documents without consulting the beneficiary.
   Most beneficiaries will be happy for this to happen - but sometimes a seller won't want this!
   For example, if the price of a commodity has increased, discrepant documents can create an opportunity for the seller.
   
   Article 16 "Discrepant Documents, Waiver and Notice" now provides these four options for a bank:
   (a) hold the documents pending further instructions from the presenter (b) hold the documents until
   the bank receives a waiver and agrees to accept it or receives further instructions from the presenter prior to agreeing to accept a waiver (c) return the documents (d) act in accordance with instructions previously given by the presenter.
   
   The last of these will allow a seller to control the release process when there are discrepancies.
   
   
9. Negotiation. This has long been a source of disagreement between bankers, so in Article 3 "Interpretations" a definition is provided.
   
   "Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by either advancing or agreeing to advance funds to the beneficiary".
   
   
10. The future of ISBP. "International Standard Banking Practice for the Examination of Documents under Documentary Credits" was published by the ICC in November 2002 (publication no 645.) Its status has always been somewhat ambiguous, as many of its provisions are of a similar nature to those in UCP; so there was an arugment for incorporating large portions of ISBP into the new UCP revision.
    
    In the event, the drafting group have elected not to do this. So UCP 600 and ISBP 645 will remain as independent and non-overlapping documents. Our understanding is that there will be a revision of ISBP when experience has been gained with the operation of UCP 600.
    

(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.