...UCP 600 UCP 600 are the latest revision of the Uniform Customs and Practice that govern the operation of letters of credit. UCP 600 comes into effect on 01 July 2007 The 39 articles of UCP 600 are a comprehensive and practical working aid to bankers, lawyers, importers, and exporters, transport executives, educators, and everyone involved in letter of credit transactions worldwide. ICC Uniform Customs and Practice for Documentary Credits (UCP 600) Foreword This revision of the Uniform Customs and Practice for Documentary Credits (commonly called “UCP”) is the sixth revision of the rules since they were first promulgated in 1933. It is the fruit of more than three years of work by the International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice. ICC, which was established in 1919, had as its primary objective facilitating the flow of international trade at a time when nationalism and protectionism posed serious threats to the world trading system. It was in that spirit that the UCP were first introduced – to alleviate the confusion caused by individual countries’ promoting their own national rules on letter of credit practice. The objective, since attained, was to create a set of contractual rules that would establish uniformity in that practice, so that practitioners would not have to cope with a plethora of often conflicting national regulations. The universal acceptance of the UCP by practitioners in countries with widely divergent economic and judicial...
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...Impressive experimental exertion is being applied in the quest for gravitational waves, the conviction being that their identification could essentially help the examining of the universe. Be that as it may, starting yet, they have been distinguished just indirectly[1]. The expectation of the presence of gravitational waves comes as an immediate outcome of Einstein's hypothesis of general relativity[1], and measuring such waves stays one the last tests of his theory[2]. As per general relativity, gravity can be communicated as a space-time curvature[1], with gravitational waves being "swells" in these four measurements which spread as waves[2]. Not at all like electromagnetic waves, gravitational waves can go through matter without being impeded[3]. For example, the electromagnetic radiation discharged from supernovae blasts will be scattered endless times thus data from the blast will be lost[4]. The same does not remain constant for gravitational waves, which gives them specific criticalness in space science. Pretty much as cosmologists use optical telescopes to watch galactic wonders today, the trust is that the same will be made conceivable utilizing hardware that can distinguish gravitational waves[1]. About all galactic wonders radiate gravitational waves in some form[4], including frameworks, for example, dark opening communications, which have no electromagnetic signature[5]. In this manner, new wonders might get to be discernible if the force of gravitational...
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...UCP 600 - Key Issues The UCP 600 became available for incorporation into letters of credit from 1st July 2007 and replaces UCP 500. It is expected that letters of credit issued after that date will be subject to the UCP 600. The UCP 500 has not been repealed and as such and in principle, parties could still opt for the UCP 500. Rationale for the UCP 600 Revisions of the UCP 500 were initiated by International Chamber of Commerce (“ICC”) which mandated the Banking Commission of the ICC to bring the UCP procedure in line with the present times. Though the UCP 500 had obvious benefits, the international business community found the procedure embedded in the UCP 500 cumbersome and open to ambiguity, error and document rejections. New and Simplified Structure One striking feature of the UCP 600 is its lean and simplified look. It is set out in a new and simplified structure. The number of articles have been reduced from 49 to 39. The practice of position papers which were issued previously to clarify rules have been discontinued. The old UCP 500 was subjected to major drafting changes. Every single article has been re-drafted and tightened with a view to not only to bringing simplicity and clarity to the language but to remove ambiguity and reduce document rejections. UCP 600 Summary of New Provisions Set out below is a summary of the new provisions: • a leaner set of rules, with 38 articles rather than 49 articles; • a new section of “Definitions”, containing...
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...Letter OF Credit: Case: Beyene sells to Mohammed Sofan. Sofan financed purchase from YBRD (Irvene Trust) The documents for LC that is the bill of lading listed the party for shipping company to notify upon arrival of the houses as Mohammad and not Mohammed Sofan. Irvene refused to pay stating that there was discrepancy between the bill of lading and letter of credit. Judgement: Court ruled in favor of Irevene .Does misspelling in case give right to Irevene to refuse to pay the LOC (Yes) Reason supporting judgement: The issuing bank that acts as the confirming bank for the issuer takes on absolute duty to pay the amount of the credit to the beneficiary, so as long and the beneficiary complies with the terms of the letter. The appeals court agreed with the lower court stating that the misspelling in the bills of lading of Sofan’s name as Soran was a material discrepancy that entitled Irevene to refuse to honour the LOC. The misspelling of his name could have resulted in his non receipts of goods and his justification refusal to reimburse Irving for credit. Documentary letter of credit defined. The documentary letter of credit is defined as (page 234) Is letter of credit a contract? Answer: LC does act like a promise from and issuing bank to a beneficiary and it seems to be treated like a contract and discussed in terms of principle contract of law. But it does not meet requirement for a contract as it does not come about through offer, acceptance or mutual assent, nor there...
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...within a period of two years. Out of the total project cost, 49% is brought in by General Motors and the rest is tied up with financial institutions, international banks and Indian banks. The working capital is financed by a consortium of banks in which Global bank, Pune branch, is the leader. The company imports many parts of the car engine in a CKD (completely knocked down) condition from General Motors, Detroit, after establishing import letters of credit through its main bankers, Global Bank, Pune Branch. M/S Auto India approached Global Bank, Pune for opening of import letter of credit as per UCP ICC 600 for USD 100,000, on sight basis, in favour of General Motors, Detroit. Type of credit Application Applicant Beneficiary Issuing Bank Advising Bank Negotiating Bank Reimbursing Bank Availability Expiry Amount Merchandise Quantity and price - Irrevocable negotiable - UCP ICC 600 - M/S Auto India, Pune, India - M/S General Motors, Detroit, USA - Global Bank, Pune, India - The American Bank, New York - The American Bank, New York - International Bank, New York - Negotiable at sight - At the counters of The American Bank, New York - USD 100,000 - Car engine parts - 50 units @ USD 2000 per unit Circumstances Issuing Bank Global Bank, Pune issued its irrevocable negotiable credit through its head office in Pune since Global Bank co-ordinated all...
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...basis of writing business letters and the purpose of writing a business letter; draft a plan for the letter; write the letter; and edit the letter to ensure it fulfills your purpose. Particularly, an introduction to international business letter with some typical correspondence such as Enquiries, Replies and Quotations, Orders, Complaints and Adjustments will be delivered to the students. The course aims to document international standard banking practice for examination of commercial documents under the UCP 600, including a general overview of import – export, commercial documents, the principles of the UCP 600, the international standard banking practice to examine these documents according to the UCP 600. The class also will discuss and review a few case studies that epitomize the issues involved in preparing documents for presentation and examining documents for honor in doing business internationally. In general, the major topics of commercial documents under the UCP will be discussed to give students a working vocabulary and basic level of knowledge and skills...
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...điều chỉnh Ngân hàng phát hành và người yêu cầu. - UCP 600 2007 ICC, nếu có dẫn chiếu trong L/C. Trước hết, ta thấy cung ứng dịch vụ là hoạt động thương mại, theo đó bên cung ứng dịch vụ có nghĩa vụ thực hiện dịch vụ cho một bên khác và nhận thanh toán; bên sử dụng dịch vụ có nghĩa vụ thanh toán cho bên cung ứng dịch vụ và sử dụng dịch vụ theo thỏa thuận. Ở trong trường hợp cụ thể này, bên ngân hàng phát hành nhận được một khoản phí mở L/C và sau đó sẽ thực hiện dịch vụ là mở L/C, kiểm tra bộ chứng từ của người nhập khẩu và thanh toán. Còn bên người nhập khẩu đã thanh toán tiền cho ngân hàng phát hành và sử dụng dịch vụ theo thỏa thuận. Do đó, có thể coi đơn xin mở L/C là hợp đồng kinh tế dịch vụ giữa ngân hàng phát hành và người nhập khẩu. Câu 15: Ngân hàng phát hành sẽ có tối đa 5 ngày làm việc ngân hàng tiếp theo ngày xuất trình để quyết định xem việc xuất trình có phù hợp hay không (điều 14 khoản b UCP 600). Ngày xuất trình phải nằm trong ngày làm việc ngân hàng (điều 33), vì thế việc trung tâm thư tín của ngân hàng phát hành nhận được bộ chứng từ vào lúc 13.30 thứ bẩy không thể tính là thời hạn xuất trình. Ngày bắt đầu tính thời hạn kiểm tra bộ chứng từ phải là thứ hai. Câu 16: Theo UCP 600 người phát hành L/C phải là ngân hàng thương mại (điều 2) Nếu người xuất khẩu nhận được một L/C được phát hành bởi công ty tài chính Hồng Kong thì có thể chấp nhận nếu không dẫn chiếu UCP 600 vào L/C, còn nếu dẫn chiếu UCP 600 vào L/C thì người xuất khẩu không được chấp nhận bởi...
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...The volume of trade transactions is gradually increasing in the international arena. To secure the international trade payment is particularly very crucial. There are so many factors that may affect the matter of securing payment for an international transaction. Most important among them are the potential risk and cost that the exporters and the importers are willing to face or share between them. There are four methods in international trade payment: Cash in Advance or prepayment; Open Account; Documentary Collection; and Documentary Credit. Under Cash in Advance or prepayment method payment is expected by the exporter, in full, prior to goods being shipped. This is the most secure method of payment for the exporters and consequently the least attractive for importers. On the other hand, open account is the least secure method of payment for the exporters. But it is the most attractive method for the importers. Documentary collection is more secure method for an exporter than open account trading, as the exporter’s documents are sent from the exporter’s bank to the importer’s bank. However, among all the mentioned methods, documentary credit method distributes risks in most balanced way in which both importers and exporters are almost equally protected. Letter of Credit (L/C) or the Documentary Letter of Credit is the most popular international trade payment method in Bangladesh, which covers the issues like potential risk that the parties in international trade namely the...
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...within a period of two years. Out of the total project cost, 49% is brought in by General Motors and the rest is tied up with financial institutions, international banks and Indian banks. The working capital is financed by a consortium of banks in which Global bank, Pune branch, is the leader. The company imports many parts of the car engine in a CKD (completely knocked down) condition from General Motors, Detroit, after establishing import letters of credit through its main bankers, Global Bank, Pune Branch. M/S Auto India approached Global Bank, Pune for opening of import letter of credit as per UCP ICC 600 for USD 100,000, on sight basis, in favour of General Motors, Detroit. Type of credit Application Applicant Beneficiary Issuing Bank Advising Bank Negotiating Bank Reimbursing Bank Availability Expiry Amount Merchandise Quantity and price - Irrevocable negotiable - UCP ICC 600 - M/S Auto India, Pune, India - M/S General Motors, Detroit, USA - Global Bank, Pune, India - The American Bank, New York - The American Bank, New York - International Bank, New York - Negotiable at sight - At the counters of The American Bank, New York - USD 100,000 - Car engine parts - 50 units @ USD 2000 per unit Circumstances Issuing Bank Global Bank, Pune issued its irrevocable negotiable credit through its head office in Pune since Global Bank co-ordinated all...
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...CASE 1: 1) Global Bank, Pune was incorrect in its interpretation of UCP 600 article 14. The credit clearly stated that it expired at the counters of the negotiating bank and that the documents were to be sent to the head office of Global Bank. The credit did not contain any indication that presentation at the counters of Global Bank’s head office was for administrative purposes only, and that effective presentation to the issuing bank would only be considered when the issuing bank had received the required documents. UCP 600 article 6 states that presentation of documents must be made to issuing bank, or the confirming bank, if any, or any other nominated bank. The beneficiary presented the documents to the nominated negotiating bank and American Bank, New York presented the documents to the issuing bank as instructed. Therefore, Global bank’s Pune Branch had a duty to determine the number of days remaining in the five banking day period after presentation of the documents at their head office in order to comply with article 14 of UCP 600. 2) Yes, the stand taken by American Bank, New York, as the negotiating bank, is correct. As per the terms and conditions of the credit, they have negotiated the documents and forwarded the same to Global Bank’s head office. The American bank, New York should have received the notice of rejection of the documents within five banking days following the day of receipt of the documents at the counters of the head office of...
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...Essay Answer Guide on Strict Compliance (Qn 3 2009 (B)) ‘The strict compliance rule in relation to letters of credit does not require exact literal compliance in all circumstances and as regards all documents. The bankers is, therefore, required to exercise judgment whether the requirements has been fulfilled.’ Discuss. The use of letter of credit is the most common way of financing in an international sales agreement. Donaldson LJ in The Bhoja Trader had even seen it as “the lifeblood of commerce”. The documentary credit system (DCS) is useful in that it gives sellers greater assurance of being paid for goods supplied while allowing buyers to open a line of credit and facilitating effective payment. Before releasing payment though, the bank would have to ensure that documents tendered by the seller strictly comply with the buyer’s mandate. This strict compliance approach will protect the buyer’s interests. The doctrine of strict compliance has been justified in the context of commercial letters of credit on two grounds. First, on principles of agency (and contract) law, where the issuer must act within the mandate given by the applicant and obtain documents which comply strictly with the applicant’s instructions. Documents which go outside the mandate do not entitle the issuer to reimbursement. Secondly, the doctrine ensures that the issuer obtains documents which are commercially marketable and can be used in case the goods are lost or destroyed. The aim...
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...Uniform Rules for Bank-to-Bank Reimbursements ("URR") were first published by ICC in November 1995 and came into force on July 1, 1996 as ICC Publication No.525. At the time, reimbursement authorizations had begun to be issued in currencies other than what had been the more common currency i.e., US Dollars and an international set of rules were deemed necessary. It should be noted that there had been Bank-to-Bank Reimbursement rules operating in the US for many years and these formed the basis for the establishment of the principles to be considered in drafting URR 525. From July 1, 1996 issuing banks were faced with the decision as to whether their reimbursement authorizations should be made subject to URR 525 or UCP 500 article 19 (currently article 13 in UCP-600). To encourage usage of the URR and reduce the possibility of any ambiguity as to the applicable rules, SWIFT modified their handbook to reflect that the issuance of an MT740 (Authorization to Reimburse) would automatically apply to URR 525, unless otherwise stated. It is true to say that the usage of URR varies from country to country and will, no doubt, continue to do so with the updated version (URR 725) when it comes into effect on October 1, 2008. Today, the majority of credits are issued available by negotiation and the issuing bank provides reimbursement of a complying presentation at sight or on a future due date. This form of issuance negates the need for any Bank-to-Bank reimbursement instructions to appear...
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...training needs & requirement focusing on the key areas of banking. The main target group of our training for 2009 are newly recruited officers and mid-level officers. Meanwhile, we have issued a separate letter on December 18,2008 inviting suggestions including training requirements from the branches / Divisions of Head Office This year, we are contemplating to organize some outreach training workshops on 'Prevention of Money Laundering' as per regulatory requirement besides participating in training courses/workshops at BIBM / Bangladesh Bank Training Academy. The following are the proposed training courses & workshops for the year 2009: Workshops on: Basel-II/ Customer Service Banking Laws & regulations / Leadership & Team Building / UCP-600 Islami Banking / Anti-Money Laundering / Investment Risk grading / Investment Risks Management & Documentation / ALM / IC& C / Uniform Financial Rating System.Training course on: Training course on: Retail & SME Banking / Application of Technology in Banking / Foundation course for new officers / Investment Management Financing Foreign Trade / Business Communication. The following is the statement of training courses & workshops organized by our Training Centre during...
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...improving logistics and Procurement practices of the chosen Organization (Assessment Criteria 2.3 : Discuss the factors that must be considered when improving logistics and Procurement practices an organization). 3.1 Explain the importance of INCOTERMS 2000/ 2010 in the chosen Organization.(Assessment Criteria 3.1 : Explain the role of Inco terms 2000 / 2010) 3.2 Interpret the types of Letter of Credit (L/C) with respect to the chosen Organization above case.(Assessment Criteria 3.2: Interpret the types of Letter of Credit (L/C). 3.3 Explain the role of Swift code in international transactions in the chosen Organization. (Assessment Criteria3.3: Role of swift code). 3.4 What is the role of UCP 600 with respect to...
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...Legal principles governing documentary credits One of the primary peculiarities of the documentary credit is that the payment obligation is abstract and independent from the underlying contract of sale or any other contract in the transaction. Thus the bank’s obligation is defined by the terms of the credit alone, and the sale contract is irrelevant. The defensive of the buyer arising out of the sale contract do not concern the bank and in no way affect its liability.[3] Article 4(a) UCP states this principle clearly. Article 5 the UCP further states that banks deal with documents only, they are not concerned with the goods (facts). Accordingly, if the documents tendered by the beneficiary, or his or her agent, appear to be in order, then in general the bank is obliged to pay without further qualifications. Policies behind adopting the abstraction principle are purely commercial, and reflect a party’s expectations: first, if the responsibility for the validity of documents was thrown onto banks, they would be burdened with investigating the underlying facts of each transaction, and would thus be less inclined to issue documentary credits as the transaction would involve great risk and inconvenience. Second, documents required under the credit could in certain circumstances be different from those required under the sale transaction. This would place banks in a dilemma in deciding which terms to follow if required to look behind the credit agreement. Third, the fact that the...
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