What is UCPDC 600
UCPDC 600 is the latest version of the rules that govern letters of credit transactions worldwide. UCPDC 600 is prepared by International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice. Its full name is 2007 Revision of Uniform Customs and Practice for Documentary Credits, UCP 600, and (ICC Publication No. 600). The ICC Commission on Banking Technique and Practice approved UCP 600 on 25 October 2006. The rules have been effective since 1 July 2007.
UCP 500 was the rules that had been in implementation before UCP 600. There are several significant differences exist between UCP 600 and UCP 500. Some of these differences are as follows;
- The number of articles reduced from 49 to 39 in UCP 600;
- In order to reach a standard meaning of terms used in the rules and prevent unnecessary repetitions two new articles have been added to the UCP 600. These newly added articles are Article 2 “Definitions” and Article 3 “Interpretations”. These articles bring more clarity and precision in the rules;
- A definitive description of negotiation as “purchase” of drafts of documents;
- New provisions, which allow for the discounting of deferred payment credits;
- The replacement of the phrase “reasonable time” for acceptance or refusal of documents by a maximum period of five banking days.
History of UCPDC
- First uniform rules published by ICC in 1933. Revised versions were issued in 1951, 1962, 1974, 1983 and 1993.
- 1933 – Uniform Customs and Practice for Commercial Documentary Credits
- 1951 Revision – Uniform Customs and Practice for Commercial Documentary Credits
- 1962 Revision – Uniform Customs and Practice for Documentary Credits
- 1974 Revision – Uniform Customs and Practice for Documentary Credits
- 1983 Revision – Uniform Customs and Practice for Documentary Credits
- 1993 Revision – Uniform Customs and Practice for Documentary Credits
Currently majority of letters of credit issued everyday is subject to latest version of the UCP. This widely acceptance is the key sign that shows the importance of the UCP, which are the most successful private rules for trade ever developed.
eUCP
Almost all of the presentations are being made in paper or traditional format still in today’s letters of credit environment. However, as telecommunication technology is expanding its borders, it is highly expected that in the very near future traditional processes will be substituted with the electronic paperless transactions. In order to establish set of rules that governs electronic presentations the ICC Banking Commission established a Working Group consisting of experts in the UCP, electronic trade, legal issues and related industries, such as transport, to prepare the appropriate rules for electronic and mixed presentations. Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation or “eUCP” is the result of the efforts of this committee.
The eUCP is not a revision of the UCP. The UCP will continue to provide the industry with rules for paper letters of credit for many years. The eUCP is a supplement to the UCP that, when used in conjunction with the UCP, will provide the necessary rules for the presentation of the electronic equivalents of paper documents under letters of credit.
1. What does UCPDC stand for?
Answer: Uniform Customs and Practice for Documentary Credits.
Explanation: It is a set of rules published by the International Chamber of Commerce (ICC) governing documentary credit operations.
2. When was UCPDC 600 implemented?
Answer: 1 July 2007.
Explanation: UCP 600 replaced UCP 500 and became effective from this date.
3. Who publishes UCPDC 600?
Answer: International Chamber of Commerce (ICC), Paris.
Explanation: The ICC is responsible for creating and maintaining international trade rules.
4. How many articles are there in UCPDC 600?
Answer: 39 Articles.
Explanation: UCP 600 consists of 39 articles that outline the rules and practices for letters of credit.
5. What is a “Credit” as defined in UCP 600?
Answer: A Credit means any arrangement that is irrevocable and thereby constitutes a definite undertaking of the issuing bank.
Explanation: It ensures the bank’s obligation to pay, accept, or negotiate under the terms of the credit.
6. What is the nature of a documentary credit under UCP 600?
Answer: Irrevocable.
Explanation: All credits issued under UCP 600 are irrevocable, meaning they cannot be amended or canceled without consent.
7. What is the role of the Issuing Bank?
Answer: The issuing bank undertakes to pay the beneficiary if the documents comply with the credit terms.
Explanation: It is the bank that issues the credit at the applicant’s request.
8. Who is the Beneficiary under UCP 600?
Answer: The party in whose favor the credit is issued.
Explanation: Usually the seller or exporter in a trade transaction.
9. What is the Applicant in UCP 600?
Answer: The party on whose request the credit is issued.
Explanation: Typically the buyer or importer.
10. What does “Complying Presentation” mean?
Answer: Presentation that is in accordance with the terms and conditions of the credit, UCP 600, and international standard banking practice.
Explanation: The issuing bank will honor only if the presentation complies fully.
11. Within how many days must a bank examine the documents?
Answer: Maximum 5 banking days following the day of presentation.
Explanation: As per Article 14(b) of UCP 600.
12. What does “Honor” mean under UCP 600?
Answer: To pay at sight, to incur a deferred payment undertaking, or to accept a bill of exchange.
Explanation: Defined in Article 2.
13. What does “Negotiation” mean in UCP 600?
Answer: The purchase by the nominated bank of drafts or documents under a complying presentation.
Explanation: It involves giving value to the beneficiary.
14. What is a Nominated Bank?
Answer: A bank with which the credit is available or any bank in the case of a freely negotiable credit.
Explanation: It can act on behalf of the issuing bank to pay or negotiate.
15. What does “Presentation” mean under UCP 600?
Answer: The delivery of documents under a credit to the issuing or nominated bank.
Explanation: It triggers the examination and payment process.
16. What happens if documents are discrepant?
Answer: The issuing bank may refuse to honor or negotiate and must give notice to that effect.
Explanation: Notice must be given within 5 banking days (Article 16).
17. Can a credit be transferable under UCP 600?
Answer: Yes, if expressly designated as “transferable.”
Explanation: Only transferable credits can be transferred (Article 38).
18. What is a “Documentary Credit”?
Answer: A written undertaking by a bank to pay a beneficiary upon presentation of specific documents.
Explanation: It secures payment in international trade.
19. Are banks concerned with the goods under UCP 600?
Answer: No.
Explanation: Banks deal with documents, not goods or services (Article 5).
20. What is the purpose of UCPDC 600?
Answer: To standardize international trade practices in documentary credit operations.
Explanation: It ensures consistency, reliability, and efficiency in global trade finance.