1. Laws related to Letters of Credit

2. ICC Rules and Standards
ICC International Court of Arbitration
ICC's Uniform Customs and Practice for Documentary Credits (UCP 500 and UCP 600 from July 01, 2007)
ICC Incoterms are standard international trade definitions used in business contracts globally
ICC Non-government organization
123 countries as members
60 national committees
Business self-regulation of e-commerce

3. Functions of ICC
ICC
Represents business communities at national and international level
Harmonizes trade practices
Formulates terminologies

4. Uniform Customs and Practices
For documentary credit
1929,1933, 1962, 1974, 1983 and 1993
UCP 500 wef 1/1/94
UCP 600 wef 1/7/07
UCP IS NOT A LAW –IT HAS TO BE INVITED
INTO LC CONTRACT

5. Uniform Customs and Practices
FUNCTIONS OF UCP
Defines –Roles and responsibilities
Clarifications
Advises

6. Three basic principles
LCs are separate transactions from underlying commercial contracts
All parties deal in documents and not in goods
Doctrine of strict compliance

7. Article 1 – Application of UCP
UCP 600 are “rules that apply to any documentary credit where there is an express indication”

9. Article 3 - Interpretations
No revocable credit. A Credit is irrevocable even if there is no indication to that effect
“from” and “ after “ means to exclude in case of maturity. In case of shipment “from”-include, “after”-exclude
A document may be signed by hand writing , perforated signature, stamp , symbol or any other mechanical/electronic manner

10. Article 3 - Interpretations
Terms such as FIRST CLASS, WELL KNOWN , QUALIFIED , INDEPENDENT , OFFICIAL to allow ISSUER ANY ONE OTHER THAN THE BENFICIARY.
word like “prompt’” , “immediate” , or “ as soon as possible” will be disregarded.

11. Attaching pro-forma invoices or contracts to LC to be discouraged
Article 4 - Credits v. Contracts
Attaching pro-forma invoices or contracts to LC to be discouraged
Credit is separate from sale contract even if it has been specifically referred in the LC

12. Article 5 - Documents v. Goods, Services or Performance
BANKS DEAL WITH DOCTS AN DOCTS NOT IN GOODS

13. Article 9 – Advising of credit and amendments
WITHOUT ANY UNDERTAKING TO HONOUR OR NEGOTIATE
BY ADVISING , IT SIGNIFIES THAT THE ADV BANK HA SATISFIED ITSELF TO APPARENT AUTHENTICITY OF THE CREDIT

14. Article 10 – amendments
CREDIT CAN NEITHER BE AMENDED OR CANCELLED WITHOUT THE AGREEMENT OF IB , CB IF ANY AND THE BENEFICIARY
PARTIAL ACCEPTANCE OF AMENDMENT NOT ALLOWED
NOTICE OF ACCEPTANCE OR REJECTION OF AN AMENDMENT BY THE BENEFICIARY NOT MUST.
TIME LIMIT IF STIPULATED FOR REJECTION WILL BE DISREGARDED

15. Article 14 - Standard for Examination of Documents
Reasonable time for rejection -maximum of 5 banking days following the day of presentation
Data in a doct need not be identical but must not conflict with LC or any other doct.
Docts other than commercial invoice ……..description can be in general terms but not in conflict with LC.

16. 'Non-documentary conditions‘ will be ignored
“ LC must state issuer of all docts other than transport doct, insurance doct and commercial invoice ,as to who has to issue and if nothing is mentioned , doct as presented will be accepted
'Non-documentary conditions‘ will be ignored
Address of the bene and applicant need not to be the same as mentioned on the LC except appearing as consignee or notify party details on transport documents which must be same as per credit

17. SHIPPER OR CONSIGNOR OF THE GOODS INDICATED ON ANY DOCUMENT NEED NOT BE THE BENEFICIARY OF THE CREDIT

18. In the currency of the credit only Must be issued by the beneficiery
Article 18 - Commercial Invoice
In the currency of the credit only
Must be issued by the beneficiery
Must be in the name of applicant
Same currency
Need not to be signed
Description must correspond with as mentioned in the lc

19. Article 26 - "On Deck", "Shipper's Load and Count", “Said by Shipper to Contain” and Charges Additional to Freight (
transport document evidencing GOODS ON DECK NO ALLOWED
WORD LIKE “SHIPPERS LOAD AND COUNT “ AND “SAID BY SHIPPWER TO CONTAIN “will be acceptable

20. Article 27 - Clean Transport Document
The word ‘clean’ need not appear on a transport document even if a credit calls for clean-on-board.
A CLEAN DOCUMENT IS ONE BEARING NO CLAUSE OR NOTATION EXPRESSLY DECLARING A DEFECTIVE CONDITION OF GOODS OR THEIR PACKAGING

21. COVER NOTE NOT ACCEPTABLE
Article 28 - Insurance Document and Coverage
Same currency
110% of invoice value
Dated before shipment UNLESS IT APPEARS FROM THE INSURANCE DOCUMENT THAT THE COVER IS EFFECTIVE FROM THE DATE NOT LATER THAN THE DATE OF SHIPMENT
COVER NOTE NOT ACCEPTABLE

22. NO EXTENSION FOR DATE OF SHIPMENT
Article 29 - Extension of Expiry Date or Last Day for Presentation
WILL BE EXTENDED TO THE NEXT WORKING DAY IN CASE OF NON-FORCE MAJURE CONDITIONS
NO EXTENSION FOR DATE OF SHIPMENT

23. Word ABOUT , APPROXIMATE -10% PLUS /MINUS
Article 30 - Tolerance in Credit Amount, Quantity and Unit Prices
Word ABOUT , APPROXIMATE -10% PLUS /MINUS
TOLERENCE UPTO 5% ALLOWED IN QUANTITY BUT NOT IN AMOUNT PROVIDED QUANTITY IN TERMS OF FIXED NO OF UNITS DOES NOT CHANGE.THIS WILL NOT BE TREATED AS PARTIAL SHIPMENT

24. Article 31 - Partial Drawings or Shipments
For the same means of conveyance, for the same journey and same destination not be considered to be a partial shipment
More than one means of conveyance within the same mode of transport even though they depart from the same place, for the same destination, on the same date, is a partial shipment
Latest date of shipment as evidenced on any set, will be regarded as the date of shipment

25. Article 32 - Instalment Drawings or Shipments
IF ANY INSTALMENT IS NOT DRAWN OR SHIPPED WITHIN THE PERIOD ALLOWED,THE CREDIT CEASES TO BE AVAILABLE FOR THAT OR ANY SUBSEQUENT INSTALMENTS

26. Article 36 - Force Majeure
Acts of Terrorism , act of God , riots, civil commotions ,wars ,strikes lockouts-NO EXTENSION

27. Contd…. Expiry dates: Article 14c – 21 days
Article Force majure conditions
previous working day
Article 29 –
Next working day for other than article 36 situations
Date of shipment never gets extended

28. Transferable credit Article 38 – Must state transferable
Can be transferred only once
To be tranferred on same terms and conditions
Following can be reduced:
Amount/ unit price/ expiry dateperiod of shipment
Following can be increased:
Percentage of insurance