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The Uniform Customs and Practice forDocumentary Credits(UCP) is a set ofrules on the issuance and use of

letters of credit. The UCP is utilized by bankersand

commercial parties in more than 175countries in trade nance.

!ome 11"15# of international tradeutilizes letters of credit$ totalin% o&er atrillion dollars (U!) each year

http://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Bankershttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/Bankershttp://en.wikipedia.org/wiki/Letters_of_credit

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'istorically$ the commercial parties$particularly banks$ ha&e de&elopedthe techniues and methods forhandlin% letters of credit ininternational trade nance.

This practice has been standardized

by the CC (nternational Chamber of Commerce)by publishin% the UCP in 1*++ and

subseuently updatin% it throu%hout

http://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/Trade_finance

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The CC has de&eloped and moulded the UCP byre%ular re&isions$ the current &ersion bein% theUCP,--.

The result is the most successful internationalattempt at unifyin% rules e&er$ as the UCP hassubstantially uni&ersal eect.

The latest re&ision /as appro&ed by the 0ankin%

Commission of the CC at its meetin% in Paris on5 2ctober --,.

This latest &ersion$ called the UCP,--$ formallycommenced on 1 3uly --7

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CC$ /hich /as established in 1*1*$ had as itsprimary ob4ecti&e facilitatin% the o/ ofinternational trade at a time /hen nationalism andprotectionism threatened the easin% of /orld trade.

t /as in that spirit that the UCP /ere rst

introduced 6 to alle&iate the confusion caused byindi&idual countries promotin% their o/n nationalrules on letter of credit practice.

The aim /as to create a set of contractual rules that

/ould establish uniformity in practice$ so that there/ould be less need to cope /ith often conictin%national re%ulations.

The uni&ersal acceptance of the UCP by

practitioners in countries /ith /idely di&er%enteconomic and 4udicial systems is a testament to the

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The latest83uly --79 re&ision of UCP is the si:thre&ision of the rules since they /ere rst

promul%ated in 1*++ The UCP remain the most successful set of pri&ate

rules for trade e&er de&eloped. ; ran%e of indi&iduals and %roups contributed to the

current re&ision includin%< the UCP =raftin% >roup$/hich /aded throu%h more than 5--- indi&idualcomments before arri&in% at this nal te:t?

the UCP Consultin% >roup$ consistin% of membersfrom more than 5 countries$ /hich ser&ed as thead&isory body?

@ore than A-- members of the CC Commission on

0ankin% Techniue and Practice made pertinentsu%%estions for chan%es in the te:t?

and 1+- CC Bational Committees /orld/ide took anacti&e role in consolidatin% comments from their

members.

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UCP,-- does not automatically apply to a creditif the credit is silent as to /hich set of rules it issub4ect to.

; credit issued by !DT @T7-- is no lon%ersub4ect by default to the current UCP 6 it has tobe indicated in eld A-E$

/hich is desi%nated for specifyin% theFapplicable rulesF.

here a credit is issued sub4ect to UCP,--$ thecredit /ill be interpreted in accordance /ith theentire set of +* articles contained in UCP,--

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EGCEPT2B

'o/e&er$ e:ceptions to the rules can be made bye:press modication or e:clusion.

Dor e:ample$ the parties to a credit may a%ree thatthe rest of the credit shall remain &alid despite the

beneciaryHs failure to deli&er an instalment.

n such case$ the credit has to nullify the eect ofarticle + of UCP,--$ such as by /ordin% the creditas< FThe credit /ill continue to be a&ailable for the

remainin% installments not/ithstandin% thebeneciaryHs failure to present complied documentsof an installment in accordance /ith the installmentschedule.F

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There are se&eral si%nicant dierences e:istbet/een UCP ,-- and UCP 5--. !ome of thesedierences are as follo/s?

The number of articles reduced from A* to +* inUCP ,--?

n order to reach a standard meanin% of termsused in the rules and pre&ent unnecessaryrepetitions t/o ne/ articles ha&e been added tothe UCP ,--.

These ne/ly added articles are ;rticle I=enitionsJ and ;rticle + InterpretationsJ.

These articles brin% more clarity and precision inthe rules?

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; deniti&e description of ne%otiationas IpurchaseJ of drafts ofdocuments?

Be/ pro&isions$ /hich allo/ for thediscountin% of deferred paymentcredits?

The replacement of the phraseIreasonable timeJ for acceptance orrefusal of documents by a ma:imum

period of &e bankin% days

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2ne of the most important chan%es in UCP,-- is the e:clusion of any &erbia%e re%ardin%re&ocable letters of credit$ /hich can be

amended or canceled at any time /ithoutnotice to the seller.

.;ctually$ ;rticle e:plicitly denes a credit asFany arran%ement$ ho/e&er named or

described$ that is irre&ocable and therebyconstitutes a denite undertakin% of theissuin% bank to honour a complyin%presentation

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Article 3states that F; credit is irre&ocable e&enif there is no indication to that eect.F and ;rticle1- makes it clear that Fa credit can neither beamended nor cancelled /ithout the a%reement of

the issuin% bank$ the conrmin% bank$ if any$ andthe beneciaryF (seller).Therefore$ it is prudent forthe seller to stipulate in the sales contract thatthe Fbuyer /ill open an irre&ocable letter of

creditF$ and to check that the buyerHs credit does$in fact$ either describe itself as Firre&ocableF orstate that it incorporates UCP ,-- (/ithoute:clusion).

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=enitions and nterpretations (;rticles and +)

The earlier UCP 5-- did not include a section

denin% the &arious terms used in the rules.UCP ,-- has rectied this in order to enablemore consistent interpretation. t also hasincluded an article that claries types of

si%natures that are acceptable$ as /ell asterms used to describe KC issuers$ and otherterms$ like FpromptF$ FimmediatelyF$ Fas soonas possibleF$ /hich /ill be disre%arded under

the ne/ rules. ; ne/ section of =enitionsand nterpretations has been introduced inthe UCP ,--. This includes denitions ofF;d&isin% bankF$ F;pplicantF$ F0ankin%dayF0eneciaryF$ FComplyin% presentationF$

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n addition to that$ the follo/in%terms are no/ clearly dened