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UCP Revision Update

UCP Revision Update . ICC Banking Commission October 25, 2005 . Content. Countries actively involved in providing comments to UCP drafts Key Issues in the drafting process were identified in Dublin (June 2005) – the results Some Outstanding Issues Next Steps. North America

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UCP Revision Update

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  1. UCP Revision Update ICC Banking Commission October 25, 2005

  2. Content • Countries actively involved in providing comments to UCP drafts • Key Issues in the drafting process were identified in Dublin (June 2005) • – the results • Some Outstanding Issues • Next Steps

  3. North America Canada United States Latin America Argentina Chile Mexico Panama Middle East and Africa Bahrain Egypt Iran Israel Jordan Lebanon South Africa Syria Europe Austria Belgium Croatia Cyprus Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Netherlands Norway Portugal Romania Russia Serbia & Montenegro Slovenia Spain Sweden Europe (cont’d) Switzerland Turkey United Kingdom Asia Bangladesh China Hong Kong India Indonesia Japan Korea Malaysia Pakistan Singapore Sri Lanka Thailand Global involvement in the revision process • Countries actively involved in providing comments to UCP drafts (i.e., responded to 4 or more drafts – out of 10)

  4. Key Issue No. 1 The view was expressed that "on its face" does not mean the front as opposed to the back of a document. The term means the review of a document in line with international standard banking practice and the features of the document itself. The Drafting Group were of the opinion that "on its face" could be removed from the UCP. National Committees were requested to indicate if they disagree. Response: 25 countries agreed to remove reference to "on its face" with 12 disagreeing

  5. Key Issue No. 2 Reasonable time. General agreement was to remove the words "reasonable time" from new Articles 20 and 22 and have a maximum number of days. National Committees were requested to indicate (a) if they disagree or (b) if they agree, the number of days following the day of receipt that should be allowed to complete the document handling process (including seeking waiver). Response: 36 countries agreed to remove "Reasonable Time" with 1 disagreeing (by the drafting of their suggested text – although reducing max period to 5 days). Suggested period allowed following the day of receipt of documents is split as follows: 5 days = 15, 6 days = 9, 7 days = 10, No comments = 2.

  6. Key Issue No. 3 Parties. Majority of comments from the audience in Dublin indicated a preference for usage of the term banks instead of parties. National Committees were requested to indicate their preference "Party" or "Bank". Response: 27 countries voted to use "Bank" with 9 voting for "Party", and 1 voting with no view either way.

  7. Key Issue No. 5 Deferred Payments. General agreement from the audience in Dublin that the UCP should provide a provision for a discount to occur. National Committees were requested to indicate whether or not they agree for a clause to be added to the UCP text allowing for the discounting of a deferred payment undertaking. Response: 27 countries voted for a clause to be included with 9 voting against

  8. Key Issue No. 6 Despite a previous request from the Drafting Group, there had been no clear consensus on whether or not UCP500 Article 28 should (a) be split into 3 separate transport articles or (b) remain as one article with a general provision covering all 3 modes of transport and then individual sub-Articles covering the differences. National Committees were, again, requested to indicate whether they prefer 3 separate articles or one as is the case today. Response: 20 countries voted for the retention of Article 28 as it is today with 17 voting for it to be split into 3 different articles

  9. Key Issue No. 7 UCP500 Article 30 covers the issuance of transport documents by Freight Forwarders. Given the drafting of current Article “Bill of Lading covering Port-to-Port Shipment”, the Drafting Group does not believe that there is a need for an equivalent of UCP500 Article 30. A freight forwarder signing as agent of a carrier or as carrier will be covered by new Article 30 (plus other, still to be drafted, transport articles). National Committees were requested to indicate if they disagree with removal of UCP500 Article 30. Response: 30 countries voted for removal of UCP500 Article 30 with 7 voting for its retention

  10. Key Issue No. 8 National Committees were requested to comment on whether defined terms should be capitalised or not (previous drafts that were in circulation (except Articles 20-29) did not have capitalised terms) Response: 18 Countries voted for capitalization with 15 voting against. 4 countries 'opted out' or offered other solutions (including 2 voting for defined terms to be in bold text).

  11. Key Issue No. 9 National Committees were requested to indicate if there is a requirement for any ‘new’ Articles. Response: 17 Countries indicated no need for any new Articles. Ideas for incorporation include: Corrections/Alterations Definition of Documents of Title Endorsements Inoperative LCs Participations Linkage Jurisdiction Good Faith Transfer by Op of Law Forwarder type documents Recourse Language Revolving Credits

  12. Outstanding Issue(s) UCPXXX Article 1 and/or 2 Issue concerning non-bank issued LCs. Discussion draft has reverted to the terminology used in UCP500 i.e., banks, but this has not resolved the problem that the Commission will be faced with when a request for an opinion (similar to that given under UCP500) is submitted shortly after adoption/implementation of the new rules. UCPXXX Article 2 Should the definition of Presentation include the same principle as that expressed in ISP98 i.e., “The receipt of a document required by and presented under a standby [credit] constitutes a presentation requiring examination for compliance with the terms and conditions of the standby [credit] even if not all of the required documents have been presented”.

  13. Outstanding Issue(s) UCPXXX Article 2 Definition of Negotiation. Is the current text “Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents by either advancing or agreeing to advance funds to the beneficiary. The mere receipt, examination or forwarding of documents does not constitute negotiation” sufficient? Comments have suggested a similar wording to that in TA.569 UCPXXX Article 3 Issue of “and/or”. Is there a requirement to include an interpretation and use throughout the rules? ISP98 states “A or B" means "A or B or both"; "either A or B" means "A or B, but not both"; and "A and B" means "both A and B“.

  14. Outstanding Issue(s) UCPXXX sub-Article 8(b) If the adviser advises the credit/amendment, it signifies that it has taken reasonable care to check the apparent authenticity of the credit/amendment and that the advice accurately reflects what has been received. UCP500 sub-Article 7(a) ….. but that bank, if it elects to advise the Credit, shall take reasonable care to check the apparent authenticity of the Credit which it advises. If the bank ……….

  15. Outstanding Issue(s) UCPXXX sub-Article 9(d) (previous wording now amended as UCP500 text) …… will remain in force for the beneficiary until the beneficiary communicates his acceptance of the amendment to the party that advised such amendment. The beneficiary must give notification of acceptance or rejection of an amendment and, if rejected, the party that advised the amendment UCP500 sub-Article 9(d) ……… will remain in force for the Beneficiary until the Beneficiary communicates his acceptance of the amendment to the bank that advised such amendment. The Beneficiary should give notification of acceptance or rejection of amendment(s). If the Beneficiary fails to give such notification, the tender of documents to the Nominated Bank or Issuing Bank, that conform to the Credit and to not yet accepted amendment(s), will be deemed to be notification of acceptance by the Beneficiary of such amendment(s) and as of that moment the Credit will be amended.

  16. Outstanding Issue(s) • UCP500 Articles that have been removed • Article 5 – Instructions to Issue/Amend Credits (1) • Article 6 (part) – Revocable ** • Article 8 – Revocation ** • Article 12 – Incomplete or Unclear Instructions • Article 38 – Other Documents ** • ** No objections received to removal • 5 countries requested reinstatement to new rules • 5 countries requested reinstatement to new rules

  17. Outstanding Issue(s) UCPXXX Article 15 5 Countries requested reinstatement of “mathematical calculations” UCPXXX Article 16 Reads ”Where the requirements stipulated in the credit have been complied with, an issuing bank or confirming bank is obliged to reimburse even in circumstances where the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank or between the confirming bank and issuing bank.” Should this provision extend beyond where a bank acts in accordance with its nomination but also to where documents are just presented at their counters?

  18. Outstanding Issue(s) UCPXXX sub-Articles 20(c) and (d) c. 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. d. If a Credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the document if its content appears to fulfil the function of the required document. UCP500 Article 21 When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom such documents are to be issued and their wording or data content. If the Credit does not so stipulate, banks will accept such documents as presented, provided that their data content is not inconsistent with any other stipulated document presented.

  19. Outstanding Issue(s) UCPXXX sub-Article 20(h) h. The addresses of the beneficiary and the applicant in any document need not be the same as those stated in the credit provided they are within the same country as the respective addresses mentioned in the credit. Contact details (telefax, telephone, email and the like) stated as part of the address of the beneficiary and the applicant will be disregarded. UCP500 No equivalent ISBP refers to contact details only.

  20. Outstanding Issue(s) • UCPXXX Article 21 • When an issuing bank determines compliance it must honour. • When a confirming bank determines compliance it must honour or negotiate and forward the documents to the issuing bank. • When a nominated bank that has not confirmed the credit determines compliance and elects to act in accordance with its nomination, it must honour or negotiate and forward the documents to the confirming bank or issuing bank. UCP500 No equivalent

  21. Outstanding Issue(s) • UCPXXX sub-Article 22(b) • The notice must state: • that the bank is refusing to honour or negotiate; and • each discrepancy in respect of which the bank refuses to honour or negotiate; and • a) that the bank is acting in accordance with instructions previously received from the presenter; or • b) that the bank is holding the documents pending further instructions from the presenter; or • c) that the bank is returning the documents; or • d) that if the Issuing Bank is seeking a waiver, it is holding the • documents until it receives a waiver and agrees to accept it. UCP500 sub-Articles 14(d) (i) and (ii)

  22. Outstanding Issue(s) UCPXXX Article 29 (removed from latest discussion draft and re-insertedunderArticle 28) “In documents other than the commercial invoice, the goods description, if stated may be in general terms not conflicting with the description in the credit.” Is there a need for an Article or reference to “Linkage of data in documents”?

  23. Outstanding Issue(s) UCPXXX Article 30 8 Countries, through comments delivered, supported the ICC UK version of this Article (some with minor changes). Remaining Countries that commented provided feedback on the draft circulated by the Drafting Group. Following the creation of the remaining Transport Articles further comments are requested from National Committees and the ICC Transport Commission based on the whole suite of Transport Articles now being available. UCPXXX Articles 37 & 38 Input from ICC Insurance Commission awaited and desired.

  24. UCP XXX Outstanding Issue(s) / Next Steps Definitions Article = work in progress Interpretations Article = work in progress “Without Delay” – is there scope to define? Next Steps / Actions: Meeting scheduled October 26-28 Full draft to be distributed to National Committees for response by end December 2005 / early January 2006 Review of National Committee comments to draft text with new draft circulated by mid March 2006 Commentary

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