T5_T6_Interpretation and application of UCP600.ppt - Interpretation and Application of UCP 600 Part 1 XXV Latin American Foreign Trade Congress CLACE

T5_T6_Interpretation and application of UCP600.ppt -...

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1 Interpretation and Application of UCP 600 – Part 1 XXV Latin American Foreign Trade Congress - CLACE Guatemala June 3-5, 2009 Gary Collyer Collyer Consulting LLP
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2 Applying UCP 600 and ISBP Understanding the main rules of UCP 600 and a review of the important and critical opinions given under UCP 600
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3 Applying UCP 600 and ISBP UCP 600 article 1 - Application of UCP Concept of “Modify or Exclude”; No reference to “unless otherwise stipulated in the credit” throughout UCP 600; UCP applicable when the LC expressly indicates that it is subject to these “rules”; and Retention of Standby Letters of Credit. There is a need to understand the concept of modification and exclusion and when it is appropriate or not.
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4 Applying UCP 600 and ISBP UCP 600 article 2 - Definitions Negotiation: the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. Q. What is agreeing to advance? Q. Why no reference to recourse? Q. Why “on or before the banking day reimbursement is due ….”?
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5 Applying UCP 600 and ISBP Understanding recourse Having confirmed a LC, the confirming bank has no right of recourse to the beneficiary in the event of default by the issuing bank, or the issuing bank subsequently identifying discrepancies that were not determined by the confirming bank. But what form of recourse is available where the documentary credit is not confirmed? Recourse when the issuing bank fails to provide reimbursement according to the terms of the credit citing bankruptcy, lack of foreign exchange, Government intervention etc. and (?) When the issuing bank identifies discrepancies in documents that the nominated bank failed to determine.
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6 Applying UCP 600 and ISBP Understanding recourse – LC available by “Honour” with a nominated bank (not confirmed) Honour is to: Pay, if the LC is available by sight payment; Accept a draft drawn on the bank, if the LC is available by acceptance; or Incur a deferred payment undertaking, if the LC is available by deferred payment. To pay, accept or incur a deferred payment undertaking is a commitment on the part of the nominated bank and is considered without recourse to the Beneficiary. For payment LCs a separate recourse agreement may, however, be made with the beneficiary
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7 Applying UCP 600 and ISBP UCP 600 article 6 - Availability, Expiry Date and Place for Presentation Sub-article 6 (a): A credit must state the bank with which it is available or whether it is available with any bank. A credit available with a nominated bank is also available with the issuing bank.
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