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NEW UCP STANDARDIZES BANKER’S DOCUMENT EXAMINATION
Once upon a time old UCPs used to ask bankers to
use international standard banking practice (ISBP) for examination of
presented documents for determining compliance, without defining and
exemplifying the standard banking practice. The result?
Controversial interpretations.
Controversial rejections.
Frequent queries and clarifications. Legal
disputes. The decline of trust in LC.
The emergence of new alternative payment methods.
Use of existing alternative payment methods.
This time, UCP – UCP 600 - in its article 14 mercifully elaborates and
illustrates standard of document examination. Now it is certain for the
banker what to accept, what to disregard. This is good for the exporter that
the banker has to follow what is clearly said by the UCP, not what he
interprets, what he understands as he used to do in the era of UCP 500. The
article 14 though guides the banker, the exporter
can use it for pre-presentation document examination for ensuring error-free
presentation. He can also use this article for dispute management where he
disputes the banker’s examination decision because this article helps him to
judge whether the banker’s rejection decision is right or
wrong . Gone are the days of confusion and
manipulation in examination. Confusion is the mother of manipulation.
Article 14 says:
Compliance determination only on the basis of presented documents alone
a. A nominated bank acting
on its nomination, a confirming bank, if any, and the issuing bank must
examine a presentation to determine,
on the basis of the documents alone,
whether not the documents appear on their face to constitute a complying
presentation.
5-day period for examination
b. A nominated bank acting on its nomination, a confirming bank, if any,
and the issuing bank shall each have
a maximum
of
five
banking days
following the day of presentation to determine if presentation is complying.
This period is not curtailed or otherwise affected by the occurrence on or
after the date of presentation of any expiry date or last day
for presentation.
Presentation time after the shipment
c. A presentation including one or more original transport documents
subject to articles 19, 20, 21, 22, 23, 24 or 25 must be made by or on
behalf of the beneficiary
not later than 21 calendar days
after the date of shipment as described in these rules, but in any event
not later than the expiry date of the credit.
Data examination
d. 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 that document, any other stipulated document or the credit.
Goods description examination
e.
In documents other than the commercial invoice, the description of the
goods, services or performance, if states, may be
in general terms
not conflicting
with their description in the credit.
Other documents
f. 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 as presented if its content appears to fulfill the function of the
required document and otherwise complies with sub-article 14 (d).
Presented but not required
g. A document presented but not required the credit will be disregarded and
may be presented to the presenter.
Non-documentary condition
h. If a credit contains a condition without stipulating the document to
indicate compliance with the condition, banks will deem such condition as
not stated and will disregard it.
Pre-dated document
i.
A document may be dated prior to the issuance date of the credit, but must
not be dated later than its date of presentation.
Addressing the address problem
j. When the address of the beneficiary and the applicant appear in any
stipulated document, they need not be the same as those stated in the credit
or in any other stipulated document, but must be 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 beneficiary’s and the
applicant’s address will be disregarded. However, when the address and
contact details of the applicant appear as part of the consignee or notify
party details on a transport document subject to articles 19, 20, 21, 22,23,
24 or 25, they must be stated as in the credit.
Shipper vs. beneficiary
k. The shipper or consignor of the goods indicated on any document need not
be the beneficiary of the credit.
Transport document issuer
l. A transport document may be issued by any party other than a carrier,
owner, master or charterer provided that the
transport document meets the requirements of articles 19, 20,21,22,23 0r 24
of these rules.
NEW UCP MAKES ADVISING BANK MORE RESPONSIBLE
UCP 600 in its article 9b says:
“By advising the credit or amendment, the advising bank signifies that it
has satisfied itself as to the apparent authenticity of the credit or
amendment and that the advice
accurately
reflects the terms and conditions of the credit or amendment received.
Article 9f makes the advising bank responsible to inform the beneficiary
that it has not been able to satisfy itself as to the apparent authenticity
of the credit, the amendment or the advice.
Accurate advice leads to accurate presentation.
NEW UCP SAFEGUARDS EXPORTER IN AMENDMENT MATTERS
UCP 600 is very friendly to the exporter in amendment matters as the
amendment rules codified in article 10 protect the exporter’s interests – no
amendment without the agreement of the beneficiary; original terms will
remain in force unless the beneficiary communicates its acceptance of the
amendment;
a provision in an amendment to the effect that the amendment shall enter
into force unless rejected by the beneficiary
within a certain time
shall be disregarded.
NEW UCP A DOCUMENTATION FACILITY
New UCP’s article 17 with regard to original
documents and copies is helpful in documentation and document examination.
What if the LC states “in duplicate” or “in two copies”?
If the LC is not clear the new UCP makes it clear for the exporter and
banker what the LC means
to
say.
The new UCP is a good guide. Since new UCP says at least one original of
each document stipulated in the credit must be presented it at the same time
guides the bank examiner how to determine whether the document presented is
original. New UCP is a solution to the exporter’s idiosyncrasies in document
preparation. The article 17 will contribute to error-free
presentation, controversy-free examination, and hassle-free
payment.
NEW UCP A STEPPING STONE TO FINANCE
Before LC is paid the exporter may need funds as stop gap arrangement – that
is, post-shipment finance. Earlier the banks were reluctant to offer
post-shipment finance by way of negotiation because of controversy over the
negotiation term, which the earlier UCPs did not
define. Lack of clarity means financing
reluctance. Confusion is the mother of reluctance. Some argued to delete
“negotiation” from the UCP text. New UCP’s kind
gesture is to save “negotiation” and define it in unequivocal terms.
Negotiation means, as article 2 says, 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.
In its article 12b UCP 600 says: “By nominating a bank to accept a draft or
incur a deferred payment undertaking, an issuing bank authorizes that
nominated bank to prepay or purchase a draft accepted or a deferred payment
undertaking incurred by that nominated bank.
The clarity in negotiation definition will lead to use of negotiation as a
pre-payment post-shipment financing mechanism. The new UCP recognizes that
LC is both payment and financing means. The new UCP meets the expectations
and needs of the exporter.
DEFINITIONS
AND INTERPRETATIONS FACILITATION TOOLS
When UCP is not clear bankers make interpretations. And, banker’s
interpretations always give rise to controversies and disputes. We therefore
need authoritative UCP interpretations. Mercifully, new UCP does this job.
New UCP gleans definitions and interpretations in its articles 2 and 3
respectively, which are very helpful to the exporter in:
. Easy understanding of UCP
. LC terms negotiation as part of sales contract negotiation
. LC examination
. Documentation and presentation
. Dispute management.
The interpretations with regard to signing of documents are helpful
for both error-free
presentation
and controversy-free examination.
Let us checklist the interpretations:
. Where applicable, words in the singular include plural and in the plural
include singular.
.
A credit is
irrevocable
even if there is no indication to that effect.
. A document may be signed by handwriting, facsimile signature, perforated
signature, stamp, symbol or any other mechanical or electronic method of
authentication.
. A requirement for a document to be legalized, visaed,
certified or similar will be satisfied by any signature, mark, stamp or
label on the document which appears to satisfy that requirement.
. Branches of a bank in different countries are considered to be separate
banks.
. Terms such as “first class”, “well known”, “qualified”, “independent”,
“official”, “competent” or “local” used to describe the issuer of a document
allow any issuer except the beneficiary to issue that document.
. Unless required to be used in a document, words such as “prompt”,
“immediately” or “as soon as possible” will be disregarded.
. The expression “on or about” or similar will be interpreted as a
stipulation that any event is to occur during a period of five calendar days
before until five calendar days after the specific date, both start and end
dates included.
. The words “to”, “until”, “from” and ‘‘between” when used to determine a
period of shipment include the date or dates mentioned, and the words
“before” and “after” exclude the date mentioned.
. The words “from” and “after” when used to determine a maturity date
exclude the date mentioned.
. The terms “first half” and “second half” of a
month shall be construed respectively as the 1st to the 15th
and the 16th to the last day of the month, all dates inclusive.
. The terms “beginning”, “middle” and ‘end” of a month shall be construed
respectively as 1st to the 10th
,
the 11th to the 20th and the 21st to the last day of the month, all dates
inclusive.
Conclusion
Remember: UCP
knowledge management for business development. Must
learn UCP. Must use UCP. Good luck!
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