Authoritative
guidance on correct use of letters of credit
Paris, 30 October
1998 - The
International Chamber of Commerce, the rule-maker for documentary credits, has
just published a reference book in the form of questions and answers for bank
officials and others who use the ICC rules. The book seeks to reduce differences
of interpretation as well as to help users to apply the rules correctly
"More Queries and Responses on UCP 500"
provides guidance on the correct application of the Uniform Customs and Practice
on Documentary Credits or UCP, as the rules governing letter of credit operations
are known. The most recent version of the Rules, which were first introduced
in 1933
, is known as "UCP 500". Written into virtually every letter
of credit, the UCP are accepted throughout the world.
The book provides the latest information on controversial
points in the rules, backed by the official views of the Banking Commission,
the body that created the UCP. It is thus an authoritative first-hand information
source.
A foreword by Gary Collyer, Vice President Trade
Services of Citibank NA, London, urges banks to adopt principles established
in this and other ICC publications on documentary credits in the interest of
consistency. Mr Collyer says: "This will go a long way towards reducing
the number of different interpretations that exist in the marketplace today."
In the book, practitioners will find answers to
a number of questions dealing with documentary credits, among them the following:
- Must the issuing bank follow instructions of
the applicant and pay against discrepant documents?
- Does an Air Waybill issued by a freight forwarder
have to be countersigned by the actual carrier?
- What are the rights of the first and second
beneficiaries under a transferred letter of credit?
Banks issue documentary credits as a means of guaranteeing
the transaction for both parties involved. The seller knows that he will be
paid as long as he hands over key documentation relating to the deal, while
the buyer is assured that the bank will not hand over the money unless it receives
these documents.
To order this and other ICC publications, click
here to enter the ICC Business Bookstore.