UCP 600 And ISBP 681.pdf

UCP 600 and ISBP 681: What are they and how do they relate?

UCP 600 and ISBP 681 are two important publications issued by the International Chamber of Commerce (ICC) that provide guidance and best practices for documentary credits, also known as letters of credit. Documentary credits are widely used in international trade as a means of payment and risk mitigation. In this article, we will explain what UCP 600 and ISBP 681 are, what they cover, and how they relate to each other.

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What is UCP 600?

UCP 600 stands for Uniform Customs and Practice for Documentary Credits, which is a set of rules that govern the rights and obligations of parties involved in documentary credit transactions. UCP 600 was published by the ICC in 2007 and replaced the previous version, UCP 500, which was in effect since 1993. UCP 600 aims to provide a clear and comprehensive framework for the operation of documentary credits, to reflect the current practices and developments in the trade finance industry, and to enhance the use and acceptance of documentary credits worldwide.

UCP 600 consists of 39 articles that cover various aspects of documentary credit transactions, such as:

• The definitions and interpretations of key terms and expressions

• The application and issuance of documentary credits

• The roles and responsibilities of issuing banks, confirming banks, nominated banks, advising banks, and beneficiaries

• The presentation, examination, and compliance of documents

• The payment, acceptance, negotiation, and reimbursement of documentary credits

• The transfer, assignment, amendment, cancellation, and expiry of documentary credits

• The liability and responsibility of banks

• The force majeure and disclaimer clauses

UCP 600 is intended to be incorporated by reference into the documentary credit contracts between the parties. By doing so, the parties agree to be bound by the rules of UCP 600, unless they expressly modify or exclude them. UCP 600 is not a law or a regulation, but a set of contractual rules that have been widely adopted by the trade finance community. UCP 600 is also recognized by courts and arbitrators as a source of international standard banking practice.

What is ISBP 681?

ISBP 681 stands for International Standard Banking Practice for the Examination of Documents under Documentary Credits subject to UCP 600, which is a publication that provides detailed guidance and clarification on how to apply the rules of UCP 600 in practice. ISBP 681 was published by the ICC in 2007 as a companion document to UCP 600. ISBP 681 replaced the previous version, ISBP 645, which was aligned with UCP 500.

ISBP 681 consists of four sections that cover various topics related to the examination of documents under documentary credits, such as:

• The general principles and preliminary considerations

• The specific issues concerning drafts and calculation of maturity date

• The specific issues concerning invoices

• The specific issues concerning different types of transport documents (e.g., multimodal transport documents, bills of lading, charter party bills of lading, air transport documents, road, rail or inland waterway transport documents)

ISBP 681 also includes appendices that provide examples of documents commonly used in documentary credit transactions, such as commercial invoices, certificates of origin, insurance documents, inspection certificates, etc. ISBP 681 aims to illustrate how the principles and content of UCP 600 should be read and interpreted by documentary practitioners. ISBP 681 does not amend or override UCP 600, but rather explains how the practices articulated in UCP 600 are applied by banks when examining documents.

How do UCP 600 and ISBP 681 relate?

UCP 600 and ISBP 681 are complementary publications that work together to provide a comprehensive framework for documentary credit transactions. UCP 600 sets out the general rules and principles that govern the rights and obligations of parties involved in documentary credit transactions. ISBP 681 provides specific guidance and clarification on how to apply those rules and principles in practice when examining documents under documentary credits. By incorporating both UCP 600 and ISBP 681 into their documentary credit contracts, the parties can ensure that their transactions are conducted in accordance with the international standard banking practice and avoid potential disputes and discrepancies.

UCP 600 and ISBP 681 are both available in PDF format from the ICC website. They are also available in other formats, such as hard copy, e-book, or online subscription. UCP 600 and ISBP 681 are essential publications for anyone involved in documentary credit transactions, such as traders, bankers, lawyers, consultants, academics, and students.