As a trade finance professional you constantly need to be abreast with trade finance rules like UCP 600, ISP98, ISBP 745, Incoterms® 2010 and URR 725. Today in a series of article, we are going to brief about UCP 600 and the reason behind creating UCP 600.
UCP (Uniform Customs & Practice for Documentary Credits (UCP 600) is a set of rules agreed by the International Chamber of Commerce, which apply to finance institutions which issue Letters of Credit. Many global banks, lenders and financial institutions are subject to these regulations. The main aim of this regulation is to standardize international trade, reduce the risks of trading goods and services, and govern trade.
As per International Chamber of Commerce, UCP 600 is a set of 39 articles on issuing and using Letters of Credit, which applies to 175 countries around the world and constitutes $1tn USD of trade per year. UCP 600 was first released on 1 July, 2005 by replacing UCP 500.
The UCP 600 are rules and incorporated into every contract and post incorporation it has to be specifically outlined in trade finance contracts. Some of the advantages of UCP 600 is its flexibility for the international parties involved. An accompaniment to the UCP 600 is the International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP), ICC Publication 745. It assists with understanding whether a document complies with the terms of Letters of Credit.
Credits that are issued and governed by UCP 600 will be interpreted in line with the entire set of 39 articles contained in UCP 600. However, exceptions to the rules can be made by express modification or exclusion.
Below is the quick summary of the elements which make UCP 600:
Learn more about UCP 600 and the incorporation of UCP principles in international trade finance by joining Exeed’s flagship programs on Documentary Credit Specialist awarded by The London Institute of Banking and Finance
Disclaimer: The views expressed and the information shared in this article are the views of the the author.
Manager – Corporate Relationship
Exeed School of Business and Finance