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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
by Dan Taylor
After the 1929 draft of the Uniform Regulations for Commercial Documentary Credits was circulated and discussed by the ICC national committees, ICC created the first version of the UCP, formally called the Uniform Customs and Practice for Commercial Documentary Credits (UCP), Brochure 82. There is no record of any meetings or formal drafts of the rules from the 1929 draft until the publishing of Brochure 82 in 1933. It appears that there were no meetings during this period and that work was carried out by mail between those involved in drafting the regulations. If there were meetings, there is no record at ICC of them nor evidence in the files of the IFSA that any representatives from the US attended. This was most likely due to the Depression.
A number of significant changes were made in the 1929 draft Uniform Regulations for Commercial Documentary Credits for the final Uniform Customs and Practice for Commercial Documentary Credits. In addition to the change in name, General Provisions were added stating that they are “applicable exclusively when other express and previously agreed arrangements between the parties do not intervene”. It also included the basic provisions that “instructions regarding papers or documents are required to be complete and precise” and “the beneficiary of a credit can in no case avail himself of the legal relations existing between Banks, or between the Bank and the Principal and the latter.” With all the early rules, the term “principal” was used for what is now termed the applicant.
Specifically, the significant additions to the 1929 draft:
In April 1934, the Committee on Foreign Banking in the US received a copy of the Uniform Customs and Practice for Commercial Documentary Credits from ICC and discussed the various differences between the UCP and their RAECC. It was not until May of 1938, however, that the Committee on Foreign Banking agreed to adopt the UCP. At that time, 128 banks in the US also agreed to adopt the UCP, applying it only to export credits and with the provision that the American Foreign Trade Definitions be incorporated. At the request of and on behalf of ICC, the Committee on Foreign Banking distributed the Uniform Customs and Practice for Commercial Documentary Credits to banks in the United States, Canada and all of Latin America. The exceptions incorporating the American Foreign Trade Definitions were referred to as “Guiding Provisions” and were annotated in the version of the UCP distributed by the Committee on Foreign Banking.
In 1946, the UCP as adopted in the US was amended to account for the changes made to the American Foreign Trade definitions in July 1941, commonly referred to as the Revised American Foreign Trade Definitions. This is the only known change to the UCP between 1938, when the US adopted the rules, and 1949 when a revision of the UCP was undertaken by ICC.
Brochure 82 Fixed by the seventh congress of the International Chamber of Commerce with guiding provisions
A. FORM OF CREDITS
Commercial Documentary Credits are essentially distinct transactions from sales contracts, on which they may be based, with which Banks are not concerned.
Commercial Documentary Credits may be either:
All credits, unless clearly stipulated as irrevocable, are considered revocable, even though an expiry date is specified.
Revocable credits are not legally binding undertakings between Banks and beneficiaries. Such credits may be modified or cancelled at any moment without the Bank being obliged to notify the beneficiary. When a credit of this nature has been transmitted to a correspondent or to a branch, its modification or cancellation can take effect only upon receipt of notification by the said correspondent or branch with which the credit has been made available.
Irrevocable credits are definite undertakings by an opening Bank in favour of the beneficiary. Such undertaking can neither be modified nor cancelled without the agreement of all concerned.
Irrevocable credits may be notified to the beneficiary through an advising Bank without responsibility on the latter’s part when it has merely been asked to notify the beneficiary.
An advising Bank may be called upon by the opening Bank to confirm an irrevocable credit. In this case, the advising Bank makes itself responsible to the beneficiary as from the date on which it gives confirmation.
In the event of the period of validity of the credit not being stipulated in an order to open, to notify or to confirm an irrevocable credit, the beneficiary will be advised of the credit for information only, and this implies no responsibility on the part of the correspondent or advising Bank. The credit will only be irrevocably opened or notified or confirmed later when the correspondent or the advising Bank have received supplementary details on the duration of validity.
When an irrevocable credit is opened in the form of a Commercial Letter of Credit, the Letter of Credit itself must include notification of the opening of an irrevocable credit and constitute the definite engagement by the issuing Bank towards the beneficiary and holder in good faith to honour all drafts issued by virtue of and in conformity with the clauses and conditions contained in the document. This document may be transmitted and/or notified by another Bank without engagement for the latter.
When a correspondent is instructed by cable or telegram to notify such Letter of Credit, the issuing Bank must send the original of the said Letter of Credit to the said correspondent, if it is intended to put the document itself into circulation; if any other procedure were followed, the issuing Bank would be responsible for all consequences which may result therefrom.
All the other provisions applicable to Commercial Documentary Credits are also applicable to the Commercial Letter of Credit.
Banks must examine all documents and papers with care so as to ascertain that on their face they appear to be in order.
Payment against documents in accordance with the terms and conditions of a credit by a Bank instructed to do so binds its principal to take them up.
Banks assume no liability or responsibility for the form, sufficiency, correctness, genuineness, falsification or legal effect of any documents or papers, or for the description, quantity, weight, quality, condition, packing, delivery or value of goods represented thereby, or for the general and/or particular conditions stipulated in the documents, or for the good faith or acts of the consigner or any other person whomsoever, or for the solvency, standing, &c. of the carriers or insurers of the goods.
Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of cables or telegrams, letters and/or documents, or for delay, mutilation or other errors in the transmission of cables or telegrams, or for errors in translation or interpretation of technical terms, and Banks reserve the right to transmit credit terms without translating them.
Banks assume no liability or responsibility for consequences arising out of the interruption of their business either by a decision of a public authority, or by strikes, lockouts, riots, wars, acts of God or other causes beyond their control. On credits expiring during such interruption of business, Banks will be able to make no settlement after expiration, except on specific instructions from their principal.
Banks utilising the services of another Bank assume no liability or responsibility towards their principal (unless they themselves are at fault) should the instructions they transmit not be carried out exactly, even if they have themselves taken the initiative in the choice of their correspondent. Banks consider themselves authorised to make provision for credits with the Banks whose services they utilise, for the account and at the risk of the principal, and without any responsibility.
The principal (purchaser) is responsible to the Banks for all obligations imposed upon the latter by foreign laws and customs.
Unless otherwise instructed, Banks consider themselves authorized to honour the documents which they judge necessary, if presented in a suitable form, viz.:
Banks have the right to waive insurance papers, if the beneficiary furnishes proof satisfactory to them that the insurance is covered by the principal or the consignee of the goods.
The date of the Bill of Lading, or date indicated on the reception stamp of the Railway or Inland Waterway Consignment Notes, Counterfoil Waybills, Postal Receipts or other shipping documents will be taken in each case to be the date of shipment of the goods.
Proof of payment of the freight will be considered by the Banks sufficient if the mention, “freight paid” or other similar expression is affixed by stamp or in handwriting on the shipping documents.
Shipping documents bearing reservations as to the apparent good order and conditions of the goods may be refused.
Unless otherwise implied by the conditions of credit or documents presented, Banks may honour documents stating that the goods are subject to C.O.D., insofar as such C.O.D. represents freight or transportation charges.
Bills of Lading
When Sea or Ocean Bills of Lading are required, the following may be accepted:
Bills of Lading issued by forwarding agents will be refused, as also Bills of Lading for shipment by sailing vessels (see guiding provisions No. 1 and No. 7).
Banks have the right to accept Bills of Lading mentioning the stowage on deck of goods of a special nature, on condition that the insurance covers the risks arising therefrom.
When shipment by steamship is required, Banks may consider themselves authorized to accept Bills of Lading for shipment by motor vessels.
When “On Board” shipment is required and is evidenced by a “Shipped” or “On Board” Bill of Lading, the Bill of Lading date will be taken as evidence that the goods have been shipped on or before that date at the place of shipment indicated on the Bill of Lading.
When loading on board is evidenced by means of a notation, and if the documents are presented for payment or for negotiation after the date of shipment stipulated in the credit, this notation must give the date of the loading on board in the port of shipment indicated on the Bill of Lading. If the date of the loading on board is not given, the date of the notation will be considered as that of the loading on board.
Banks have the right to require that the name of the beneficiary of the credit appear on the Bill of Lading as shipper or endorser.
Railway or Inland Waterway Consignment Notes, Counterfoil Waybills, Postal Receipts
Banks will consider these documents as regular when they bear the reception stamp of the railway or postal authorities, or, in the case of Inland Waterway Consignment Notes, when signed by the master. The documents must indicate as consignee either the principal (purchaser) or the opening Bank.
When an attestation or certificate of weight is required in the case of railway transport, Banks may refer to the indications contained in the shipping documents, on condition that weighing has been duly witnessed by means of a weight stamp or other official means. A weight attestation will only be required on special request.
If, in the case of shipment by rail, by inland waterway or by post, the name of the beneficiary does not appear on the transport documents, Banks may require them to be countersigned by him.
Banks may accept either Policies or Certificates of Insurance issued by companies or their agents, by underwriters or eventually by brokers (see guiding provision No. 2).
The minimum value insured must be the C. I. F. value of the goods insofar as it is possible to check it by means of the documents tendered, but in no case should it be less than the amount of the settlement, or than that of the invoice if the latter is higher.
Failing instructions as to the risks to be covered, Banks will accept insurance documents as tendered providing that these cover the goods against transport risks.
When a credit stipulates “Insurance against all Risks” Banks can in no way be held responsible if any particular risk is not covered
Invoices must be made out in the name of the principal (purchaser) or in the name of any other person designated by him.
In order to determine the quality of the goods, Banks may refer to the indications given in the Invoices, which should correspond with those stipulated in the credit. Banks will accept shipping or insurance documents bearing the generic description of the goods.
When other documents are required, such as: Warehouse Receipts, Delivery Orders, Consular Invoices, Certificates of Origin, Certificates of Weight, of Quality or of Analysis, without further definition, Banks may accept such documents as tendered without responsibility on their part.
In special cases to be determined by Banks, the latter will require all other documents which they may consider necessary.
D. INTERPRETATION OF TERMS
“About”, “Circa” or Similar Terms
These terms to be construed as allowing a difference not to exceed 10% more or less applicable, according to their place in the instructions or letters of credit, to the amount of the credit, or to the quantity or unit price of the goods.
When the goods, by their nature, do not allow the delivery of the exact quantity indicated – as, for instance, oil in barrels, ore in bulk, chemicals in bulk or in cylinders, &c. – a difference of 3% more or less will be allowed, even if the terms of the credit call for a fixed weight or measurement.
Banks may refuse to pay for partial shipments if they think it advisable. (This article superseded by guiding provision No. 4)
If shipment by instalments within given periods is specified, each instalment shall be treated as a separate transaction. The instalment not shipped within a given period cannot be added to subsequent shipments and is considered as ipso facto cancelled. Banks may however pay against documents for subsequent shipments provided they are made within the given periods.
Maturity or Validity
The period for which all irrevocable credits are to remain in force must be stipulated. The period may be either a time for payment or a time for shipment. If the credit does not specify which, the Bank shall consider the date to be the date for payment and after its expiration shall refuse payment, even if the documents bear a date within the time for payment.
The words “to”, “until”, “till” and words of similar import applying to dates of maturity for payment or negotiation are understood to include the date mentioned.
When the stipulated expiry date falls on a Sunday or legal or local holiday, or upon any holiday recognized as such by the Banks, the last day of the period of validity will be extended until the first following business day. This does not apply to the last day for shipment which must be respected whatever the day.
The validity of a revocable credit, if no date is specified, will be considered to have expired six months from the date of the notification sent to the beneficiary by the Bank with which the credit is available and this Bank may refuse any payment after said period, unless its principal gives special instructions to the contrary.
Shipment, Loading or Dispatch
“Prompt”, “immediately”, “as soon as possible”, &c.: these terms, and others of similar import, are to be interpreted as a request for shipment within thirty days from the notification to the beneficiary, unless a date has been stipulated.
When the words “departure”, “dispatch”, or “loading” are used in Commercial Documentary Credits, and unless specific evidence in respect thereto is required, the Banks will consider these words as synonymous to “shipment”, and they may be guided by the date appearing upon the Bills of Lading or other shipping documents.
Documents must be presented without delay. Banks may refuse the documents if presented to them too late, in other words at a date not justified by the usual time taken to cover the distance between the place of dispatch and the place where payment is made.
Banks are under no obligation to accept documents outside their banking hours.
Any extension of the period for shipment shall extend for an equal period the time fixed for presentation or negotiation of documents or drafts (see guiding provision No. 5).
The terms “first half ”, “second half ” of a month shall be construed respectively as from the 1st to the 15th, and the 16th to the last day of each month, inclusive.
The terms “beginning”, middle”, or “end” of a month shall be construed respectively as from the 1st to the 10th, the 11th to the 20th, and the 21st to the last day of each month, inclusive.
When a credit is opened as good “for one month”, “for six months”, &c., and the principal has not specified the date from which the time is to run, the time shall run from the date on which the beneficiary is advised by the Bank which notified the opening of the credit, and at which the credit is to be payable.
A credit can only be transferred on the express authority of the principal. In this case the credit can be transferred once only, and on the terms and conditions specified in the original credit, with the exception of the amount of the credit and of the time of validity, which both may be reduced.
If a Commercial Documentary Credit is transferred by fractions, such fractional transfers shall be considered as constituting one single transfer only.
Authority to transfer a credit covers authority to transfer it to another place. Bank charges entailed by such transfers are payable by the original beneficiary unless otherwise specified. During the validity of the original credit, payment may be made at the place to which the credit has been transferred.
Adherence of the United States banks, which have subscribed to these regulations, is effective October 1, 1938.
Distributed by Committee on Foreign Banking New York, N. Y.
The first page of an original 1933 Uniform Customs and Practice for Commercial Documentary Credits distributed in North and South America with Guiding Provisions incorporating the American Foreign Trade Definitions
Courtesy of the International Financial Services Association, from their original files.