1. Documents in General
    Documents play a crucial role in letter of credit transactions. It is a well-settled principle of letter of credit law and practice that the banks and the seller/beneficiary deal with documents and not with goods in letter of credit transactions (see UCP 600 art. 5).

  1. Recurring Documents
    There are a number of documents that recur in letter of credit transactions. Section 2(a) of chapter I discusses the commercial invoice, and chapter VI discusses the transport document and the draft. The negotiable draft is a unique document. Issuers typically do not deliver the draft to the buyer. The draft is drawn on the issuer or the nominated bank, not on the buyer/applicant. Once honoured, the draft becomes legal proof of honour. Traditionally, the bank that honoured the draft stamped it “paid” and held on to it but delivered the other documents to the buyer/applicant. If the draft is accepted, the issuer or nominated bank returns it to the seller/beneficiary, who presents it a second time when it comes due. Generally, however, UCP 600 document rules apply to drafts.

  1. Certificates
    In addition to the invoice and the transport document, certificates play an important role in documentary credit transactions. Generally, certificates are written representations, certified or sworn to by the signer, that certain events have occurred or that certain facts exist as stated in the certificate. An insurance company certifies that goods are insured during transport. A local chamber of commerce certifies that goods are of local origin. An inspector certifies that goods conform to industry standards.
    There are no limits on the number of certificates that a letter of credit may require, but parties are well served if they limit certification to essential matters. Letters of credit are quick commercial devices, greyhounds not elephants. Letters of credit do not function well with excess baggage. Note that UCP 600 warns parties not to include the underlying contract, proforma invoices and the like in the letter of credit (see UCP 600 art. 4(b)).
    Applicants will sometimes insist on certificates, however, and must consider the content of each certificate and the identity of the certificate issuer. If the credit does not designate the party that will issue the certificate, anyone can issue it, even the seller/beneficiary (see UCP 600 art. 14(f)).


  1. Strict Compliance
    “Formalism” is the key to understanding letter of credit law and practice. The banking industry keeps documentary credit charges low by restricting the banks’ duties to the examination of documents. Under letter of credit practice, banks do not examine goods, nor do they investigate the underlying sales contract (see UCP 600 arts. 4 and 5). When the seller/beneficiary presents the documents to the issuer or the nominated bank, the bank’s document examiner reviews the documents against (1) the documentary conditions of the letter of credit; (2) UCP 600 and international standard banking practice; and (3) each other (see UCP 600 art. 14).

  1. Documents, UCP 600 and ISBP 2007
    UCP 600 provisions cover invoices, transport documents, insurance documents and “other” documents in some detail. It is not the purpose of this handbook to discuss the UCP document rules. Commercial parties should read the UCP, a rather brief set of industry rules and practices. This reading may raise questions, but the merchant’s forwarder or banker can answer most of these. In addition, ICC’s International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP 2007 Revision for UCP 600, ICC Publication. No. 681), provides an invaluable explanation of UCP 600 document rules, and while ICC’s Commission on Banking Technique and Practice issues official opinions, many of which are published in DCInsight, a quarterly newsletter published by ICC, and are then compiled in books that are also available from ICC.
    While these publications are somewhat technical, they are largely the work not of lawyers but of bankers and other letter of credit experts. They are understandable to merchant sellers and buyers, forwarders and others in the transport industry and, of course, international bankers. Parties that use letters of credit with frequency should avail themselves of these resources. Above all, exporters and importers should avail themselves of the local expertise available at their forwarders’ offices and at the counters of their international bankers.

  1. eUCP
    Electronic document presentation, though slow in implementation, is now a real possibility. The eUCP Version 1.1, a supplement to UCP 600, governs this innovation, which permits parties to present their documents to the nominated bank or the issuer electronically.