FAQs ON UCPDC:

Assumptions
for
the
below
questions:
The Term Credit in the below
questions means Letter of Credit.
Questions are based on UCPDC
Articles.

1. What is UCPDC and who publishes it?

UCPDC stands for Uniform Customs and Practice for
Documentary Credits. International Chamber of Commerce
Publishes it and the latest version of the same 1993 Version,
Publication No.500.
2. To whom are the UCPDC rules are applicable ?
They are binding on all parties in the Documentary Credit,
unless otherwise expressly stipulated in the Credit. (Art 1)
3. What is the meaning of Documentary Credit As per
UCPDC Article?

Documentary Credit means any arrangement, however named or

described, whereby a Bank (Issuing Bank) acting at the Request
and on the Instructions of a customer (Applicant) or on its own
behalf is to make payment to or to the order of a third party
(Beneficiary) or to accept and pay Bill of Exchange (Draft) drawn
by the Beneficiary against stipulated documents. (Art 2)
4. Are Banks governed by the underlying Sale Contracts
(even if they are referred to in Credit)?
No, Banks are in no way concerned with or bound by such Sale
Contracts, even if any reference to such Contracts are mentioned
in Credit (Art 3).
5. If an Applicant refuses to pay/accept drafts drawn
under Credit due to poor quality of goods, what is the
remedy for banks?
We should bring Article 4 of the UCPDC to the notice of the
customer. In Credit operations, all parties concerned deal with
documents and not with goods, services and/or other
performances to which the documents may relate ( Art 4)
6. If the type of credit is not mentioned in MT 700, how
do the banks interpret the same?
In the absence of such indication, the credit shall be deemed to
be IRREVOCABLE (Art 6)

7. XYZ Bank (Negotiating Bank) negotiated documents under

a Revocable Credit for one of its customers. After the

negotiation/payment,
it
received
the
notice
of
Cancellation of Credit from the ABC Bank (Issuing Bank).
What is remedy for Negotiating Bank?
Negotiating Bank is protected under Art 8 of UCPDC. The Issuing
Bank is under an obligation to reimburse Negotiating Bank with
which a revocable credit has been made available for any
Negotiation made by such bank prior to receipt by it of notice of
cancellation. The Negotiating Bank should have paid against
documents which appear on their face to be in compliance with
the terms of Credit. (Art 8)
8. XYZ Bank advised Credit and the subsequent Amendment
to Bharat Pvt Ltd (BPL). BPL tendered documents for
payment to XYZ Bank (Nominated Bank) conforming to
Credit terms alongwith the Original Letter of Credit and
did not submit the subsequent amendment to the Credit.
Hence, the documents complied with Credit terms and
differed with the subsequent amendment. Whether it will
be in order for the XYZ Bank (Nominated Bank) to
negotiate and pay the draft drawn under Credit?
As per UCPDC, if the Beneficiary presents documents to the
Nominated Bank conforming to the Original Credit terms and not
conforming to subsequent amendment(s), it will be deemed that
the Beneficiary has not accepted the amendment and hence will
be in order to handle such documents as per the Original Credit.
(Art 9)
9. What is the reasonable time, defined in UCPDC, for
examination of documents?

The Issuing Bank, Confirming Bank, Nominated Bank acting on

their behalf, shall each have a reasonable time, not to exceed
SEVEN Banking Days following the day of receipt of the
documents for examination and decide whether they will take up
or refuse the documents and also to inform the party/bank from
whom it received the same.

10.
BPL submitted documents (under Documentary
Credit issued by ABC Bank) to the XYZ Bank (Nominated
Bank) for negotiation. While verifying the documents
with the Credit terms, the Nominated Bank, found no
document for one of the additional conditions of the
credit which stated Quality of the Merchandise should
be of international standard. How do you, as a
Nominated Bank, proceed?. Whether you will consider it
as a discrepancy and refuse to negotiate?
The Nominated Bank may ignore the abovementioned additional
condition and proceed with negotiation, if otherwise in order,
since the additional condition is not supported by any document.
Art 13[c] states If a credit contains conditions without stating
the document(s) to be presented in compliance therewith, banks
will deem such condition as not stated and will disregard them.
11.
ABC Bank, at the request of the Applicant, issued
a Documentary Credit and transmitted the same to XYZ
Bank (Advising Bank) with instructions to recover their
Charges from the Beneficiary. But Beneficiary, refused
to pay the charges. What is option for XYZ Bank for
recovery of its charges?

XYZ Bank can claim the charges from ABC Bank (Issuing Bank) as
per Art 18[c][i] and 18[c][ii] which respectively states
A Party instructing another party to perform services is liable
for any charges, including commissions, fees, costs or expenses
incurred by the instructed party in connection with its
instructions.
Where a Credit stipulated that such charges are for the account
of a party other than the instructing party, and charges cannot
be collected from such party, the instructing party remains
ultimately liable for the payment thereof.
12.
Whether any documents which are dated prior to
the issuance of the Credit can be accepted?
Yes, unless the Credit terms prohibits the same. (Art 22)
13.
Whether it will in order for the Nominated Bank to
accept Commercial Invoice which are not signed by the
Beneficiary?
Yes. Unless credit specifically requires the Invoice to be signed,
unsigned invoice can be accepted. (Art 37)

14.
If the credit does not stipulate the period of
presentation of documents, within how many days the
documents should be presented to the Bank?
If a credit does not stipulated the period of presentation, Banks
should accept documents presented to them within 21 days after

the date of shipment and within the expiry date of credit. (Art
43)
15.
A Documentary Credit issued by ABC Bank
mentioned the Last Date for Negotiation of Documents
as 15th August 2005. The exporter tendered the
documents for negotiation on 16th August 2005. The
Negotiating Bank refused to negotiate on the plea that
the documents have been presented after the expiry of
the Credit. Assuming that the documents were otherwise
in order, please comment whether the Negotiating Bank
plea is correct?
The negotiating banks plea is not correct as per Art 44 (a) which
states If the expiry date of the Credit and/or the last day of
the period of time for presentation of documents stipulated by
the credit falls on a holiday, the stipulated expiry date and/or
the last day of the period of time after the shipment date for
presentation of documents, as the case may be, shall be extended
to the first following day on which such bank is open. Art 44[c]
further says The bank to which presentation is made on such
first following day must provide a statement that the documents
were presented within the time limit.
16.
XYZ Bank confirms a Credit issued by ABC Bank .
The credit is later amended to add Quality Certificate
issued by SGS and the amendment contained a clause
This amendment will be deemed to be accepted unless we
hear from you to the contrary within 15 days of issue.
The amendment is advised with the XYZ Banks
confirmation. The beneficiary did not respond, but after
a month submits documents as per original LC. Is XYZ
Bank (Confirming Bank) expected to pay?

UCPDC does not provide for any time limit for the beneficiary to
accept or reject amendments. He may convey his acceptance or
otherwise to the advising bank , but if he does not do so, the
proof of acceptance/rejection is submission of documents. If the
documents are as per the amended credit, the amendment is
presumed to be accepted otherwise it is rejected. Beneficiary
can wait till the last day of validity of credit to decide this.
17.
A Credit is issued with the last date of shipment as
15th April. Bill of Lading is issued on 13th April, but on
On Board notation is dated 17th April . Is Bill of Lading
is in order?
No. It is Late shipment. The goods are said to be shipped only
when the cargo is ON BOARD the vessel, which is 17 th April.
(Art 23(a))
18.
UCPDC requires that a Bill of Lading should
invariably marked Clean and On Board. TRUE or FALSE
FALSE
19.
XYZ Bank confirms a Credit opened by ABC Bank.
The credit is later amended. Having information about
the ABC Banks difficulties, XYZ Bank advised the
amendment without adding confirmation. When the
beneficiary submitted documents confirming only to
original Credit, XYZ Bank refused to negotiate as it has
not added its confirmation to the amendment. Is it
right?

NO, XYZ Bank (confirming bank) can advise amendment without

adding its confirmation. But it is bound by the undertaking given
earlier to the Original Letter of Credit. Beneficiary can submit
documents conforming to original Credit and demand Payment.
20.
While advising a credit received from ABC Bank
(Issuing Bank), the XYZ Bank (Advising Bank) notices
that the Restriction of Negotiation to it. Since ABC
Banks past experience has not been good, XYZ Bank has
been contemplating on whether to advise the LC or not.
Please suggest.
There is no harm in advising the credit. By simply advising, XYZ
Bank has no obligation to negotiate, just because the credit is
restricted to it. But if it chooses to add its confirmation, the
matter will be different.

Compiled By:
S.R.NAGARAJ
Manager (International Banking)
STATE BANK OF INDIA
Peenya Industrial Estate Branch
BANGALORE 560 058
Note: Every effort has been made to provide appropriate
answers. Any suggestions/additions/alterations may please be
sent my e-mail :
nagaraj.r@sbi.co.in