UCP 600: a document restoring the credibility of LCs

Little did the drafters of the first Uniform Customs and Practice (UCP) for Documentary Credits in 1933 realize that they were leaving a legacy that would, one day, convert the Letter of Credit (LC) from a payment vehicle into a means to avoid payment. Instead of a tool and a technique for the settl...

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Bibliographic Details
Published inBusiness Credit Vol. 109; no. 2; p. 56
Main Author Taneja, Pradeep
Format Magazine Article Trade Publication Article
LanguageEnglish
Published New York National Association of Credit Management 01.02.2007
Subjects
Banking industry
Banks
Beneficiaries
Commercial credit
Commercial finance companies
Commercial loans
Credibility
Documents
Fraud
International trade
Letters of credit
Nominations
Ports
State court decisions
Waivers
United States
United States > US
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Summary:Little did the drafters of the first Uniform Customs and Practice (UCP) for Documentary Credits in 1933 realize that they were leaving a legacy that would, one day, convert the Letter of Credit (LC) from a payment vehicle into a means to avoid payment. Instead of a tool and a technique for the settlement of trade transactions, the UCP provisions would be frequently misused, misinterpreted and maneuvered as a mechanism for raising unwarranted disputes and disagreements. International traders became wary of LCs in fraudulent situations, as it became increasingly difficult to dispute the interpretation of the term "reasonable care" in court. The author contends that UCP 600 will restore the respect, credibility and rightful place of LCs in international commerce. A recognition that UCP are rules that a credit is irrevocable and that it is banks and not all parties that deal with documents and not goods should bring greater exactitude to the rules.
ISSN:0897-0181