Many industries are financially regulated and governed to facilitate trade, prevent risks and standardise rules.
The UCP 600 (“Uniform Customs & Practice for Documentary Credits”) is the official publication which is issued by the ICC (International Chamber of Commerce). It is a body of rules on the issuance and use of a letter of credit and applies to 175 countries. The aim has been to standardise a set of rules aimed to benefit all parties during a trade finance transaction – for that reason, it is designed by industry experts rather than through legislation. The UCP was created in 1933 and has been revised by the ICC up to the point of the UCP600. The UCP600 came into force on 1 July 2007.
The UCP 600 are voluntarily incorporated into contracts and have to be specifically outlined to apply. They also allow 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.
The UCP 600 are most successful rules ever developed in relation to trade and most letters of credit are subject to them. At the recent ICC UK Winter Trade Finance Conference, there was a special programme which addressed the UCP 600, which looked at recent developments in industry practice and ICC policy, as well as a review of the latest Banking Commission Opinions.
If you would like to find out more about UCP 600s or are wondering how these could affect your businesses trade transactions, get in touch with our team at Trade Finance Global. We have a comprehensive guide on Letters of Credit, Bonds and Guarantees here.