Letter of Credit Forum

a) new organization of the material
One of the most important structural changes of the Uniform Customs and Practices consists of the concentration of the definitions in article 2. In the UCP 500 these definitions had been mentioned for each transport document and thus the same text was repeated. The objective of the UCP 600 was to reduce this redundancy.

To place the definitions at the beginning of the UCP certainly is correct from a systematic point of view. The practitioner however will struggle with this change, since he/she now has to decide which definition to apply to which document.
Furthermore, the definitions are not devoid of redundancy, since some of the definitions  and rules for interpretation (article 3), as e.g. the terms "negotiation" or "complying  presentation" have to be mentioned for issuing and secondary bank.

b) definitions
Article 2 UCP 600 now contains the twelve most important definitions for the use of the UCP. The reason for this summary was according to the ICC, that these definitions are "complete when standing alone and are not part of an article". Article 2 does not contain definitions regarding a second advising bank (Article 9 c), pre-advised credits (Article 11), Bank-to-Bank Reimbursements (Article 13 a), or the liability for commissions, fees and other charges of a bank instructing another bank to perform
services (Article 37 c).

Some of the definitions of Article 2 (e.g. Advising Bank, Applicant, Beneficiary, Confirmation etc.) do not need further explanation. The following lists the definitions that offer a new
terminology without substantive changes:

Complying presentation: This new term is just a summary of well known principles of examination.
A presentation has to fulfill three criteria to qualify as a complying presentation: It has to comply with
a) the terms and conditions of the Credit
b) the applicable provisions of the UCP, and
c) international standard banking practices.

Regarding the international standard banking practices, the ICC refers to its publication 681-E (ISBP) with the caveat that the ISBP are not all-encompassing and that hence the term international standard banking practice is broader than its publication 681-E.

Credit: The definition of Credit (arrangement, however named .. that constitutes a undertaking of the issuing bank to honour..) has not changed. What is new however is that all Credits are irrevocable,
as hitherto was the case in practice.

Honour: the definition of the term honour contains the obligation of a bank to pay, deferred pay, of accept bills of exchange. It is however little systematic not to mention a bank's obligation to
fulfill its obligations under a negotiation credit.
Nevertheless, the substantive law has not changed: An issuing bank is obligated to negotiate documents presented under a complying presentation (Article 7 a) and the Credit has to state whether it is available by sight payment, deferred payment, acceptance or negotiation (Article 6 b).

Non banks issuing Credits: The UCP 600 designate the issuer of a Credit as "Issuing Bank". Nevertheless, Credits can be issued by non-banks, a fact confirmed by the ICC Banking Commission (Comm. ICC-Pub. No. 680, page 18,19). However, when a bank advises a Credit issued by
a non-bank, it has to inform the beneficiary of this  fact.

Banking Day: The definition of a Banking Day is relevant for the calculation of the five day deadline (Article 14 b) to examine the documents. That a bank is open for business is not sufficient, rather,
a banking day is a day on which the issuing or nominated bank is regularly open to conduct letter of credit business. Hence, local customs come into play as e.g. Saturday is a Banking Day in China
but not in Singapore. Furthermore, differences may occur within one country.