Reading between the lines: UCP Article 1

Rupnarayan Bose[1]

Introduction

Letter of credit (LC) is one of several instruments used in international trade for the settlement of dues between the parties concerned. It offers reliability, safety and a reasonable degree of certainty of payment in an uncertain world. For these reasons the LC is said to be the most preferred instrument of choice for exporters and importers. The rules governing LCs’ operations flow from a document called the Uniform Customs and Practice for Documentary Credits (UCP) created by the International Chamber of Commerce, Paris. These rules were first published in 1933. It had been revised several times since then. The current version is operative from 1 July 2007. The UCP remains the most successful set of private rules for trade ever developed.

History of the UCP[2]

The first attempt to codify letter of credit practice can be traced back to 1929 when the ICC, following an earlier American initiative, introduced its ‘Uniform Regulations for Commercial Documentary Credits’ (Bernard Wheble 1971, p. 97). Unfortunately these regulations were only limited to Belgian and French banking practices, and whilst these failed to gain wide acceptance, they nevertheless provided a basis for further development.

In 1933 the ICC issued the (continued...)

[This article is continued in the book 'Beyond Trade Finance', published on 13-Apr-2021 by Notion Press, and available at https://notionpress.com/read/beyond-trade-finance or at https://www.amazon.in/dp/1638508666]

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[1] Home page http://www.rnbose.com. The author is a consultant, faculty and a specialist on international trade rules. Contact: RNBOSE@GMAIL.COM.

[2] Source: UCP 600: Letter of Credit Rules Revised, Roberto Bergami, School of Applied Economics, Institute for Community Engagement and Policy Alternatives, Victoria University, Melbourne, Australia. http://www.melbournecentre.com.au/Finsia_MCFS/2007/Roberto_Bergami_final.pdf