We all know that in the international trade of goods and services transactions takes place between the people belonging to different continents, languages, culture, and laws. Since the language used for communication of terms and conditions of LC may suggest different meaning in different parts of the world, people across the world realised the need of uniform rules with standardised words offering the same meaning everywhere for LC transactions. As a result, international chamber of Commerce (ICC) was created in Paris, France in 1919 and its International Court of Arbitration was formed in 1923 to deal with the difficulties in international trade.
Uniform Customs and Practice (UCP) for Documentary Credits is a publication of International Chamber of Commerce (ICC) which is a voluntary code applied by the banks all over the world. Though the drawn-up rules of UCP do not have the binding of law, they have gained almost universal acceptance and are incorporated as a reference in all documentary credits.
The International Chamber of commerce published the first Uniform Customs and Practice for Documentary Credits in 1933 and same was periodically revised 1951, 1962, 1974, 1983, 1993 & 2007. The latest UCP revision is done in July 2007 under publication Number UCP 600 of ICC.
There are different parties involved in LC mechanism viz. LC applicant (on whose behalf LC is issued), LC issuing bank, the beneficiary of the LC, LC advising bank, LC confirming bank, LC negotiating bank, ‘LC paying bank’ or nominated bank, ‘LC reimbursing bank’. All the above parties refer to UCP for international commercial terms (INCOTERMS), like partial shipment, transhipment, the latest date of shipment, the expiry date of LC, means of conveyance or mode of transport, FOB value, CIF value etc.
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