UCP600

UCP600 Article 19: Transport Document Covering at Least Two Different Modes of Transport Explanation

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UCP600 Article 19: Transport Document Covering at Least Two Different Modes of Transport

Clause (a): Requirements for Transport Document

Clause (a)(i): Indication and Signature

  • Clause: “A transport document covering at least two different modes of transport (multimodal or combined transport document), however named, must appear to: indicate the name of the carrier and be signed by:
    • the carrier or a named agent for or on behalf of the carrier, or
    • the master or a named agent for or on behalf of the master. Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent. Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master.”
  • Explanation: The transport document must indicate the name of the carrier and be signed by the carrier, the master, or a named agent on behalf of the carrier or the master. The signature must clearly identify the signer as the carrier, master, or agent and specify on whose behalf the agent is signing.
  • Example:
  • A multimodal transport document shows the carrier as “ABC Shipping Co.” and is signed by “John Doe, Agent for ABC Shipping Co.”
  • A multimodal transport document shows the carrier as “ABC Shipping Co.” and is signed by “ABC Shipping Co.”
  • A multimodal transport document shows the carrier as “XYZ Maritime” and is signed by “Jane Smith, Master of MV Oceanic.”

Clause (a)(ii): Indication of Dispatch, Taking in Charge, or Shipped on Board

  • Clause: “indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit, by:
    • pre-printed wording, or
    • a stamp or notation indicating the date on which the goods have been dispatched, taken in charge or shipped on board. The date of issuance of the transport document will be deemed to be the date of dispatch, taking in charge or shipped on board, and the date of shipment. However, if the transport document indicates, by stamp or notation, a date of dispatch, taking in charge or shipped on board, this date will be deemed to be the date of shipment.”
  • Explanation: The document must indicate that the goods have been dispatched, taken in charge, or shipped on board at the place specified in the credit. This can be shown through pre-printed wording, a stamp, or a notation indicating the date. The date of issuance is considered the date of dispatch unless another date is specified.
  • Example:
  • A multimodal B/L states “Shipped on board MV Horizon on 15th July 2024.” Date of issuance as 08th July 2024. Then 15th July 2024 will be considered as shipment date
  • A multimodal B/L with pre-printed text “Shipped on board” and the date of issuance as 20th July 2024, will have 20th July 2024 as the shipment date unless an on board notation specifies a different date.
  • A multimodal B/L states date is issuance as 08th July 2024 and does not contain any separate onboard notation then issuance date will be considered as shipment date

Clause (a)(iii): Indication of Place of Dispatch and Final Destination

  • Clause: “indicate the place of dispatch, taking in charge or shipment and the place of final destination stated in the credit, even if: a. the transport document states, in addition, a different place of dispatch, taking in charge or shipment or place of final destination, or b. the transport document contains the indication “intended” or similar qualification in relation to the vessel, port of loading or port of discharge.”
  • Explanation: The transport document must show the place of dispatch and the final destination as stated in the credit, even if it mentions other places or uses terms like “intended.”
  • Example: A document shows “Place of Dispatch: Mumbai, Final Destination: New York,” but also mentions “intended final destination: Los Angeles.” This is acceptable as the primary places match the credit terms.

Clause (a)(iv): Sole Original or Full Set

  • Clause: “be the sole original transport document or, if issued in more than one original, be the full set as indicated on the transport document.”
  • Explanation: The document must be the sole original or, if issued in multiple originals, the full set as indicated on the document.
  • Example: If a transport document states “Three originals,” all three must be presented. If only one original exists, it should be the one presented.

Clause (a)(v): Terms and Conditions of Carriage

  • Clause: “contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back transport document). Contents of terms and conditions of carriage will not be examined.”
  • Explanation: The document must include or reference terms and conditions of carriage, but the content of these terms is not subject to examination.
  • Example:
  • A B/L mentions the detailed Terms and Conditions conditions in the back side of documents.
  • A B/L references “Terms and Conditions available at www.abcshipping.com.”

Clause (a)(vi): No Charter Party Indication

  • Clause: “contain no indication that it is subject to a charter party.”
  • Explanation: The document must not indicate that it is subject to a charter party.
  • Example: A document stating “Subject to charter party” is unacceptable. It must not contain such indications. Because there is a separate article available in UCP 600 for checking charter party bill of lading

Clause (b): Definition of Transhipment

  • Clause: “For the purpose of this article, transhipment means unloading from one means of conveyance and reloading to another means of conveyance (whether or not in different modes of transport) during the carriage from the place of dispatch, taking in charge or shipment to the place of final destination stated in the credit.”
  • Explanation: Transhipment refers to unloading from one conveyance and reloading to another during the carriage from the dispatch point to the final destination.
  • Example: Goods are unloaded from a ship at Singapore and reloaded onto a truck to continue to the final destination. This is considered transhipment.

Clause (c)(i): Transhipment Indication

  • Clause: “A transport document may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same transport document.”
  • Explanation: The document may indicate that transhipment will or may occur as long as the entire journey is covered by one transport document.
  • Example: A document states, “Transhipment may occur at Singapore,” but it covers the entire journey from Mumbai to New York under one document. It is acceptable.

Clause (c)(ii): Acceptability Despite Prohibition

  • Clause: “A transport document indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment.”
  • Explanation: A transport document indicating possible transhipment is acceptable even if the credit prohibits transhipment.
  • Example: Even if a credit states “No transhipment allowed,” a document indicating “Transhipment may occur” is acceptable as per UCP600 Article 19.

UCP600 Article 20: Bill of Lading Explanation With Example

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UCP600 Article 20 Explained with Examples

Clause (a): Requirements for a Bill of Lading

i. Carrier’s Name and Signature

  • Clause: A bill of lading, however named, must appear to:
    • indicate the name of the carrier and be signed by:
      • the carrier or a named agent for or on behalf of the carrier, or
      • the master or a named agent for or on behalf of the master.
    • Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent.
    • Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master.
  • Explanation: The bill of lading must clearly show the name of the carrier. It must also have a signature that identifies whether it is from the carrier, the master, or an agent acting on their behalf. The agent’s signature must specify if it is on behalf of the carrier or the master.
  • Example:
    • Correct:
    • A bill of lading signed as follows: “John Doe, Agent for ABC Shipping Co.” Wherein somewhere else from the documents ABC Shipping Co. can be identified as carrier.
    • A bill of lading signed as follows: “ABC Shipping Co., As Carrier”
    • A bill of lading signed as follows: “John Doe, As Master” Wherein somewhere else from the documents ABC Shipping Co. can be identified as carrier.
    • Incorrect: A bill of lading signed simply as “John Doe” without specifying the capacity in which the signature is made.

ii. Shipped on Board Notation

  • Clause: Indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by:
    • pre-printed wording, or
    • an on board notation indicating the date on which the goods have been shipped on board.
    • The date of issuance of the bill of lading will be deemed to be the date of shipment unless the bill of lading contains an on board notation indicating the date of shipment, in which case the date stated in the on board notation will be deemed to be the date of shipment.
    • If the bill of lading contains the indication “intended vessel” or similar qualification in relation to the name of the vessel, an on board notation indicating the date of shipment and the name of the actual vessel is required.
  • Explanation: The bill of lading must state the shipped on board date. If not stated, the issuance date is considered the shipment date. If the vessel is mentioned as “intended,” the bill of lading must specify the actual vessel name and shipment date.
  • Example:
    • Correct:
    • Bill of lading evidences by pre-printed wordings or stamp as “Shipped on board SS Maritime on 20th July 2024.”
    • Bill of lading states “Intended for SS Maritime” it also evidences by pre-printed wordings or stamp as “Shipped on board SS Maritime on 20th July 2024.”
    • Incorrect: “Intended for SS Maritime” without the actual vessel and shipment date.

iii. Port of Loading and Discharge

  • Clause: Indicate shipment from the port of loading to the port of discharge stated in the credit. If the bill of lading does not indicate the port of loading stated in the credit as the port of loading, or if it contains the indication “intended” or similar qualification in relation to the port of loading, an on board notation indicating the port of loading as stated in the credit, the date of shipment and the name of the vessel is required. This provision applies even when loading on board or shipment on a named vessel is indicated by pre-printed wording on the bill of lading.
  • Explanation: The bill of lading must clearly show the correct ports of loading and discharge. If the port of loading is qualified with “intended,” it must have an on-board notation with the actual port, shipment date, and vessel name.
  • Example:
    • Correct:
    • A bill of lading shows “Port of Loading: Shanghai” and “Port of Discharge: Los Angeles.”
    • If the bill of lading states “Intended Port of Loading: Shanghai,” it must also include an on board notation, such as “Loaded at Shanghai on MV Horizon on 15th July 2024.”
    • Incorrect: “Intended Port of Loading: Hamburg” without further on-board notation details.

iv. Original Bill of Lading

  • Clause: Be the sole original bill of lading or, if issued in more than one original, be the full set as indicated on the bill of lading.
  • Explanation: The bill of lading must be the original document. If multiple originals are issued, all must be presented as per the indication on the bill.
  • Example:
    • Correct:
    • A bill of lading indicates “Original – 1 of 1.” Then 1 original needs to be presented.
    • If it states “Original – 1 of 3,” then all three originals must be presented.
    • Incorrect: Presentation of only 1 out of 3 originals when it states “Original – 1 of 3,”.

v. Terms and Conditions of Carriage

  • Clause: Contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back bill of lading). Contents of terms and conditions of carriage will not be examined.
  • Explanation: The bill of lading must include or reference the terms and conditions of carriage. However, these terms will not be scrutinized by the examiner.
  • Example:
    • Correct:
    • A bill of lading includes the detailed Terms and Conditions as per carrier’s standard form in the back side of B/L.
    • A bill of lading references “Terms and Conditions available at www.abcshipping.com.”(this is called short form or blank back B/L)
    • Incorrect: Not mentioning any reference to terms and conditions of carriage.

vi. Charter Party Bill of Lading

  • Clause: Contain no indication that it is subject to a charter party.
  • Explanation: The bill of lading must not indicate that it is governed by a charter party agreement.
  • Example:
    • Correct: Standard bill of lading with no indication of a charter party.
    • Incorrect: If it indicates like “Subject to Charter Party Agreement dated 1st July 2024.”

Clause (b): Definition of Transshipment

  • Clause: For the purpose of this article, transhipment means unloading from one vessel and reloading to another vessel during the carriage from the port of loading to the port of discharge stated in the credit.
  • Explanation: Transshipment involves transferring goods from one vessel to another during transit from the loading port to the discharge port.
  • Example:
    • Transshipment: Goods are unloaded from Vessel A and reloaded onto Vessel B en route to the final destination.

Clause (c): Transshipment Conditions

i. Single Bill of Lading for Entire Carriage

  • Clause: A bill of lading may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same bill of lading.
  • Explanation: Transshipment is allowed if the entire journey is covered by one bill of lading.
  • Example:
    • Correct: A bill of lading states “Goods may be transhipped at Singapore”. If the entire journey completed through single transport document then it is acceptable .
    • Incorrect: Separate bills of lading for different segments of the journey and bill of lading states “Goods may be transhipped at Singapore”

ii. Transshipment Despite Prohibition

  • Clause: A bill of lading indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment, if the goods have been shipped in a container, trailer or LASH barge as evidenced by the bill of lading.
  • Explanation: Transshipment is acceptable even if prohibited by the credit, provided the goods are shipped in containers, trailers, or LASH barges.
  • Example:
    • Correct: A bill of lading shows “Goods in container, may be transhipped,” and in the bill of lading somewhere else it is evidenced that goods shipped in a container. The letter of credit prohibits transhipment. This is acceptable.
    • Incorrect: Non-containerized goods with transshipment indicated against credit terms.

Clause (d): Carrier’s Right to Transship

  • Clause: Clauses in a bill of lading stating that the carrier reserves the right to tranship will be disregarded.
  • Explanation: Any clauses in the bill of lading that give the carrier the right to transship will not be considered.
  • Example: A clause that states “Carrier reserves the right to transship.” This clause will not affect the acceptance of bill of lading.

UCP600 Article 21: Non-Negotiable Sea Waybill Explained with Examples

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Explanation of UCP600 Article 21 with Examples

Clause a(i):

Clause: A non-negotiable sea waybill, however named, must appear to indicate the name of the carrier and be signed by:

  • the carrier or a named agent for or on behalf of the carrier, or
  • the master or a named agent for or on behalf of the master.

Any signature by the carrier, master, or agent must be identified as that of the carrier, master, or agent. Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master.

Explanation: The sea waybill must clearly show the name of the carrier and be signed by an authorized person. The signature can be from the carrier directly, the ship’s master, or an agent authorized by either the carrier or the master. The role of the signatory must be clearly stated.

Example:

  • A sea waybill shows the carrier as “ABC Shipping Co.” and is signed by “John Doe, Agent for ABC Shipping Co.”
  • A sea waybill shows the carrier as “ABC Shipping Co.” and is signed by “ABC Shipping Co.”
  • A sea waybill shows the carrier as “XYZ Maritime” and is signed by “Jane Smith, Master of MV Oceanic.”

Clause a(ii):

Clause: The sea waybill must indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by:

  • pre-printed wording, or
  • an on board notation indicating the date on which the goods have been shipped on board.

The date of issuance of the sea waybill will be deemed to be the date of shipment unless the sea waybill contains an on board notation indicating the date of shipment, in which case the date stated in the on board notation will be deemed to be the date of shipment.

Explanation: The sea waybill must confirm that the goods are on board a specific vessel at the designated port. This can be indicated through pre-printed text or a specific on board notation. The shipment date is typically the issuance date unless a separate onboard date is mentioned.

Example:

  • A sea waybill states “Shipped on board MV Horizon on 15th July 2024.” Date of issuance as 08th July 2024. Then 15th July 2024 will be considered as shipment date
  • A sea waybill with pre-printed text “Shipped on board” and the date of issuance as 20th July 2024, will have 20th July 2024 as the shipment date unless an on board notation specifies a different date.
  • A sea waybill states date is issuance as 08th July 2024 and does not contain any separate onboard notation then issuance date will be considered as shipment date

Clause a(iii):

Clause: The sea waybill must indicate shipment from the port of loading to the port of discharge stated in the credit. If the sea waybill does not indicate the port of loading stated in the credit as the port of loading, or if it contains the indication “intended” or similar qualification in relation to the port of loading, an on board notation indicating the port of loading as stated in the credit, the date of shipment, and the name of the vessel is required.

Explanation: The sea waybill must clearly specify the ports of loading and discharge as mentioned in the credit. If there is any ambiguity (e.g., “intended port” or similar words or if it contains a different port of loading), an on board notation must state the actual port of loading (as per credit), the shipment date, and the vessel’s name.

Example:

  • A sea waybill shows “Port of Loading: Shanghai” and “Port of Discharge: Los Angeles.”
  • If the sea waybill states “Intended Port of Loading: Shanghai,” it must also include an on board notation, such as “Loaded at Shanghai on MV Horizon on 15th July 2024.”

Clause a(iv):

Clause: The sea waybill must be the sole original non-negotiable sea waybill or, if issued in more than one original, be the full set as indicated on the sea waybill.

Explanation: The sea waybill presented must be the only original copy or part of the full set of originals issued. If multiple originals are issued, the complete set must be presented.

Example:

  • A sea waybill indicates “Original – 1 of 1.” Then 1 original needs to be presented.
  • If it states “Original – 1 of 3,” then all three originals must be presented.

Clause a(v):

Clause: The sea waybill must contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back sea waybill). The contents of terms and conditions of carriage will not be examined.

Explanation: The sea waybill should include or reference the terms and conditions of carriage. The specific terms do not need to be checked.

Example:

  • A sea waybill includes the text “Terms and Conditions as per carrier’s standard form mentioning all the detailed conditions.” Generally it is mentioned in the back side of sea way bill.
  • A sea waybill references “Terms and Conditions available at www.abcshipping.com.”(this is called short form or blank back sea way bill)

Clause a(vi):

Clause: The sea waybill must contain no indication that it is subject to a charter party.

Explanation: The sea waybill must not indicate that it is governed by a charter party agreement.

Example:

  • A sea waybill without any mention of a charter party is acceptable.
  • A sea waybill that states “Subject to Charter Party dated 1st July 2024” would not be acceptable.

Clause b:

Clause: For the purpose of this article, transhipment means unloading from one vessel and reloading to another vessel during the carriage from the port of loading to the port of discharge stated in the credit.

Explanation: Transhipment is defined as transferring the goods from one vessel to another during the journey from the loading port to the discharge port.

Example:

  • Goods loaded on MV Horizon in Shanghai and transhipped onto MV Oceanic in Singapore before reaching Los Angeles.

Clause c(i):

Clause: A sea waybill may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same sea waybill.

Explanation: The sea waybill can state that transhipment may occur as long as the entire journey is documented under the same sea waybill.

Example:

  • A sea waybill states “Goods may be transhipped at Singapore”. If the entire journey completed through single transport document then it is acceptable .

Clause c(ii):

Clause: A sea waybill indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment, if the goods have been shipped in a container, trailer, or LASH barge as evidenced by the sea waybill.

Explanation: Even if a letter of credit prohibits transhipment, a sea waybill indicating transhipment is acceptable if the goods are shipped in a container, trailer, or LASH barge.

Example:

  • A sea waybill shows “Goods in container, may be transhipped,” and in the sea way bill somewhere else it is evidenced that goods shipped in a container. The letter of credit prohibits transhipment. This is acceptable.

Clause d:

Clause: Clauses in a sea waybill stating that the carrier reserves the right to tranship will be disregarded.

Explanation: Any statements in the sea waybill about the carrier reserving the right to tranship will be ignored.

Example:

  • A sea waybill includes “Carrier reserves the right to tranship.” This clause will not affect the acceptance of the sea waybill.

UCP600 Article 39: Assignment of Proceeds in Documentary Credits: Explanation

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Clause:

Assignment of Proceeds

Explanation:

This clause in UCP600 Article 39 specifies that even if a credit (Letter of Credit or LC) is not stated to be transferable, it does not prevent the beneficiary from assigning the proceeds of the credit. The beneficiary has the right to assign any proceeds they are entitled to or may become entitled to under the credit, following the applicable laws. It’s important to note that this article deals solely with the assignment of proceeds and not with the assignment of the rights to perform under the credit.

Example:

Consider a scenario where a company, Company A, is the beneficiary of a Letter of Credit issued by Bank X. The LC specifies that Company A will receive payment upon fulfilling certain conditions. Company A needs immediate funds to purchase raw materials and decides to assign the proceeds of the LC to its supplier, Supplier B.

Even though the LC is not stated to be transferable, Company A can still assign the proceeds (the funds it will receive under the LC) to Supplier B, in accordance with applicable laws. This means that once Company A fulfills the conditions of the LC, the payment will be made directly to Supplier B, as per the assignment agreement.

Detailed Clause-by-Clause Explanation:

Clause: The fact that a credit is not stated to be transferable shall not affect the right of the beneficiary to assign any proceeds to which it may be or may become entitled under the credit, in accordance with the provisions of applicable law.

Explanation: This clause clarifies that the non-transferable status of a credit does not impede the beneficiary’s right to assign the proceeds. The beneficiary can assign the funds they are or will be entitled to receive, as long as they comply with the relevant legal provisions.

Example: A beneficiary, Company C, is expecting $100,000 under a non-transferable Letter of Credit issued by Bank Y. Company C assigns this $100,000 to Lender D as part of a loan agreement. Despite the LC being non-transferable, Company C can legally assign the proceeds to Lender D, ensuring that Lender D receives the funds once Company C meets the LC conditions.

Clause: This article relates only to the assignment of proceeds and not to the assignment of the right to perform under the credit.

Explanation: This clause emphasizes the distinction between assigning proceeds and assigning the performance rights under the credit. While the proceeds (the funds payable) can be assigned, the beneficiary cannot assign their responsibility or rights to perform the tasks required to fulfill the credit conditions.

Example: In a different scenario, Beneficiary E is required to deliver goods to Buyer F under an LC issued by Bank Z. Beneficiary E can assign the payment proceeds from the LC to Finance Company G. However, Beneficiary E cannot assign the obligation to deliver goods to Buyer F to another party; Beneficiary E must still fulfill the delivery requirements to satisfy the LC terms.

By understanding UCP600 Article 39, businesses involved in international trade can effectively manage their financial transactions, ensuring flexibility in funding and cash flow management through the assignment of proceeds.

UCP600 Article 38 Explanation: Transferable Credits

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Clause (a)

Clause: A bank is under no obligation to transfer a credit except to the extent and in the manner expressly consented to by that bank.

Explanation: This clause means that a bank can choose whether or not to transfer a credit. The transfer will only occur if the bank agrees to it and follows the terms and conditions specified by the bank.

Example: Company A receives a transferable letter of credit from their buyer. Company A requests Bank X to transfer the credit to Company B. Bank X reviews the request and agrees to transfer the credit according to their internal policies and the terms of the original credit.

Clause (b)

Clause: For the purpose of this article:

  • Transferable credit means a credit that specifically states it is “transferable”. A transferable credit may be made available in whole or in part to another beneficiary (“second beneficiary”) at the request of the beneficiary (“first beneficiary”).
  • Transferring bank means a nominated bank that transfers the credit or, in a credit available with any bank, a bank that is specifically authorized by the issuing bank to transfer and that transfers the credit. An issuing bank may be a transferring bank.
  • Transferred credit means a credit that has been made available by the transferring bank to a second beneficiary.

Explanation: This clause defines the key terms used in Article 38. A transferable credit explicitly states that it can be transferred, allowing the first beneficiary to request its transfer to a second beneficiary. The transferring bank is the one authorized to transfer the credit, and the transferred credit is the result of this transfer process.

Example: Company A (first beneficiary) receives a transferable credit and requests Bank X (transferring bank) to transfer it to Company B (second beneficiary). Bank X, having the authorization from the issuing bank, completes the transfer, creating a transferred credit for Company B.

Clause (c)

Clause: Unless otherwise agreed at the time of transfer, all charges (such as commissions, fees, costs or expenses) incurred in respect of a transfer must be paid by the first beneficiary.

Explanation: By default, the first beneficiary is responsible for paying all costs associated with the transfer of the credit, unless an alternative arrangement is made.

Example: Company A asks Bank X to transfer the credit to Company B. Bank X informs Company A of the transfer fee. Unless Company A and Bank X agree otherwise, Company A is responsible for paying this fee.

Clause (d)

Clause: A credit may be transferred in part to more than one second beneficiary provided partial drawings or shipments are allowed. A transferred credit cannot be transferred at the request of a second beneficiary to any subsequent beneficiary. The first beneficiary is not considered to be a subsequent beneficiary.

Explanation: A transferable credit can be divided and transferred to multiple second beneficiaries if the credit permits partial shipments. However, once transferred, the second beneficiary cannot further transfer the credit. The first beneficiary can transfer portions to different second beneficiaries but cannot transfer again beyond that.

Example: Company A receives a transferable credit and requests Bank X to transfer it to Company B and Company C, as partial shipments are allowed. Company B and Company C cannot transfer the credit further.

Clause (e)

Clause: Any request for transfer must indicate if and under what conditions amendments may be advised to the second beneficiary. The transferred credit must clearly indicate those conditions.

Explanation: When requesting a transfer, the first beneficiary must specify whether and how amendments to the credit will be communicated to the second beneficiary. These conditions must be clearly stated in the transferred credit.

Example: Company A requests Bank X to transfer the credit to Company B and specifies that any amendments will be communicated directly to Company B. The transferred credit issued to Company B includes this condition.

Clause (f)

Clause: If a credit is transferred to more than one second beneficiary, rejection of an amendment by one or more second beneficiary does not invalidate the acceptance by any other second beneficiary, with respect to which the transferred credit will be amended accordingly. For any second beneficiary that rejected the amendment, the transferred credit will remain unamended.

Explanation: If multiple second beneficiaries are involved, and one or more reject an amendment while others accept it, the amendment is valid for those who accept it. For those who reject it, the original terms remain unchanged.

Example: Company A transfers a credit to Company B and Company C. An amendment is proposed. Company B accepts, but Company C rejects it. The amendment applies to Company B’s part of the credit, while Company C’s part remains unchanged.

Clause (g)

Clause: The transferred credit must accurately reflect the terms and conditions of the credit, including confirmation, if any, with the exception of:

  • the amount of the credit,
  • any unit price stated therein,
  • the expiry date,
  • the period for presentation, or
  • the latest shipment date or given period for shipment, any or all of which may be reduced or curtailed. The percentage for which insurance cover must be effected may be increased to provide the amount of cover stipulated in the credit or these articles. The name of the first beneficiary may be substituted for that of the applicant in the credit. If the name of the applicant is specifically required by the credit to appear in any document other than the invoice, such requirement must be reflected in the transferred credit.

Explanation: The transferred credit must match the original credit’s terms, with exceptions for reducing the credit amount, unit price, expiry date, presentation period, and shipment date. Insurance cover percentage may be increased. The first beneficiary’s name can replace the applicant’s name in the credit, except when the applicant’s name is required on documents other than the invoice.

Example: Company A requests Bank X to transfer a $100,000 credit to Company B. Bank X reduces the credit amount to $80,000 and the expiry date by one month. The transferred credit reflects these changes but retains other original terms.

Calculation of Insurance Percentage

The insurance percentage typically covers the value of the goods plus an additional amount (often 10%) to protect against unforeseen events. Here’s how it works:

For the first beneficiary:

  • LC Value: $100,000
  • Insurance Coverage: 110% of $100,000 = $110,000

For the second beneficiary:

  • Transferred LC Value: $80,000
  • Insurance Coverage: 110% of $80,000 = $88,000

Clause (h)

Clause: The first beneficiary has the right to substitute its own invoice and draft, if any, for those of a second beneficiary for an amount not in excess of that stipulated in the credit, and upon such substitution the first beneficiary can draw under the credit for the difference, if any, between its invoice and the invoice of a second beneficiary.

Explanation: The first beneficiary can replace the second beneficiary’s invoice and draft with their own, provided the amount does not exceed the credit limit. The first beneficiary can then draw the difference between their invoice and the second beneficiary’s invoice under the credit.

Example: Company A (first beneficiary) transfers a $100,000 credit to Company B (second beneficiary). Company B presents an invoice for $80,000. Company A substitutes Company B’s invoice with its own for $100,000 and draws the $20,000 difference under the credit.

Clause (i)

Clause: If the first beneficiary is to present its own invoice and draft, if any, but fails to do so on first demand, or if the invoices presented by the first beneficiary create discrepancies that did not exist in the presentation made by the second beneficiary and the first beneficiary fails to correct them on first demand, the transferring bank has the right to present the documents as received from the second beneficiary to the issuing bank, without further responsibility to the first beneficiary.

Explanation: First beneficiary must present their invoice and draft but fails to do so or correct discrepancies, the transferring bank can submit the second beneficiary’s documents to the issuing bank without further obligations to the first beneficiary.

Example: Company A (first beneficiary) must present its invoice but fails to do so. Company B (second beneficiary) submits their documents to Bank X (transferring bank). Bank X sends Company B’s documents to the issuing bank without further responsibility to Company A.

Clause (j)

Clause: The first beneficiary may, in its request for transfer, indicate that honour or negotiation is to be effected to a second beneficiary at the place to which the credit has been transferred, up to and including the expiry date of the credit. This is without prejudice to the right of the first beneficiary in accordance with sub-article 38 (h).

Explanation: The first beneficiary can specify that honouring or negotiating the credit should occur at the location to which the credit is transferred, up to the credit’s expiry date. This does not affect the first beneficiary’s rights under clause 38(h).

Example: Company A (first beneficiary) requests Bank X to transfer the credit to Company B (second beneficiary) and specifies that negotiation should take place at Company B’s location. This arrangement is valid until the credit expires.

Clause (k)

Clause: Presentation of documents by or on behalf of a second beneficiary must be made to the transferring bank.

Explanation: The second beneficiary or their representative must present all required documents to the transferring bank, not directly to the issuing bank.

Example: Company B (second beneficiary) must submit all documents to Bank X (transferring bank) rather than the issuing bank. Bank X will then handle the documents and present them to the issuing bank.

UCP600 Article 37 Explanation: Disclaimer for Acts of an Instructed Party

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Clause a:

Clause: A bank utilizing the services of another bank for the purpose of giving effect to the instructions of the applicant does so for the account and at the risk of the applicant.

Explanation: When an issuing bank uses another bank’s services to fulfill the applicant’s instructions, it does so on behalf of and at the risk of the applicant. This means any issues arising from the other bank’s actions are the applicant’s responsibility.

Example: A company in India (the applicant) applies for a letter of credit with an Indian issuing bank to pay a supplier in Germany. The Indian bank uses a German bank to advise the credit to the supplier. If the German bank fails to deliver the documents on time, causing a delay, the risk and consequences of this failure fall on the Indian company, not the Indian issuing bank.

Clause b:

Clause: An issuing bank or advising bank assumes no liability or responsibility should the instructions it transmits to another bank not be carried out, even if it has taken the initiative in the choice of that other bank.

Explanation: Neither the issuing bank nor the advising bank is liable if the instructions they send to another bank are not executed, even if they chose that bank themselves.

Example: The Indian issuing bank selects a German advising bank to notify the supplier in Germany. If the German bank fails to notify the supplier, the Indian bank is not responsible for this failure, even though it chose the German bank.

Clause c:

Clause: A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (“charges”) incurred by that bank in connection with its instructions. If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges. A credit or amendment should not stipulate that the advising to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges.

Explanation: The bank that instructs another bank to perform services must pay any charges incurred by that bank. If the credit specifies that charges are the beneficiary’s responsibility but cannot be collected, the issuing bank must pay. Credits should not make the beneficiary’s receipt of advice conditional on the advising bank receiving its charges.

Example: An Indian issuing bank instructs a German advising bank to notify the supplier and charges the supplier for the advising fees. If the supplier refuses to pay, the Indian bank must cover the advising fees. Additionally, the letter of credit should not state that the supplier will only be advised upon payment of the advising bank’s charges.

Clause d:

Clause: The applicant shall be bound by and liable to indemnify a bank against all obligations and responsibilities imposed by foreign laws and usages.

Explanation: The applicant must cover any obligations and responsibilities the bank faces due to foreign laws and customs.

Example: An Indian company applies for a letter of credit with an Indian bank to pay a supplier in Germany. If German laws impose additional requirements or responsibilities on the advising bank, the Indian company must indemnify the Indian bank for any resulting costs or obligations.