Letter of Credit Forum

Since coming into existence of the ICC guidelines regarding the examination of documents, the main duty of the LC bank consists of determining whether the documents appear on their face to comply with the LC provisions. The obligation to strictly follow the issuer's instructions is a consequence of the credit being an instrument of documentary payment.

The North Carolina Business Court ruled yesterday onteh  issue when a North Carolina Court should apply the law of a foreign country and concluded that it would apply North Carolina law to a forum selection clause requiring the parties to litigate their dispute in the Commercial Court of Paris, under French law.

Article 13 UCP 600 was drafted in order to conform with the URR Uniform Rules for Bank-to-Bank Reimbursement (URR 525). The URR 525 were in need of reform and  have been replaced by the URR 725 which entered into effect as of October 1, 2008. 

This means, that the URR are still separate from the UCP and have to be specficially referenced in order to make them part of the agreement. Unless such a reference exists Article 13 UCP 600 governs the obligations of the banks regarding reimbursement. 

Issuing or confirming bank often use and authorize secondary banks
to perform certain task when processing a letter of credit (typically examination of the documents or payment). Issuing and confirming banks are obligated to reimburse a secondary bank for any costs associated  with fulfilment of these tasks; furthermore, as a consequence of the obligation to reimburse issuing and confirming bank are obligated to accept documents if the secondary bank has already
performed the obligations due under the credit.

This pop-cultural reference to Supertramp's 1975 album raises some
questions regarding the perception of current events. On the one hand I have the impression that everyone talks about the crisis but the understanding of its causes and consequences is equally limited as Franz Kafka's reaction to Germany's declaration of war against Russia on August 1, 1914:
"Germany has declared war on Russia.-Afternoon swimming lessons".

Nomination means that the issuing bank request the help from a secondary bank which in turn does not enter into an obligation to honour or negotiate (unless it expressly agrees to doing so). The task undertaken by the nominated bank typically are the acceptance of drafts or incurring a deferred payment undertaking.

Regarding its substance Article 12 a and c UCP 600 are idential with Article 10 c UCP 500. Article 12 c UCP 600 clarifies that a nominated bank is not liable for payment or honour even if it received and examined the documents.

Article 11 UCP 600 is identical to Article 11 a and 11c  UCP 500. Article 11b UCP 500 had been moved to Article 9 d UCP 600 ("A bank utilizing the services of an advising bank or second advising bank to advise a credit must use the same bank to advise any amendment thereto.")

Article 10 a - c UCP 600 repeats with small stylistical modifications the provision of Article 9 d(i) to (ii) UCP 500.

Many of us have come to appreciate Peter M, whose posts have answered authoritatively many questions raised in the forum. Peter has disclosed that he is a Senior manager in the Commercial Financial Services  section of  a major North American Bank and has agreed to share with us his "Trade Finance - A User Guide".