Letter of Credit Forum

A Credit transaction will be substantially determined 

• by the place of presentation where the beneficiary has to present the documents (formerly Article 42 UCP 500), and 
• the place where the credit is to be honored either by sight payment, acceptance, or negotiation (formerly Article 10 UCP 500)

Normally the place of presentation will be the place of availability; however, this is not mandatory but rather impractical to separate the place of presentation and availability. (exception: freely negotiable letters of credit are available at any bank which is willing to take up the documents). If the Issuing Bank has made the documents available with a certain secondary bank, the primary obligation of the Issuing Bank becomes to look after the secondary bank fulfilling the payment obligation. The Beneficiary may present the documents to the Issuing Bank, however, he cannot claim payment from the Issuing Bank and must contact the secondary bank. Availability, Expiry Date and Place for Presentation Following Article 10 UCP 500, the UCP 600 require, that 

• -A credit must state the bank with which it is available or whether it is available with any bank (Article 6 a UCP 600). 
• a credit must state whether it is available by sight payment, deferred payment, acceptance or negotiation (Article 6 b UCP 600), and 
• A credit must state an expiry date for presentation (Article 6 d UCP 600). 

Hence, regarding the availability and validity of credits the UCP 600 do not differ from the UCP 500.  No drafts on ApplicantArticle 6 c UCP 600 reinforces the principle (already mentionedin Article 9 a (iv) and Article 9 b (iv) UCP 600), that "a credit must not be issued available by a draft drawn on the applicant". The ICC included this provision to avoid making the applicant part of the LC transaction.  This danger however is nonexistant, since the issuing bank is liable under an acceptance LC when the nominated bank fails to pay (cf Article 7 a (iv) UCP 600).  This must equally apply, if the applicant does not provide his acceptance for a draft drawn on him. Nevertheless, to avoid misunderstandings, it is advisable not to issue credits available by drafts drawn on the applicant.  AvailabilityArticle 6 a UCP provides that: "A credit available with a nominated bank is also available with the issuing bank."This provision is new and ambiguous since it seems to indicate that the beneficiary has an option, to demand honour of the documents either withthe issuing or the nominated bank. This would lead to chaos, since when being asked to honour, the issuing bank first would have to check, whether the nominated bank already has examined, paid or rejected the documents. I believe that a direct request to the issuing bank is not permitted by the UCP 600. This follows from Article 7 a (ii) UCP 600: "Provided that the stipulated documents are presented to the nominated bank or to the issuing bank and that they constitute a complying presentation, the issuing bank must honour if the credit is available by:...ii. sight payment with a nominated bank and that nominated bank does not pay;"Article 7 a (ii) clearly defines the payment obligation of the issuing bank as an obligation secondary to the payment obligation of the nominated bank and one has to assume that the ambiguous language of Article 6 a was not intended to overrule the clear language of Article 7 a (ii).