UCP 500

Slide 1 : 1 UCP 500 Uniform Customs and Practice for Documentary Credits,International Chamber of Commerce, Paris, France Publication No. 500. UCP 500 e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 2 : 2 UCP 500 e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. Buyer / Applicant Seller / Beneficiary Advising Bank IssuingBank UCP 500 Uniform Customs and Procedures for Documentary Letters of Credit. The UCP 500 Letter of Credit - Concept END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 3 : 3 UCP 500 Uniform Customs and Practice for Documentary Credits,International Chamber of Commerce Publication No. 500. UCP 500 Article 1: Application of UCPThis article states that all Letters of Credit, including Standby Credits, are issued subject to UCP 500 provided that the Letter of Credit specifically indicates this to be the case. Article 2: Meaning of Credit This article is saying that a Letter of Credit is any instrument issued by a financial institution subject to UCP 500 that contains a conditional undertaking to effect payment provided that its terms and conditions have been complied with. Article 3: Credits vs Contracts Credits, by their nature are separate transactions from the sales or other contract(s) on which they may be based. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 4 : 4 UCP 500 UCP 500 Article 4: Documents vs. Goods / Services / Performance In Credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate. Article 5: Instructions to Issue / Amend Credits Instructions for the issuance of a Credit must be complete and precise. In order to avoid confusion, Credit should not include excessive detail, The Credit must state precisely the documents that are to be presented. Article 6: Revocable v. Irrevocable Credits A Credit may be either (i) revocable or (ii) irrevocable. Article 7: Advising Bank’s Liability A Credit may be advised to a beneficiary through another bank (the Advising Bank) without engagement on the part of the Advising Bank… e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 5 : 5 UCP 500 UCP 500 Article 8: Revocation of a Credit A revocable Credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. Article 9: Liability of Issuing and Confirming Banks An irrevocable Credit constitutes a definite undertaking of the Issuing Bank. Article 10: Types of Credit All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation. Article 11: Teletransmitted and Pre-Advised Credits When an Issuing Bank instructs an Advising Bank by an authenticated teletransmission to advise a Credit or an amendment to a Credit, the teletransmission will be deemed to be the operative Credit instrument. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 6 : 6 UCP 500 UCP 500 Article 12: Incomplete or Unclear Instructions If incomplete or unclear instructions are received to advise, confirm or amend a Credit, the bank requested to act on such instructions may give preliminary notification to the Beneficiary only and without responsibility. Article 13: Standard for Examination of DocumentsBanks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit… Documents not stipulated in the Credit will not be examined by banks. Article 14: Discrepant Documents and Notice When the issuing bank authorizes another bank to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the issuing bank and the confirming bank, if any, are bound: e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 7 : 7 UCP 500 UCP 500 Article 15: Disclaimer on Effectiveness of Documents “Banks assume no liability of responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document’s… Article 16: Disclaimer on the Teletransmission of Documents Banks assume no liability or responsibility for errors in translation and/or interpretation of technical terms, and reserve the right to transmit Credit without translating them. Article 17: Force Majeure Banks accept no liability or responsibility for consequences arising out of the interruption of their business by Acts of God… Article 18: Disclaimer for Acts of an Instructed Party When a bank requests one of its correspondent banks to “give effect to the instructions of the applicant” they do so “for the account of and at the risk of such applicant. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 8 : 8 UCP 500 UCP 500 Article 19: Band-to-Bank Reimbursement Arrangements When an issuing bank transmits a Credit through a correspondent bank with which they do not have an account… Documents Article 20: Ambiguity as to Issuers of Documents Terms such as ’first class,’ ‘well known,’ ‘qualified,’ independent’, ‘official,’ ‘competent,’ ‘local,’ and the like shall not be used to describe the issuers of any document’s to be presented under a Credit. Article 21: Unspecified Issuers of Contents of Documents When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom they are to be issued and their wording or data content. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 9 : 9 UCP 500 UCP 500 Article 22: Issuance Date on Documents v. Credit Date Documents may be presented showing an issuance date prior to the issuance date of the Credit unless the Credit stipulates otherwise. Article 23: Transport Documents A Bill of Lading services three purposes; a contract between the shipper and carrier to transport goods; a receipt by the carrier for the goods being shipped; and it normally transfers title of the goods represented by it. Article 24: Non-Negotiable Sea Waybill The main difference between a negotiable bill of lading and non-negotiable document is the way the bill of lading is consigned. A negotiable bill of lading is consigned “to order of” a named party. Title is passed by surrender of an endorsed original bill of lading. A non-negotiable bill of lading has a direct consignment to a named party. Title is passed by surrender of either an original or non-negotiable copy of the B/L or Waybill. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 10 : 10 UCP 500 UCP 500 Article 25: Charter Party Bill of Lading A charter party bill of lading is one where a shipper has contracted with a shipping line to charter a vessel for the movement of cargo. The Credit must stipulate that charter party bills of lading are acceptable. Article 26: Multimodal Transport Document A multimodal transport document is one that covers more than one kind of conveyance. Article 27: Air Transport Document Air transport documents are issued in the form of an Air Waybill. A significant difference between an Air Waybill and Ocean Bill of Lading is that the former are always straight consignments whereas Ocean Bills of Lading may be either straight or negotiable e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 11 : 11 UCP 500 UCP 500 Article 28: Road, Rail or Inland Waterway Transport Documents Frequently letters of credit issued for the purpose of accommodating shipments within North America will call for some type of “domestic” transport document. Article 29: Courier and Postal Receipts Small or lightweight shipments are frequently sent via courier such as Airborne, Federal Express, DHL, etc. Article 30: Transport Document Issued by Freight Forwarders Sometime a freight forwarder receives cargo from several different shippers and consolidates them into a single container shipment. Article 31: On deck,” “Shipper’s Load and Count,” Name of Consignor Transport documents which do indicate that the goods may be carried “on deck”; bear a clause such as “shippers load and count”; or indicate a consignor other than the beneficiary. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 12 : 12 UCP 500 UCP 500 Article 32: Clean Transport Documents A clean transport document is one that does not indicate any defect in the goods such as “damaged.” Article 33: Freight Payable/Prepaid Transport Documents All Letters of Credit that require presentation of a transport document must indicate whether the freight has been prepaid or is being sent “freight collect”. Article 34: Insurance Documents Insurance is a contract between the insurance company and the shipper, consignee or party having an insurable interest in the merchandise Article 35: Type of Insurance Cover Credits should stipulate the type of insurance required and, if any, the additional risks which are to be covered. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 13 : 13 UCP 500 UCP 500 Article 36: All Risk Insurance Cover Frequently a Credit requires that the insurance document cover “all risks.” Banks will accept an insurance document that bears an “all risks” clause or notation even though the insurance document contains wording elsewhere that certain risks are excluded. Article 37: Commercial Invoice This is the only document where the merchandise description must correspond exactly with that indicated in the Credit. Must appear on their face to be issued by the Beneficiary named in the Credit, and must be made out in the name of the Applicant. Article 38: Other Documents This article covers weight certificates on transport documents other than by sea. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 14 : 14 UCP 500 UCP 500 Article 39: Miscellaneous Documents Allowances in Credit Amount, Quantity and Unit Price. Banks will accept documents which show that the quantity of goods being shipped has a variance of 5% more or less than that stipulated in the Credit. Article 40: Partial Shipments/Drawings Partial shipments are allowed, unless the Credit stipulates otherwise. Sometimes a shipper may load goods on the same carrier at different times or even different ports. So long as the transport documents indicate that the goods were all shipped on the same carrier, for the same journey, show the same destination, then a bank may not treat thee as partial shipments. Article 41: Installment Shipments/Drawings If a shipper (beneficiary) fails to make a drawings and/or shipment within a specified time frame then the entire Letter of Credit ceases to be available for any future drawings. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 15 : 15 UCP 500 UCP 500 Article 42: Expiry Date and Place for Presentation of Documents All Credits must stipulate an expiry date and a place for presentation of documents for payment. Article 43: Limitation on the Expiry Date every Credit which calls for a transport document should also stipulate a specified period of time after the date of shipment during which presentation must be made… If no such period of time is stipulated banks will not accept documents presented to them later than 21 (calendar) days after the date of shipment Article 44: Extension of Expiry Date If the expiry date of the Credit and/or last day of the period of time for presentation of documents falls on a day on which the bank… is closed the stipulated expiry date shall be extended to the first following day on which such bank is open. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 16 : 16 UCP 500 UCP 500 Article 45: Hours of Presentation Banks are under no obligation to accept presentation of documents outside their banking hours. Article 46: General Expressions as to Dates Unless otherwise stipulated in the Credit, the expression ‘shipment’ used in stipulating an earliest and/or latest date for shipment will be understood to include the expressions such as ‘loading on board,’ ‘dispatch,’ ‘accepted for carriage, and the like. Article 47: Date Terminology for Periods of Shipment When Credits refer to dates such as “from X date to Y date” and the like, then banks will interpret that to mean that both “X” and “Y” dates are included. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 17 : 17 UCP 500 UCP 500 Article 48: Transferable Credit A transferable Credit is one under which the beneficiary may request that the Credit be made available to a third party. A Credit is considered transferable only if it is expressly designated as “transferable” by the issuing bank. Article 49: Assignment of Proceeds The beneficiary may request the paying/negotiating bank to “assign” all or part of the proceeds to a third party. Unlike a transferee, an assignee is entirely dependent on the beneficiary to perform in order to receive payment. In addition, an assignee is not entitled to receive any notification of amendments or even cancellation of the Credit. The main advantage to an assignee is that it will be assured that payment will be made directly to them instead of to the first beneficiary. e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN

Slide 18 : 18 UCP 500 e Trade Finance Platform™ | Import | Export | Freight | Bank | www.InterNetLC.com | We create trade and jobs. UCP 500 Guidelines - Summary The UCP 500 is the global standard for issuing, advising, presenting documents, and negotiating Commercial Letters of Credit in over 200 countries. It is the “gold standard” for international transaction settlement. END WORKSHOP ENGLISH CANTONESE MADARIN SPANISH JAPANESE FRENCH GERMAN PORTUGUESE RUSSIAN ARABIC KOREAN