Gearing up for UCP 600

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01 December 2006

With the ICC having approved the UCP 600 regulations governing the use of documentary credits, banks must now think about how they will adapt to meet the requirements of the new rules. However, the shift from UCP 500 to 600 might be more challenging than many might have anticipated.

After much debate, the ICC approved the revisions to the UCP 500 rules that regulate the letters of credit transactions across the world. Following the decision, made on 25 October 2006, the ICC has now published its 2007 Revision of Uniform Customs and Practice for Documentary Credits (UCP 600). Banks, along with traders, contractors, manufacturers and insurance companies now have got until 1 July 2007 to make all the necessary changes to their letters of credit procedures. The impact of the changes is significant. It took at least three years for the updates to be finalized and the rules haven't been reformed since 1993. Although the UCP 600 is not a matter of law and therefore not compulsory, in practice all banks dealing in letters of credit (LCs) adhere to the regulations. With international deals involving LC worth around $700 billion every year, any change to the way in which this...

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