Effective July 2007, UCP 500 will be no longer effective in governing the application and operations of Letter of Credit. UCP 600 will be the new governing set for all parties concerned; bankers, traders, transport operators, insurance companies, lawyer etc.
One of the major changes is article 14(b). This new article defines the number of days required to hold the documents for processing or examining by banks. The ‘reasonable time’ in article 13(b) of UCP500, as expected, has been eliminated and replaced with a definite 5 banking days in UCP600. Now, the issuing bank, nominated bank or confirming bank (if any) shall each have a maximum of 5 banking daysto process, examine and determine whether the documents are in compliance with the terms and conditions of the LC. If the documents are to be rejected, the notice to this effect must also be made within this new time frame.With this new change, trading parties, buyer and seller can expect faster payment.
In addition to this, articles 16(c)(iii)(a) and 16(c)(iii)(d) provide comfort to the seller where seller has a control over the discrepant documents.In the event the bank refuses the documents due to discrepancies, it will hold the documents pending further instruction from the presenter on how to dispose the documents. Seller may also provide such instruction at the time of tendering documents to his bank. In this condition, even if the bank has decided to refuse payment, the bank somehow will act in accordance to the instruction given by the presenter. The bank either waits for the instruction from the presenter while waiting for the buyer to waive the discrepancies or acts accordingly to the instruction given by presenter on the covering schedule. This new article however may expose buyer to a new threat or rather create an opportunity to the seller when dealing with commodities. When price has appreciated and documents are discrepant, seller may not want to release the documents to the buyer.