CLARIFICATION OF UCP 600 ARTICLE 11 WITH REGARD TO TELETRANSMITTED & PRE-ADVISED LETTERS OF CREDIT & AMENTMENDS

QUESTION

Hi Mr. Old Man, 

How are you? Hope this email finds you well.

I need your kind support in understanding UCP 600 ARTICLE 11.

Please share any case studies or opinions shared by you for this Article.

Regards

Siva Prasad

—-

ANSWER

Hi Siva,

In fact, the provision in Article 11 of UCP 600 is very clear. If you read it carefully, you will understand the spirit of this provision.

I have simplified this provision in a more understandable way as follows:

QUOTE

a. When an LC or amendment is sent by an authenticated teletransmission (like a SWIFT message), that LC or amendment is considered operative. Any mail confirmation , which is sent later, will be ignored.

However, if the teletransmission message says something like “full details to follow” or mentions that the mail confirmation will be the operative one, then the teletransmission is not considered operative. In that case, the issuing bank must send the operative LC or amendment as soon as possible, and it must match the details in the teletransmission message.

b. A pre-advice (an advance notice of an LC or amendment) can only be sent if the issuing bank is ready and committed to issue the operative LC or amendment. Once the pre-advice is sent, the bank must issue the operative LC or amendment without delay, and it must match the terms in the pre-advice.

UNQUOTE

In practice, there are also cases where the LC is not operative at the time of issuance but becomes operative when a certain condition is met. For example, the LC includes the following clause:

“This LC will become valid when the issuing bank receives a performance guarantee worth USD 20,000 issued by ABC Bank in favour of the Applicant”.

Note that a provision in an amendment to the effect that the amendment shall become operative unless rejected by the beneficiary within a certain time shall be ignored or disregarded (UCP 600 article 10 (f)

Best regards,

Mr. Old Man