CAN A BANK REFER TO THE PROVISIONS OF ISBP IN ADDITION TO UCP WHEN CHECKING DOCUMENTS?

QUESTION

Dear Mr. Old Man,

When the LC only indicates UCP 600 as governing rule but not ISBP, should a bank also make references to ISBP provisions in addition to UCP when checking documents to determine clean/discrepant?

Please also advise on what other occasions do we use ISBP.

Thanks.

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ANSWER

Hi,

According to the introduction of ISBP, the international standard banking practices documented in ISBP are consistent with UCP 600 and the Opinions and Decisions of the ICC Banking Commission. ISBP does not amend UCP 600. It explains how practices articulated in UCP 600 are to be applied by documentary credit practitioners. This ISBP and the UCP should be read in their entirety and not in isolation.

However, it is also noted that the incorporation of this publication into the terms of a documentary credit is deemed inappropriate, as the requirement to follow agreed practices is implicit in UCP 600.

Documents should be examined in accordance with international standard banking practice as stated in UCP 600. However, there is no harm in explaining to another party which paragraph of the ISBP supports a particular position the Banking Commission has taken in applying the UCP (ICC Opinion R599/TA562rev).

You can check documents based on ISBP to determine the compliance of  the documents. As an issuing bank, you can cite the relevant paragraphs in the ISBP to support your position when the nominated bank or presenting bank rejects the discrepancy based on which you have refused the documents. Similarly, as a nominated bank or presenting bank, you can cite the relevant paragraphs in the ISBP to rejects the invalid discrepancy raised by the issuing bank or the confirming bank (if any).

Kind regards,

Mr. Old Man