1 What is the UCP?

A little bit of history !!! 1933UCP # 82 First 1951 UCP # UCP # UCP # UCP # UCP # UCP # 600 Effective from 1 st July 2007

POST-EXPORTPRE-EXPORT Trade Importer Trade Exporter Payment...…Risk!… export finance? Performance...…Risk!…. …import finance… Letter of Credit BRIDGING THE RISK

or Documents Financial or Commercial Bill of Exchange Promissory Note COMMERCIALINVOICESCOMMERCIALINVOICESPACKINGLISTPACKINGLIST CERTIFICATE OF ORIGIN CERTIFICATE INSURANCECERTIFICATEINSURANCECERTIFICATE TRANSPORTDOCUMENTSTRANSPORTDOCUMENTS

5 5 Exporter Beneficiary Importer Applicant Importer Applicant THE PARTIES COMMERCIAL CREDIT Purchase Order Pro-Forma Invoice Pro-Forma Invoice UCP 600 ISBP Fundamentals

6 6 Exporter Beneficiary Importer Applicant Importer Applicant THE PARTIES

7 7 Exporter Beneficiary Importer Applicant Importer Applicant THE PARTIES COMMERCIAL CREDIT Purchase Order Pro-Forma Invoice Pro-Forma Invoice

8 8 Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order

9 9 Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order Article 1 Application of UCP The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication no. 600 (“UCP”) are rules that apply to any documentary credit (“credit”) (including, to the extent to which they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded by the credit. Article 1 Application of UCP The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication no. 600 (“UCP”) are rules that apply to any documentary credit (“credit”) (including, to the extent to which they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded by the credit. Article 2 - Definitions Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation. Article 2 - Definitions Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.

10 The UCP 600 concept of Honour Honour means: a.to pay at sight if the credit is available by sight payment. b.to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c.to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance. Honour means: a.to pay at sight if the credit is available by sight payment. b.to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c.to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

11 Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order

12 Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order Pro-Forma Invoice :41Aavailable with/by - swift addr : BOFI IE 2D BANK OF IRELAND DUBLIN BY SIGHT PAYMENT AGAINST PRESENTATION OF DOCUMENTS :41Aavailable with/by - swift addr : BOFI IE 2D BANK OF IRELAND DUBLIN BY DEFERRED PAYMENT AT 180 DAYS FROM SHIPMENT DATE AGAINST PRESENTATION OF DOCUMENTS :41Aavailable with/by - swift addr : BOFI IE 2D BANK OF IRELAND DUBLIN BY ACCEPTANCE OF DRAFTS AT 180 DAYS FROM SHIPMENT DATE Article 2 - Definitions - HONOUR Honour means: a.to pay at sight if the credit is available by sight payment. b.to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c.to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance. Article 2 - Definitions - HONOUR Honour means: a.to pay at sight if the credit is available by sight payment. b.to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c.to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

13 Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. The UCP 600 concept of Negotiation

14 Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order Article 2 - Definitions - Negotiation Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. Article 2 - Definitions - Negotiation Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. :41Aavailable with/by - swift addr : NB BA 2N NL NOMBA BANK INTL BY NEGOTIATION OF DRAFTS AT SIGHT DRAWN ON ISSUING BANK :41Aavailable with/by - swift addr : NB BA 2N NL NOMBA BANK INTL BY NEGOTIATION OF DRAFTS AT SIGHT DRAWN ON ISSUING BANK :41Aavailable with/by - swift addr : BOFI IE 2D BANK OF IRELAND DUBLIN BY NEGOTIATION OF DRAFTS AT 120 DAYS FROM SHIPMENT DATE DRAWN ON ISSUING BANK :41Aavailable with/by - swift addr : BOFI IE 2D BANK OF IRELAND DUBLIN BY NEGOTIATION OF DRAFTS AT 120 DAYS FROM SHIPMENT DATE DRAWN ON ISSUING BANK

Exporter Beneficiary Importer Applicant Importer Applicant UCP 600 AND LC CYCLE Purchase Order Article 4 Credits v. Contracts a. A credit by its nature is a separate transaction from the sale or other contract on which it may be based. Banks are in no way concerned with or bound by such contract, even if any reference whatsoever to it is included in the credit. Article 4 Credits v. Contracts a. A credit by its nature is a separate transaction from the sale or other contract on which it may be based. Banks are in no way concerned with or bound by such contract, even if any reference whatsoever to it is included in the credit. Article 5 Documents v. Goods, Services or Performance Banks deal with documents and not with goods, services or performance to which the documents may relate. Article 5 Documents v. Goods, Services or Performance Banks deal with documents and not with goods, services or performance to which the documents may relate. INVOICE

BANK WHERE CREDIT IS AVAILABLE Are these documents real???? As a banker I check documents….which evidence peformance.. If the documents comply the bank must. ? Article 34 Disclaimer on Effectiveness of Documents A bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document, or for the general or particular conditions stipulated in a document or superimposed thereon; nor does it assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods, services or other performance represented by any document, or for the good faith or acts or omissions, solvency, performance or standing of the consignor, the carrier, the forwarder, the consignee or the insurer of the goods or any other person. Article 34 Disclaimer on Effectiveness of Documents A bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document, or for the general or particular conditions stipulated in a document or superimposed thereon; nor does it assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods, services or other performance represented by any document, or for the good faith or acts or omissions, solvency, performance or standing of the consignor, the carrier, the forwarder, the consignee or the insurer of the goods or any other person. Letters of Credit Advanced Workshop Section – I – Technical Analysis

17 Draft and Calculation of Maturity Date Background to ISBP and Preliminary Considerations General Principles Invoices Transport Documents Insurance Documents Certificate of Origin Other Documents

* Appears to have been issued by the Benef. (or second Benef.) * Description is to correspond to LC’s. (no requirement for a mirror image). LC’s description is “BLACK COLOUR HANOKI BRAND BRIEF CASES – TOTAL 2000 PCS” CPT BREEZEPORT INCOTERMS 2010” * To indicate value and currency (and unit price if any), as well as trade term and its source, when stated as part of goods description * Need not be signed or date * Made out in the name of Applicant or First Beneficiary (UCP 600 sub-article 18 a.ii) * May indicate a discount or advance payment, even if not stated in the LC * Must no indicate an over- shipment, except as provided in UCP 600 sub-article 30 (b)

19 a The word indicates that: ICC Opinion The goods description in the commercial invoice and in the LC must be ‘in harmony’ with each other. correspond

20 MT 700 ISSUE OF A DOCUMENTARY CREDIT 45A/DESCRIPTION OF GOODS AND/OR SERVICE: BRIGHT YELLOW SULPHUR IN BULK. 213

PETRO BY-PRODUCTS LTD. LC WITHIN 5% MORE LC AMT NOT OVER- DRAWN

And then stating what has ACTUALLY being shipped is ACCEPTABLE. An invoice showing the entire goods description as stated in the LC

LC

SIGNING OF BILLS OF LADING S i g n e d

Issuance Dates Amount, Risk Coverage, endorsement and other issues Insurance Document and Coverage

Issuance An insurance document is to appear to have been issued and signed by an: -insurance company or its agent or proxy. -Underwriter or its agent or proxy. When an issuer is identified as “insurer”, the document need not indicate that is an insurance company or underwriter

Issuance If as requested by the credit or evident from the insurance document, that it is issued in more than one original: All originals are to be presented Under UCP 600 what is minimum insurance coverage percentage?