UCP - Will It Ever be Perfect?

LC VIEWS, 20 May 2006

Disclaimer

The names of the parties, as well as the data and information in the cases stated below, have been sanitized in order to protect the identity of the parties involved. The complexities of the cases have also been simplified to facilitate easy understanding of the key issues involved.
Our expert's opinions do not necessarily reflect the views of the ICC or the ICC Commission on Banking Technique and Practice. No legal imputation should be attached to any of the contents of the cases and no legal responsibility is accepted for any errors, omissions or misleading statements or opinions caused by negligence or otherwise. Our expert's opinions are given for your reference only and you should not rely upon or act on our opinions, of which we are not held liable. You should consult your legal counsel or other experts for their opinions in your specific cases.
No article, opinion, or comment can be reproduced in whole or in part without our express written permission.

Every UCP has been controversial as is evident from the recurrent queries for clarifications. Confusion led to controversy led to clarification. Alas, even the new UCP has become controversial at drafting stage. Will there be ever prefect UCP? The LC specialists debate reasons, suggestions. and expectations.
T.O. Lee's Disappointment and Resultant Suggestions
I am a little bit disappointed at the progress of UCP 500 Revision. Here are some main points suggested for improvements:

The definition of the applicant has to be redrafted or it better be removed. The reasons have already been elaborated by Ravi (click "need to refine what they define") and I am not going to reiterate here. It should follow ISP98 wording for consistency.
The transport articles have been updated to a certain extent to follow the transport practices but not enough has been done. Here are some comments for improvements:

I am glad that one of my prayers has been answered, such as in the new draft, when an agent signs for the master, the name of the master needs not be given. Mr. Heinz Hertl objects to this change and I am glad to explain to him the underlying reasons when he meets me in Vienna one week later.
The article for bill of lading should have the words "port-to-port" deleted as some carriage are in fact by "land bridge" mode, for example for sea carriage from Hong Kong to New York, the cargoes may be discharged in San Francisco and carried onward by train or truck to New York over land. The new BIMCO Conlinebill 2000 may resolve this problem by showing San Francisco as the port of discharge and New York as the place of final destination. But if the document checker is trying to be difficult he may still name these as discrepancies because (i) it is a multimodal transport carriage, not 100% port-to-port carriage and that (ii) the port of discharge is San Francisco, not consisting with that in the letter of credit, New York.
Sea waybills should not be treated same as bills of lading, because they are different transport documents, particularly that the new article requires full set of original sea waybills and that the sea waybill should indicate number of originals issued because these are against the current trade practices. Full details have already been pointed out in FIATA's opinions to the ICC Banking Commission and I am glad that Mr. Chris Gillespie, the Chair of FIATA has supported my views in his opinions. Please click below for this FIATA opinion:
http://www.tolee.com/html/ucp600_letter_apr06.htm
Concerning partial shipments, the new draft only allows loading on board at different dates at a range of ports of loading. It does not include discharge on different dates at a range of ports of discharge. This is not consistent with the trade practice in commodity trade. I did this thirty years ago in timber and log trade, shipping logs and timber from a range of Indonesian and Malaysian ports of loading to a range of ports of discharge in Taiwan, Japan and South Korea.

For insurance articles, the effective date of an insurance document has nothing to do with its effective date. It is based on the Transit Clause under the Duration Clause in clause 8.1 of Institute Cargo Clauses (A), (B) or (C). I have written a lot of articles on this topic but the Drafting Group still insist not to change a word. I am very disappointed that they do not respect the trade practice of the insurance trade and have seriously jeopardised the backbone doctrine of the insurance profession. It appears that we can only rely on a future juridical decision to make ICC change the wording of this sub-article. The document checkers should not buy "convenience in checking document" with a price paid by the insurers.
I suggest ICC Banking Commission to work hand in hand with the ICC Insurance Commission to publish acceptable exclusion clauses from time to time to catch up with the ever changing trade environment. Words of the same effect should be written into the new insurance articles as from time to time we may have new exclusion clauses created due to unforeseen circumstances.
I am glad that ICC Banking Commission has reversed their previous opinion that when the letter of credit stipulates insurance amount to be 100% of CIF value, the insurance amount in the presented insurance document must be accurate up to two places after decimal. For details of this article please click below:
http://www.tolee.com/html/col241.htm
Having said all these, I think we should not blame the Drafting Group entirely as they cannot have active feedbacks from the ICC Commissions on transport and insurance upon consultation. Despite my article "Inconsistencies Among Terms Used in ICC Rules" published in Documentary Credits Insight (Volume 6, No 4), to urge the different ICC Commissions to work together as a team, and my suggestions are further supported by the past Secretary-General of ICC, Maria Cattuai, it seems that the situation has not been improved.

(905) 237-6465

(905) 237-6867