Our contributor, Xavier Fornt, examines the practical and legal distinctions between UCP 600 and ISP98, highlighting their differing applications to documentary and standby letters of credit, and clarifying key variations in document requirements, timeframes, renewals, and beneficiary expectations in international banking practice.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of ICC Academy or ICC.
Documentary credits may be issued subject to UCP 600 or to ISP98.
According to Article 1 of UCP 600, the rules are also applicable to standby letters of credit. However, standby letters of credit have their own framework under ISP 98. Reading the scope and application in Rule 1.01 of ISP98, we see that this set of rules is intended to apply only to standby letters of credit.
There is no reciprocity between the two frameworks.
Read: ‘Geopolitics & sanctions: Challenges for UCP 600 & documentary credits‘
UCP 600 and ISBP 821 Practitioner
Applicability of UCP 600 and ISP98
Scope of UCP 600 under Article 1
UCP 600 is designed to govern documentary credits in general, though it explicitly extends its applicability to standby credits.
Scope of ISP98 under Rule 1.01
By contrast, ISP98 is intended exclusively for standby letters of credit, as confirmed in its general provisions.
Lack of reciprocity
While UCP 600 may apply to standby letters of credit, ISP98 does not extend to traditional documentary credits.
Read: ‘Evolution of UCP 600 and its impact on documentary credits‘
Practical differences between UCP 600 and ISP98
Purpose of beneficiaries: use versus non-use
While a documentary credit beneficiary anticipates using the instrument as part of the transaction, a standby credit beneficiary relies on its presence as security, with the intention that it will never actually be invoked.
Document requirements: Originals versus copies
Under UCP 600 (sub-article 17 (a)), original documents are required unless otherwise stated. Under standby credits, however, copies are usually acceptable, apart from the demand itself.
Renewals and extensions of credit
Documentary credits are not intended to be renewed. Under ISP98 (Rule 3.09), renewal is expressly possible.
Timeframes for presentation and dishonour
Under UCP 600 (sub-article 14(c)), the beneficiary may have up to 21 days after shipment to present documents. ISP98 requires that a notice of dishonour be given within a reasonable time after presentation (Rule 5.01a).
Language requirements
While UCP 600 may remain silent on the language of documents, Reference should be made to ISBP 821 paragraph A21. ISP98 (Rule 4.04) specifies that documents must be presented in the language of the standby.
Demand for payment: necessity in ISP98
In UCP 600, no separate demand for payment is required. In ISP98, however, a demand for payment is usually necessary.
Time allowed for document examination
Banks have up to five business days to review documents under UCP 600 (sub-article 14(b)). Under ISP98, the timeframe ranges between three and seven business days (Rule 5.01).
Presentation and expiry times
UCP 600 does not require specification of the exact hour for presentation (Article 33 ). Under ISP98, a standby may state a specific time of day for expiry.
Syndication possibilities
UCP 600 does not provide for syndication (although it is certainly feasible), whereas ISP98 expressly allows it (Rule 10.01).
Transferability of credits
While credits issued under UCP 600 allow partial transfer (Art. 38), credits issued under ISP98 only allow full transfer (Rule 6.02).
Key takeaways on UCP 600 and ISP98
UCP 600 rules are developed by the ICC Banking Commission, while ISP98 reflects rules of the Institute of International Banking Law and Practice, endorsed by the same commission.
Though the frameworks may appear similar, they are distinct in purpose and application.
Certified UCP 600 Specialist (CUCP)
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