Introduction
The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No. 600 (UCP 600) provides internationally recognized rules for documentary credits.
But an important question comes first:When does UCP 600 actually apply to a Letter of Credit?
The answer is found in UCP 600 Article 1 – Application of UCP.
Article 1 establishes the foundation for understanding the entire UCP 600 framework. It explains when the rules apply, the types of credits covered, who is bound by the rules, and how the rules can be modified or excluded.
For CDCS candidates, Article 1 is a relatively short article—but it is an important foundation for understanding the rest of UCP 600.
1. What does UCP 600 Article 1 mean?
In simple terms:
UCP 600 applies when the documentary credit expressly states that it is subject to UCP 600.
UCP 600 does not automatically apply simply because a transaction involves a bank, an LC, or international trade.
The credit must expressly incorporate the rules.
Example
An LC contains the following statement:
“This Documentary Credit is subject to UCP 600, ICC Publication No. 600.”
This means UCP 600 applies to the credit, subject to any express modifications or exclusions contained in the credit.
2. Express Incorporation Is Important
Article 1 states that the rules apply when:
the text of the credit expressly indicates that it is subject to these rules.
Therefore, UCP 600 should not be treated as automatically applicable merely because it is commonly used in documentary credit transactions.
Think of it this way:
No express incorporation → UCP 600 does not automatically apply.
Express incorporation → UCP 600 applies, subject to the terms of the credit.
This is one of the first concepts a CDCS candidate should understand.
3. Does UCP 600 apply to Standby Letters of Credit?
Yes.
Article 1 specifically recognizes that UCP 600 can apply to:
standby letters of credit
However, the wording “to the extent to which they may be applicable” is important.
A standby LC may have a different commercial purpose from a traditional commercial documentary credit, but UCP 600 rules can apply where the standby is subject to UCP 600.
Practical takeaway
Don't assume:
“Standby LC = ISP98 only.”
A standby LC can be subject to UCP 600 if its terms expressly incorporate UCP 600.
4. Who is bound by UCP 600?
Once UCP 600 has been incorporated into the credit, Article 1 provides that the rules are binding on the parties to the credit unless expressly modified or excluded by the credit.
Depending on the transaction, relevant parties may include:
Issuing Bank
Confirming Bank
Nominated Bank
Beneficiary
Other parties involved in the documentary credit transaction, as applicable
Important point
The beneficiary cannot simply decide:
“I don't want UCP 600 to apply to me.”
If the credit is subject to UCP 600, its rules form part of the documentary credit framework unless the credit itself modifies or excludes applicable provisions.
5. Can UCP 600 Articles be modified?
Yes.
Article 1 allows the rules to be modified or excluded by the credit.
This is a very important concept.
Modification
Modification means that the credit changes the way a particular UCP 600 rule operates.
Example
UCP 600 Article 14(c) provides a standard 21-calendar-day presentation period for certain original transport documents.
Suppose the credit states:
“Documents must be presented within 15 calendar days after the date of shipment.”
The credit has modified the applicable presentation period.
So, when examining the presentation, the parties must consider the 15-day requirement stated in the credit.
6. What does "exclusion" mean?
Exclusion means that the credit expressly removes the application of a particular UCP 600 provision.
For example, a credit could expressly state that a particular UCP 600 article is excluded.
Important principle
The modification or exclusion should be clear and express.
Do not assume that a UCP 600 provision has been excluded merely because the credit contains wording that appears inconsistent with it.
For CDCS purposes, remember:
UCP 600 applies — but the credit can expressly modify or exclude its provisions.
7. Practical Example: Excluding Article 32
Let's look at an important example involving instalment shipments.
Suppose a documentary credit is issued for:
USD 60,000
with three monthly instalments:
| Month | Shipment |
|---|---|
| January | USD 20,000 |
| February | USD 20,000 |
| March | USD 20,000 |
The credit is subject to UCP 600.
Under the normal operation of UCP 600 Article 32, failure to make a required instalment drawing or shipment within the relevant period has consequences for subsequent instalments.
Now suppose the credit expressly states:
“UCP 600 Article 32 is excluded. Non-utilization of any instalment shall not affect subsequent instalments.”
The effect is different.
Scenario
January: Shipment completed ✅
February: Shipment not made ❌
March: Shipment made ✅
Because Article 32 has been expressly excluded and the credit provides its own treatment, the failure to use the February instalment does not automatically prevent the March instalment from being utilized, subject to the exact wording and other terms of the credit.
CDCS lesson
This is an excellent example of why you should read the credit terms together with UCP 600.
Don't simply memorize:
“Article 32 says X.”
Instead ask:
“Does the credit modify or exclude Article 32?”
That is the kind of thinking required when dealing with documentary credit cases.
