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Introduction
The Uniform Customs and Practice for Documentary Credits (UCP) is of great significance because it is the set of rules made by the International Chamber of Commerce (ICC) to govern the operation of letters of credit around the world. In accordance with the international nature of this instrument, the objective of the UCP is to harmonize the practice and laws of letters of credit. Despite the fact, the UCP is not a code having the force of law, it is universally recognized and is incorporated into almost all letters of credit in international trading. The UCP 600 came into force on 1 July 2007, after three years of drafting efforts to replace UCP 500. A revision became necessary because international trade has evolved and UCP 500, introduced in 1994, no longer dealt with the practice of letters of credit transactions adequately.
Before payment is effected, a beneficiary will have to present documents to the bank and the bank will examine the documents against the requirements of the credit. If the documents comply with the principle of strict compliance, the bank will have to make payment and the issuing bank will advise the applicant that payment is due. If the documents fail to comply with the terms of the credit, the bank will need to reject the documents or obtain a waiver of the discrepancies, causing further delays. This article will examine the provisions in UCP 600 addressing issues of document discrepancies. The writer will make comparisons with UCP 500 in order to analyse the changes brought about by the new UCP and the extent to which it succeeds in solving discrepancy problems existing under the old UCP. In fact, one of the main foci of the revision process was to address the persistent discrepancy issues and to reduce the incidence of rejection of documents. It is important to analyse the new revision since there are changes which will affect businesses engaged in international trading and the way banks facilitate the financing of goods. From a seller's perspective, understanding how documents will be compliant under the new UCP 600 is very important since rejection of documents can cause substantial monetary losses, delay in time and unwarranted litigation. It is also important for banks to study...