Bergami, Roberto (2007) Will the UCP 600 Provide Solutions to Letter of Credit Transactions? International review of business research papers, 3 (2). pp. 41-53. ISSN 1832-9543

Abstract

It is generally accepted that international trade transactions carry inherently more risk than domestic trade transactions, because of differences in culture, business processes, laws and regulations. It is therefore important for traders to ensure that payment is received for goods despatched and that the goods received and paid for comply with the contract of sale. One effective way of managing these risks has been for traders to rely on the letter of credit as a payment method. However for exporters in particular, the letter of credit has presented difficulties in meeting the compliance requirements necessary for the payment to be triggered. The current rules that govern letter of credit transactions (UCP 500) have been under review for the past three years and an updated set of rules (UCP 600) is expected to be introduced on 1 July 2007. This paper focuses on the changes mooted for 2007 and compares these main issues with the existing rules and other associated guidelines and regulations governing this method of payment. The conclusion is that the UCP 600 have not paid enough consideration to traders and service providers and are likely to engender an environment of uncertainty for exporters in particular.

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