Executive Summary
The UCP600 provides a global standard set of practices for letters of credit.
Anyone engaged in international trade, whether selling goods, buying goods, or providing financing, needs to be familiar with the UCP600.
While the UCP is designed for use with commercial letters of credit, it is often used for standby letters of credit, a reliable type of bank guarantee.
The most important principles of letters of credit set down in the UCP are the independence principle, and the principle that banks deal in documents, not goods.
The UCP defines the responsibilities of banks involved in handling letters of credit and provides rules for examining documents they call for; documents must strictly comply in order to trigger the issuing and confirming banks’ payment obligation, but if documents do not strictly comply, the banks must themselves follow strict rules for refusing payment.
Parties who have used the UCP to govern their standby letters of credit and bank guarantees in the past should seriously consider using the International Standby Practices instead.