by Roy Becker

In the early 1900s as large New York banks became more involved in financing international trade and issuing letters of credit, they discussed the need for a standardization of the way banks process and interpret letters of credit. A committee formed to develop common rules and the banks agreed to standardization around 1915. Soon thereafter, banks in Europe saw the need to do the same.

As time passed, it became apparent that banks all over the world should process and interpret letters of credit uniformly. Again a committee formed, with representation from many countries, under the auspices of the International Chamber of Commerce (ICC).

The first universally accepted rules developed in 1935, entitled, Uniform Customs and Practice for Documentary Credits, usually referred to simply as the UCP. Since 1935 it has gone through several revisions, usually about every 10 or 12 years. The 2007 revision, International Chamber of Commerce Brochure No. 600, well written in plain English with no legalese, has become a guide for anyone who works with letters of credit.

Every letter of credit needs interpretation in light of the 39 articles of the UCP. Although one would not read the UCP for leisure, the document contains valuable information and anyone who works with letters of credit should have one close at hand. The ICC makes the book available on its website, and many local international banks provide copies for their customers.

While banks typically spearhead the drive for each revision, they consult many different interest groups who may also have a hand in its writing. These include shipping companies, insurance companies, exporters and importers.