Latest ICC Briefing Paper on UCP600 Practice Addresses Amendments

In an attempt to clarify aspects of UCP600 Article 10, the ICC Banking Commission has issued its 10th Technical Advisory Briefing.

TAB No. 10, “Acceptance or rejection of an amendment, by a beneficiary, under a documentary credit issued subject to UCP 600”, was released 5 August 2024.

Although TAB-10 posits that UCP600 Sub-Article 10(c) provides “clear details” of the rules regarding beneficiary notification of acceptance or rejection of an amendment, the rules are not always well understood and followed in practice. Hence, the ICC identified a need for guidance in the form of an educational briefing.

Based on UCP600 Sub-Article 10(a), a UCP600 credit can only be amended with the agreement of the issuing bank, the confirming bank, if any, and the beneficiary. TAB-10 goes on to discuss key features of UCP600 Article 10 impacting these parties and under various scenarios.

In its role, a confirming bank has no obligation to extend its confirmation to an amendment. If it is not prepared to extend its confirmation, but is willing to advise the amendment, the confirming bank is to indicate to the beneficiary that its confirmation does not apply as regards that amendment and must inform the issuing bank “without delay” (the subject of TAB-2 and previous reporting).  

A beneficiary should give notification of acceptance or rejection of an amendment, but if it does not, the amendment remains a pending offer and the beneficiary is not bound to comply with its content. As explained by TAB-10: “Some form of affirmatory action is required by the beneficiary to be bound by the (amendment’s) content.” 

Confusion can arise regarding what constitutes acceptance or rejection of an amendment.

The Briefing outlines an example whereby a presentation covering a partial shipment which complies with the credit but not an amendment’s content does not necessarily mean that the beneficiary has rejected the amendment since the amendment may pertain to future shipment(s).  

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Relating to such a scenario, the Briefing also addresses a tactic it considers “not good practice”: Issuance of credits which require presentation of a certificate by the beneficiary indicating which amendments have been accepted or rejected whenever one or more amendments have been issued. The problem with this type of requirement is that it fails to cover the possibility of a still-pending amendment applying to a future shipment.

In its Analysis, TAB-10 reinforces the critical role of the beneficiary in the amendment process and what this means for banks. Where a nominated bank has provided a beneficiary with an express agreement to honour or negotiate, as per UCP600, the bank may need to stipulate in such agreement the process for acceptance or rejection of amendments.

For its part, an issuing bank is irrevocably bound by an amendment as of the amendment’s issuance, irrespective of whether a confirming bank extends its confirmation to that amendment. And if a confirming bank extends its confirmation to an amendment, it is irrevocably bound at that point.

While it is expected that a beneficiary provides notice of acceptance or rejection of an amendment, beneficiaries often fail to give notification. UCP600 Sub-Article 10(c) states that “a presentation that complies with the credit and to any not yet accepted amendment will be deemed to be notification of acceptance by the beneficiary of such amendment. As of that moment the credit will be amended.”

In situations where a presentation complies with the credit both with and without an amendment, the amendment’s status remains unclear. Under such circumstances, TAB-10 advises that “it may be necessary for a bank to contact the beneficiary in order to clarify and determine whether or not the beneficiary has accepted an amendment.”

When a beneficiary’s presentation of documents does not include any acceptance or rejection of an amendment and such presentation complies with the original credit but not with the amended terms and conditions, the amendment will be considered to have not yet been accepted or rejected by the beneficiary. A beneficiary may accept or reject an amendment at any time and the Briefing references further options available to it.

As a final note, TAB-10 reminds of the UCP600 Article 10(f) rule that an amendment must not include a condition to the effect that the amendment will enter into force unless rejected by the beneficiary within a certain period of time. If it does, such provision shall be disregarded.

In its concluding summary, TAB-10 underscores the beneficiary-friendly nature of UCP600 Article 10 regarding amendments. A beneficiary should notify of its acceptance or rejection of an amendment, but is under no obligation to do so in a timely fashion, may delay its decision, or may even refrain from providing any specific notification.       

TAB-10 and previously issued technical advisory briefings are freely available at the ICC Digital Library.

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