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  • Incorporating UCP 600 in the sales contract

     
     

    The major advantage of incorporation for a seller is that, where the rules are incorporated, he will know in advance the criteria against which the banks will examine the shipping documents in deciding whether or not to pay under the credit. The major advantage of incorporation for a buyer is that he will know in advance the criteria against which the price for the goods will be paid against tender of documents. However, for the buyer to be under an obligation to open a letter of credit governed by the UCP 600, the sale contract needs to include an express condition imposing such an obligation on the buyer. Only with such a condition in place can the seller object if the buyer were to open a letter of credit that is not governed by the UCP, e.g. 'Payment by irrevocable letter of credit, incorporating UCP 600'.

    However, buyers may still stipulate in the credit that certain aspects of the UCP rules are excluded, provided of course this was laid down in the sales contract.

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