ISP98, A Success Story

Every good story has a beginning, a middle, and an ending. I was there at the beginning of ISP98, its conception so to speak. Next, I participated in its creation and birth, and then helped ISP98 grow up and mature into its prime. Now, I look forward to ISP98’s future. It is fair to say ISP98 has already been proven a success.

The Vision

In the 1990s, some of us who worked on the revision of the United States’ Uniform Commercial Code (UCC) Article 5 on Letters of Credit (LCs) were frustrated by the way the Uniform Customs and Practice for Documentary Credits (UCP) treated standby LCs as second-class citizens as compared to commercial LCs. The UCP was drafted decades earlier to accommodate commercial LCs, and its focus remained on commercial LCs and the documents typically presented under these instruments (e.g., transport documents, insurance documents, invoices, packing lists, and related documents needed to clear customs). However, in recent decades the usage of standby LCs had grown greatly and the outstanding face amount of undrawn standby LCs exceeded the outstanding face amount of undrawn commercial LCs.

Since 1983, multiple versions of the UCP have provided that its rules apply to standby LCs “to the extent to which they may be applicable” but no similar statement was made as to commercial LCs, even though both statements would obviously be true (e.g., the 2007 version of the UCP, ICC Publication No. 600, Article 1). See also the 1983 version (UCP400) and the 1993 version (UCP500).

Not all articles of the UCP would apply to a particular standby LC any more than they would apply to a particular commercial LC. For example, UCP600 Article 23 (Air Transport Document) does not apply to an LC that does not call for the presentation of an air transport document, regardless of whether that LC is a commercial LC or a standby LC. The drafters of the UCP felt no need to state a rule that UCP Article 23 and other UCP articles apply to a commercial LC “to the extent to which they may be applicable,” but they felt a need to state such a rule as to standby LCs.

Some of us discussed whether the UCP might be revised to treat all types of LCs more even handedly. For instance, there could be a section of general rules that would apply to all LCs unless a particular LC provided otherwise, a section that focused on commercial LCs and a section that focused on standby LCs. As those discussions progressed, and as we received feedback on the likely response from the ICC, it became evident to many of us that it was preferable to draft a set of practice rules focused on standby LCs.