US UCC Article 5’s Non-Variable Provisions

I teach a lot of classes on letters of credit and I feel it is important to educate people who will actually be issuing and paying letters of credit in the United States on not just the practice rules but also Article 5 of the US Uniform Commercial Code. “UCC Article 5”, as it is known, is the law governing letters of credit issued in the United States.

When someone asks, “Should I issue letters of credit that are subject to both UCC Article 5 and either the ISP or the UCP?”, it indicates a basic misunderstanding about UCC Article 5. The fact is that UCC Article 5 applies to every letter of credit issued in the US whether the credit says so or not. It’s the law. (It’s actually a state law, but it has been adopted with very little variation in all 50 US states, the District of Columbia, and US Virgin Islands. The only way to avoid it with a credit issued in the US is to state in your letter of credit that it is subject to the laws of some other country.)