The UCP does not, as such, offer standardised definitions for the types of credits as we would
normally come across in textbooks. As will be evident in due course, the definitions and
characteristics of certain types of credits have to be derived from the articles in the UCP or the
purpose the credit is created to serve.
For example, although UCP 600 contains a separate article (Article 2 titled Definition) introduced
for the first time ever in any UCP, this article does not include a formal definition of any type of
documentary credit â€“ save and except one. The UCP being all about documentary letters of credit
(or simply â€˜creditâ€™, as the UCP terms it nowadays) Article 2 does define a â€˜creditâ€™. It is defined
as an arrangement that is irrevocable in nature. However, what makes a credit irrevocable, the
features that characterises an â€˜irrevocableâ€™ credit, are available not under Article 2 (devoted to
â€˜definitionsâ€™) but elsewhere in the UCP.
Similarly, Article 8 describes the liabilities and responsibilities of a confirming bank. A close
study of this article reveals the special characteristics of a credit confirmed by another bank.
Accordingly, we get to learn all about confirmed credits. By extension of this logic, we may define
â€˜unconfirmedâ€™ credits as those which are not â€˜confirmedâ€™, and hence not covered by Article 8.
Article 6(a) calls on the issuing bank to state with which bank a credit is made available.
Article 6(b) states that, â€˜a credit must state whether it is available by sight payment, deferred
payment, acceptance or negotiation.â€™ Thus, the UCP provides a clue as to how a credit could
be distinguished according to its availability. However, the UCP â€“ being about rules rather
than procedures â€“ does not define â€˜availabilityâ€™ clearly. The very same credit, therefore, could
be â€˜available by negotiationâ€™ with a nominated bank, while simultaneously being â€˜available by
sight paymentâ€™ (honour) with the issuing bank.
Proceeding further, Article 32 deals with â€˜instalment drawing or shipmentâ€™ and outlines the
characteristics of a credit available by instalment. This article, therefore, helps us to categorise
such credits as one of the types of credit that we should know about. Finally, Article 38 of UCP
600 devotes itself exclusively to transferable credits. Sub-article 38(b) also defines a transferable
Thus the UCP, through its various articles, helps us to define and profile certain types of credits.
But the list does not end here. The types of credits extend beyond those described in the UCP.