UCP 600 Article 7: Examining Bills of Lading Under the Issuing Bank Undertaking
Introduction
When a bill of lading is presented under a documentary credit, the issuing bank's obligation under Article 7 is triggered if the presentation complies. The bill of lading must meet the requirements of Article 20 (transport documents), the credit terms, and ISBP 745 Section D. The issuing bank's examination is governed by Article 14, and its obligation to honour arises upon a complying presentation per Article 7(a). The bill of lading is the most commonly required transport document, and its compliance is often the deciding factor in whether the issuing bank must pay.
ICC trade-finance guidance and documentary credit publications provide context on bill of lading examination. The operative rules come from UCP 600 Articles 7, 14, 20, and ISBP 745 Section D.
Failure Mode Analysis
Failure Mode 1: Bill of lading lacks on-board notation
The bill of lading is presented without an on-board notation. Article 20(a)(iii) requires an on-board notation. Without it, the bill of lading does not comply and the issuing bank is not obligated to honour under Article 7(a).
Failure Mode 2: Bill of lading signed by wrong party
The bill of lading is signed by the shipper rather than the carrier, master, or agent. Article 20(a)(ii) requires signing by the carrier, master, or agent. Signing by the shipper does not satisfy this requirement.
Failure Mode 3: Bill of lading data conflicts with credit
The bill of lading describes the goods differently from the credit description. Article 14(d) prohibits data conflicts. The issuing bank must find a discrepancy if the descriptions conflict.
Failure Mode 4: Bill of lading presented to wrong bank
The beneficiary presents the bill of lading to a bank that is not the nominated bank or issuing bank. Article 7(a) requires presentation to the nominated bank or issuing bank. Presentation to the wrong bank does not trigger the issuing bank's obligation.
Deterministic Resolution Architecture
- Confirm the bill of lading is signed by the carrier, master, or agent per Article 20(a)(ii).
- Verify the on-board notation is present per Article 20(a)(iii) and ISBP 745 D6.
- Confirm the bill of lading description does not conflict with the credit or other documents per Article 14(d).
- Verify the bill of lading is presented to the nominated bank or issuing bank per Article 7(a).
- Confirm the presentation is made on or before the expiry date per Article 6(e).
- Allow five banking days for examination per Article 14(a).
- If the presentation complies, confirm the issuing bank must honour per Article 7(a).
- If discrepancies are found, issue a single rejection notice per Article 16(b).
Conclusion
The issuing bank's obligation under Article 7 arises upon a complying presentation. The bill of lading must meet Article 20 requirements and ISBP 745 standards. The issuing bank examines the bill of lading under Article 14 and must honour if the presentation complies.
FAQ
Does the issuing bank have to honour if the bill of lading lacks an on-board notation?
No. Article 20(a)(iii) requires an on-board notation. Without it, the bill of lading does not comply.
Can the issuing bank refuse a bill of lading signed by the carrier's agent?
No. Article 20(a)(ii) permits signing by the carrier, master, or agent. Any of these is acceptable.
What if the bill of lading is presented to the wrong bank?
Article 7(a) requires presentation to the nominated bank or issuing bank. Presentation to the wrong bank does not trigger the issuing bank's obligation.
Does the issuing bank have to examine the bill of lading within five days?
Article 14(a) provides five banking days for examination. The bank must determine compliance within that period.
What happens if the bill of lading data conflicts with the credit?
Article 14(d) prohibits data conflicts. The issuing bank must refuse the presentation per Article 16.
Source Notes
- Canonical authority: UCP 600 Articles 7, 14, 20; ISBP 745 Section D.
- Live context: ICC Academy documentary-credit guidance and trade-finance commentary surfaced through Google News RSS. Context only.
UCP 600 Article 7(a) provides that the issuing bank must honour a complying presentation.
| Regulation | Article / Section | Requirement | Consequence |
|---|---|---|---|
| UCP 600 | Article 7 | Issuing Bank Undertaking | Binary determination (compliant/discrepant) |
| UCP 600 | Article 20 | Bill of Lading | Binary determination (compliant/discrepant) |
| UCP 600 | Article 14 | Standard for Examination of Documents | Binary determination (compliant/discrepant) |
| UCP 600 | Article 6 | Availability, Expiry Date and Place for Presentation | Binary determination (compliant/discrepant) |
| UCP 600 | Article 16 | Discrepant Documents, Waiver and Notice | Binary determination (compliant/discrepant) |
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Quick Reference Summary
- No reference captured.
Compliance Checklist
| ✓ What Banks Expect | ✗ What Beneficiaries Often Do Wrong |
|---|---|
| Bill of lading lacks on-board notation | The bill of lading is presented without an on-board notation. Article 20(a)(iii) requires an on-b... |
| Bill of lading signed by wrong party | The bill of lading is signed by the shipper rather than the carrier, master, or agent. Article 20... |
| Bill of lading data conflicts with credit | The bill of lading describes the goods differently from the credit description. Article 14(d) pro... |
| Bill of lading presented to wrong bank | The beneficiary presents the bill of lading to a bank that is not the nominated bank or issuing b... |
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