To standardise terms and procedures and avoid misunderstandings, a set of international rules for letters of credit have been developed by the International Chamber of Commerce (ICC).
Most commercial letters of credit are governed by these rules, which are referred to as Uniform Customs and Practice for Documentary Credits (UCP). The current version of the rules is UCP 600, which came into effect on 1 July 2007.
The UCP standards give definitions of important terms that are used in letters of credit. When referring to letters of credit, banks and others involved in international trade will generally use the UCP definitions of key terms and phrases.
UCP also sets out general documentary requirements and standard practices for handling letters of credit.
Using UCP 600 letters of credit
Because UCP 600 standards are internationally recognised it's always best to use letters of credit that are covered by them. If you're an importer you may well find that sellers require you to use UCP letters of credit.
If a letter of credit is subject to UCP it will state this somewhere on it. It might include a statement like 'This letter of credit is subject to the latest version of Uniform Customs and Practice for Documentary Credits published and updated by the International Chamber of Commerce'.
Be aware that in some instances the definitions and procedures set out in the UCP standards may differ from the laws of a particular country.