A Letter of Credit (LC) is an arrangement by means of which a bank (issuing bank) acting at the request of a customer (applicant), undertakes to pay to a third party (beneficiary) a predetermined amount by a given date according to an agreed stipulation and against presentation of stipulated documents e.g., the timeframe and the submission of precise documents. Letters of Credit are considered as the lifeblood of commerce. The uniformity and standard understanding in their use, application and meaning have been achieved by the publication of Uniform Customs and Practices for Documentary Credits (UCPDC) by the International Chamber of Commerce (ICC), subject to which LCs are generally issued. UCPDC is applicable to all documentary letters of credit, where they are so cited into the text of the LC. UCPDC is standardized code of practice issued by the International Chamber of Commerce in Paris covering Documentory Credits. It can be considered as the best example of universally acceptable private rule making. Presently, an estimated $1 tn a year in trade (i.e., nearly 15% of world trade) is done with letters of credit issued under UCPDC.
ICC is the voice of world business, championing the global economy as a force for economic growth, job creation and prosperity with "The World Business Organization" as its trademark. Setting rules and standards is one of its activities. The present rules include the above mentioned UCPDC governing LC transactions, URR (Publication 525) guiding the Bank-to-Bank reimbursements under LCs, URC (Publication 522) covering collection documents, supplementary rules like e-UCP & ISP98 (Publication 590) etc. ICC issues policy statements which almost have the force of the relative rules on subjects like issue of LC by a nonbank, transferable LCs etc. Besides these, ICC has a number of publications on these subjects, which are considered as the authentic views of ICC.
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