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L.C. or documentary
credits is a contract between a bank (the issuing bank) and a customer (the
applicant), according to which the bank is to make a payment to or to the order
of a third party (the beneficiary), or is to accept and pay the drafts drawn by
them, or to authorize another bank to that effect, against stipulated documents
complying with the credit’s terms and conditions. It is a major means for
international payments and essential to international trade. As any other
commercial relation involving two or more countries/legal systems, documentary
credits have not been immune from difficulties arising from inconsistencies and
conflicts between different practices/systems in different countries. Therefore,
the International Chamber of Commerce (ICC) as a non-governmental organization
comprising from trade unions and commercial interests’ groups undertake to introduce unified rules of documentary credits called “ICC Uniform Customs and
Practice for Documentary Credits”(UCP) through self regulation by business.
“UCP 500”, in force as from
1994, is the latest version of the ICC rules concerning documentary credits; it
is also effective with respect to the Iranian banks as it is accepted by the
Iranian Banking commission.
For further information on UCP
500, Iranian banking and financial law, and relevant practices please do not
hesitate to contact us.
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