In international trade, even small differences in wording can cause major disputes. That’s why the ICC (International Chamber of Commerce) included Article 3 in UCP 600, which explains how certain terms and expressions should be interpreted in letters of credit (LCs).
This article removes ambiguity from common phrases that might otherwise be misunderstood across different countries and legal systems.
What Does Article 3 of UCP 600 Say?
Article 3 states:
1. A branch of a bank in a different country is considered to be a separate bank.”
2. Terms such as ‘first half’, ‘second half’, and ‘middle’ of a month shall be construed as follows:
** ‘First half’ means from the 1st to the 15th of the month (inclusive).
** ‘Second half’ means from the 16th to the last day of the month (inclusive).
** ‘Middle’ of a month means the 11th to the 20th of the month (inclusive).”*
3. “The words ‘from’ and ‘after’ when used to determine a maturity date exclude the date mentioned. The words ‘to’ and ‘until’ when used to determine a maturity date include the date mentioned. The word ‘till’ has the same meaning as ‘until’.
The word ‘through’ has the same meaning as ‘to’ and ‘until’.”
4. “The terms ‘on or about’ and similar expressions when used in connection with shipment dates are to be interpreted as a period of 5 calendar days before and 5 calendar days after the specified date, both dates included.”
5. “The words ‘any’ and ‘all’ shall be construed to mean one or more or all, as the context may require.”
Breaking Down Article 3
1. Branches in Different Countries = Separate Banks
- If a bank has branches in two different countries, they are treated as separate banks under UCP 600.
- This matters for responsibilities, reimbursement, and liability.
Example:
HSBC London and HSBC Dhaka are considered different banks for LC purposes.
2. Interpretation of “First Half,” “Second Half,” and “Middle” of a Month
- First Half → 1st to 15th
- Second Half → 16th to last day
- Middle → 11th to 20th
Example:
If an LC states “Shipment in the first half of July,” the goods must be shipped between July 1 and July 15.
3. From/After vs. To/Until/Till/Through
- “From” / “After” → exclude the mentioned date
- “To” / “Until” / “Till” / “Through” → include the mentioned date
Example:
- Maturity “30 days after 1st March” = due on 31st March (1st March excluded).
- Shipment allowed “until 15th September” = last valid shipment date is 15th September.
4. “On or About” Shipment Dates
- Means 5 calendar days before and 5 calendar days after the given date.
- Both ends are included.
Example:
If LC requires shipment “on or about 20th August,” shipment between 15th and 25th August is acceptable.
5. Interpretation of “Any” and “All”
- Both words are flexible, interpreted according to context.
- “Any” can mean one or more.
- “All” can mean either everything or as much as is required by context.
Example:
- LC states “Shipment from any port in China” → one or more Chinese ports is acceptable.
- LC states “All documents must be signed” → every required document must be signed.
Why Article 3 Matters
Article 3 ensures that:
- There’s no confusion about vague terms like “middle of the month” or “on or about.”
- Banks and traders avoid disputes over dates, deadlines, or document wording.
- The rules bring uniformity across global trade, where language differences could otherwise create uncertainty.
Practical Trade Example
A Bangladeshi exporter receives an LC stating:
- “Shipment in the second half of October.”
- “Payment 60 days after 1st November.”
Interpretation under Article 3:
- Shipment must take place between October 16 and October 31.
- Payment falls due on December 31 (60 days after November 1, with November 1 excluded).
Without Article 3, banks in different countries might interpret these phrases differently, causing disputes or delays in payment.
Final Thoughts
Article 3 of UCP 600 may look like fine print, but it is essential for clarity. It defines how vague expressions about dates, times, and terms should be understood, ensuring everyone operates on the same page.