Office of the Iraq Programme
oil for food

Provided for information purposes: please note that the OIP is unable to respond to inquiries from companies or their representatives  who should direct all inquiries or requests for further information to their Permanent Mission.

Humanitarian Letter of Credit applications are received by Banque Nationale de Paris, New York from the Central Bank of Iraq on behalf of the relevant Iraqi Government buyer. Upon receipt of such L/C’s, Trade Finance Services/Commodities & Trade finance Desk check the following:

1. Verify that the L/C is irrevocable, non-transferable and non-assignable (except to the supplier’s bank for the repayment of financing for the purchase of the humanitarian supplies) and for the account of the Iraqi purchase in favor of the supplier.

2. Verify that the request provides for payment with funds from the United Nations Iraq Account.

3. Verify documents to be presented and payments (is/are) to be made at the counters of BNP NY

4. Verify that the L/C’s require the following documentation as condition for payment:

• Customary commercial documentation

• A copy of the 661 Committee’s letter stating that the exporter is eligible for payment from the United Nations Iraq Account

• A confirmation by the Secretary-General’s designee of the arrival of the exported goods in Iraq

• A copy of any required governmental license or equivalent authorizing the export, and

• In the case of food and soap products, a heath/phytosanitary certificate stating that goods are fit for human consumption and are consumed locally in country of origin.

5. Verify that the L/C is governed by the UCP 500, and review the L/C to make sure the UCP 500 is respected and that all terms and conditions can be verified by the bank through the presentation of documents.  If any of these items are not complied with, BNP must go back to the applicant through the Central Bank of Iraq for amendment or clarification. If the L/C allows for partial shipments, the UN will have to confirm to the bank that the contract also allows for partial shipments.

6. After verifying the above, the bank will prepare and forward a copy of the L/C request to the United Nations Treasury for approval to issue the L/C. The approval will also allow the bank to segregate Cash Collateral for L/C reimbursement and related fees from Available Funds in the United Nations Iraq Account. The bank shall not issue and L/C unless there are sufficient Available Funds in the United Nations Iraq Account to cover the L/C amount and the related L/C fees.

7. When the Standardized Confirmations of Arrival are prepared by the United Nations, they are delivered directly to Trade Finance Services of BNP who then notifies the exporters of their receipt, and invites them to present their other documents under the L/C.

Upon receipt of all of the required documents under the L/C, Trade Finance Services of BNP examines them to make sure they are in conformity with the terms of the letter of credit. If they are, payment is made promptly with notification to the United Nations Treasury. If they are not, discrepancies are advised to the beneficiary for possible correction.  Also see "UNIQUE FEATURES OF THE LETTER OF CREDIT"

Flow Chart showing the processes followed by the United Nations Secretariat

Unique Features of the Letter of Credit issued in the context of the oil for food programme

• The credit will always start with the following: "In accordance with the United Nations Security Council Resolution 986 dated 14 April 1995, the Memorandum of Understanding under reference S/1996/356 dated 20 May 1996 and the Procedures of the 661 Committee under reference S/1996/636 dated 12 August 1996, please find the text for the issuance of a letter of credit.

• A copy of the 661 Committee's letter stating that the exporter may be eligible for payment from the Iraq Account

• Standardised confirmation by the Secretary-General on the arrival of the humanitarian supplies in Iraq. The arrival of the humanitarian supplies in Iraq will be confirmed by independent inspection agents appointed by the Secretary-General.

• The credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500.

• The credit is NOT TRANSFERABLE and NOT ASSIGNABLE (except to the beneficiary's bank for the repayment of financing for the purchase of humanitarian supplies). The credit is NOT NEGOTIABLE.

• The credit will always indicate that this credit has been issued by BNP New York under license No. 10-758 issued by the US department of the Treasury, Office of Foreign Asset Control.