We make no apologies for returning to this issue which remains of key importance.
Just a few weeks ago we posted a blog which outlined a number of UCP issues that we believe need to be addressed at some stage - this can be found at: https://www.tradefinance.training/blog/articles/ucp-700-yes-or-no/
However, the seven issues mentioned therein are far from sufficient in providing a business rationale that would support the complex task of a UCP revision.
Furthermore, in a separate blog, https://www.tradefinance.training/blog/articles/isbp-745-is-it-time-to-update/ , we made reference to ISBP 745 and our suggestion that this be revised and ‘International Standard Banking Practice' established much earlier in the process, i.e. at the time of drafting the credit. It could then extend throughout the various workflows: issuance, advising/confirming, amendment, etc.
So let's be a little more controversial this time. If we look at the many issues that have been addressed by the ICC since the release of UCP 600 in December 2006, does this provide us with a holistic justification for looking once more at UCP 600 ... and ISBP 745?
A number of invaluable ‘guidance' papers have been released individually over the years. Should these now be considered as part of a revised UCP 600 and/or ISBP 745?
Further items for consideration:
- Amalgamate UCP 600 & ISBP 745 - this is far from easy as one relates to rules and the other to practices. When rules are contravened, there is always a verifiable impact - the same cannot be stated about practices. However, could it be done?
- Remove Standby Credits from UCP 600. Based on the introduction of ISP98, this was suggested during the revision of UCP 500. However, as many standby credits were still issued under UCP, it was considered apt that they remain within the UCP - it is perhaps time to look again.
- Add an appendix to UCP 600 and/or ISBP 745 that includes a guidance checklist on how individual documents should be prepared. This would aid the commercial parties and lead to a decrease in discrepancies.
- Add an appendix to UCP 600 and/or ISBP 745 providing templates for each individual document.
- Review all ICC Opinions since the outset of UCP 600 and determine if changes may be needed in the rules.
- A far swifter revision process - we have numerous thoughts on this, and believe that, with the correct focus, a revision could be achieved within a twelve-to-fifteen-month time period.
- Why have discrepancy rates on first presentation not decreased under UCP 600? This is absolutely critical to understanding how to take the ICC rules forward.
- Are aspects of eUCP version 2.0 useful for incorporation into a revised UCP 600?
- Do the transport articles still reflect customs and practice in the transport industry?
- Is the default 21 calendar day period still appropriate for presentation of documents?
- Should ‘negotiation' be re-addressed? Should it even be included within UCP 600 just because it is ‘historically' used in some regions? Is this sufficient justification to persist with a process that is consistently misunderstood?
- Should UCP 600 (and, in fact, other ICC rules) include a Force Majeure article? There is no choice of law (or jurisdiction) article in UCP and the rules generally avoid legal issues. Should this, therefore, be left to the contract between the buyer and the seller?
- The Uniform Rules for Digital Trade Transactions (URDTT) do not include an assignment article. This is predicated on the basis that the use of the term "transfer" is to replace the English law word commonly used of "assignment" and is an equivalent right to that of an assignment and covers the transfer of rights and benefits". Could this also apply to UCP?
In conclusion, there are a number of avenues that could, and should, be contemplated:
- Revise UCP 600
- Revise and/or broaden ISBP 745
- Revise both and/or amalgamate
- Appendices for UCP 600 and/or ISBP 745, e.g. ‘Simple Documentary Credit Format', ‘Checklist Guidance' for preparation of individual documents, document templates.
We are sure that the ICC Banking Commission will be addressing these issues, and many others, and we look forward to the outcome.