On 6th June 2017, the ICC Banking Commission provided a press release announcing the launch of a Working Group to anticipate and accompany the digitalisation of trade finance. One core activity was to evaluate existing ICC rules in order to assess e-compatibility and ensure they are ‘e-compliant', i.e. enabling banks to accept data vs. documents. It was identified that this was required in order to accommodate evolving practices and technologies.
A drafting Group was established, co-chaired by David Meynell and Gary Collyer, with the initial aim of reviewing the e-compatibility of existing ICC rules.
As a result of this review, a mandate was received from the ICC Banking Commission Executive Committee to draft eURC in order to ensure continued digital compatibility for presentation of electronic records under Collections. The eURC Version 1.0, came into force from 1st July 2019.
The rules accommodate evolving practices and technologies and are drafted with version numbers in order to update regularly and without impacting upon URC 522.
They allow for the presentation of electronic records (documents) solely or in combination with paper documents.
Any eURC transaction is also, by default, subject to URC 522. However, the eURC prevails in the event of any conflict. It should be noted that eURC only applies to presentations of electronic records.
The focus of the eURC is concentrated upon the presentation of electronic records under the eURC, alone or in combination with paper documents, and not to issuance of an eURC collection instruction. The principles on which the eURC has been based are the underlying principles in URC 522 and standard practice currently existing for eCommerce transactions. As such, most of these principles are reflected in the definitions contained in eURC Article e4.
A number of issues received specific attention during the course of the drafting, and a few of those of particular interest are outlined below.
The precedent for including ‘Preliminary Considerations' was established in ISBP, and with the preamble to DOCDEX. The preliminary considerations are listed on a separate page to the rules in order to provide a distinction between the two.
The original aim was to align definitions with those used in local law. However, many legal definitions differ among themselves in formulation if not meaning. As a result, the definitions are modelled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce, which is the most widely imitated in eCommerce legislation. The UNCITRAL Model Law on Electronic Transferrable Records were also used as a reference point.
DATA PROCESSING SYSTEMS
The rules do not provide guidelines on required data processing systems and focus principally on the electronic presentation of documents. As with all ICC rules, they cannot mandate which platforms/systems are acceptable-the rules must remain neutral in this respect. Any bank that engages in an eURC transaction is responsible for maintaining a data processing system. This responsibility is a fundamental precondition for using the eURC. The term refers to any automated means (be it computerised, electronic, or any other) that is utilised for the processing and manipulation of data, for initiating an action, or for responding to data messages or performances either partially or in full.
This article requires that the eURC collection instruction state the format of a required or permitted electronic record. Should this not be the case, the relevant banks take on any resultant risk. In view of the fact that data processing systems are unlikely to be able to access all formats, it is essential that any data received is readable by the relevant data processing system(s). As a result, if a credit or collection instruction fails to specify the required format, then the electronic records can be presented in any format. The direct consequence of this situation would be that banks would be in a position to disallow a presentation on the basis that they are unable to read the format of the electronic records.
Although the eURC do not define or explain the meaning of ‘electronic
address', the term signifies the precise electronic location or a proprietary system to which an electronic record can be sent. It would include a URL, an email address, or an address on a dedicated system. It was decided that there was no need to provide a definition, as any relevant requirements would be within the terms of the credit or collection instruction.
In the digital world, there is a greater deal of focus on the authentication of data.
Although used extensively throughout eURC, it is deliberate that ‘authentication' is not defined. The basis for this approach is the conviction that any purported definition would either unnecessarily duplicate the definition of ‘electronic record' or, even worse, provide a specific link to existing technology. As referenced in the ‘ICC Guide to the eUCP' (version 1.0), authentication is that process of screening incoming data as to identity, source, and error that is preliminary to it being deemed to have been presented.
It should be noted that there is no conflict between most eCommerce laws and the eURC. The only recognised issue that has surfaced to date relates to potential requirements for a greater degree of security with regard to electronic signatures and authentication than is imposed by the eRules or an eURC collection instruction. Where there is a mandatory requirement under local electronic commerce law for a higher degree of authenticity than would be required under the eURC, local electronic commerce law may impose additional requirements on an electronic presentation. It is strongly advised that internal legal advice is actively sought for the transition to electronic presentations for eURC collection instructions. A review of customer agreements may be required in order to ensure that issues such as formats for electronic records, authentication and electronic signature requirements are covered. In working with the eRules, it is necessary to consider each applicable legal system with respect to the eURC definitions to determine:
Obviously, a major element of the transition to acceptance of the eURC will require the involvement of the technology area of a bank. This area must provide the data processing systems capability to deal with all aspects of eURC collection instructions. In this regard, it must ensure that internal systems can process the necessary formats required, authenticate messages, and execute electronic signatures. An analysis of system needs should be conducted, as well as preparation of an overall project plan for implementation of any required system changes to accommodate electronic presentations.
It is recommended that a thorough review of internal ‘risk management' policies be completed in order to account for changes in processing practices for eURC collection instructions, as well as any additional risks deemed relevant to transaction processing.
Once the above work has been completed, all staff that will handle presentations under eURC collection instructions must be properly trained in the eURC, as well as being cognisant of internal technology changes related to the processing of electronic records.
Specific preparations for usage of the eURC
Listed below are a few generic issues that require consideration when handling collection instructions subject to the eURC. This list is not comprehensive and other matters may require attention.
The principal should have in place an agreement with the drawee in respect of the electronic records to be submitted and the format for such records. By default, they must be records that the principal is capable of producing in the requisite format, and that the remitting bank is capable of accepting in the specified format. The principal should assure itself that any requirements for authentication of electronic records or electronic signatures can be fulfilled.
Remitting, collecting, and presenting banks
From the perspective of a bank there are a number of aspects that need consideration when preparing to handle eURC collection instructions and process presentations of electronic records. Refer above: ‘Preparations for usage of both sets of eRules'. Depending on its role in an eURC collection instruction, a bank should ensure that it is prepared to act in the required capacity. In particular, it is important to review the collection instruction to ensure that the specified format and any authentication or digital signature requirements are feasible.
The decision to allow presentation of electronic records must be made jointly with the principal. The drawee must be assured that the principal can present any necessary electronic records in the format required, and that this format is also acceptable to any collecting and presenting banks. It is essential to ascertain that the electronic records required are sufficient to clear any merchandise and are acceptable to the customs authorities.