A previous blog focussed on the potential release of ‘Guidance Papers' in order to help resolve a number of the problems that exist with the handling of documentary credits.
As such, it is worth recalling why this approach was agreed. An initial communication dated 6 October 2016 was sent to ICC National Committees, which included a ‘Position of the Executive Committee of the ICC Banking Commission regarding a revision of the UCP'.
Two meetings were subsequently held with ICC National Committee representatives (i) at the ICC National Committee Forum in Rome on 8 November 2016, and, (ii) the ICC National Committee ‘Sharing Session' in Paris on 23 November 2016. Whilst many National Committees were supportive of the Executive Committee recommendation not to proceed with a revision, there were a few counter-views, and comments were given supporting a UCP revision.
These comments were incorporated into an analysis of ICC Banking Commission Opinions / trade press / social media feedback and included within an email sent to National Committees on 19 December 2016. This stated that, in the view of the ICC Banking Commission Executive Committee, existing feedback still did not provide a compelling enough rationale to justify a revision of UCP 600. In order to ensure that all views were represented, National Committees were then asked to consult with their membership regarding the need, if any, for a revision and revert with their findings.
The results were collated and subsequently presented by David Meynell, Senior Technical Advisor, and Dan Taylor, Executive Committee member, at the Banking Commission Annual Meeting in Jakarta on 6 April 2017.
The overwhelming response revealed that a revision of UCP 600 was not required. The prime objective of a revision is to address developments in the banking, transport and insurance industries. Significant feedback evidenced that any problems lay not with the rules themselves, but with the application, i.e., practice ("international standard banking practice") of the rules. An analysis of the revision explanatory notes (which covered over 70 issues including comments received from National Committees) did not provide a compelling enough rationale, nor sufficient support, to justify a revision of UCP 600 at this stage.
As we have often pointed out, the majority of problems are caused by:
Only a very limited number of the comments in the Revision explanatory notes contradicted the above assertion. In fact, only seven items were identified for possible inclusion in a revision of UCP and most of these were already an integral part of ISBP 745. No new problems were raised which would prove that existing rules are wrong or that there is a gap.
There was, however, a definitive viewpoint that a greater understanding of practices should be the way forward, rather than a revision of the rules.
One of the key proposals was to provide more comprehensive and widely circulated training and guidance.
Rule revisions are not always the correct way forward; a greater understanding of practices, including ISBP 745, is what is needed in order to alleviate problems and reduce many of the bottle-necks that surround them.