22/06/2021
Authored by David Meynell, the ICC have recently published an enhanced Users Guide to the eUCP, which is available online and downloadable free of charge at https://2go.iccwbo.org/users-guide-to-the-eucp.html
The guide is intended as a complement to the original supplementary guides and has a particular focus upon preparations for usage and operational issues.
Preparations for practitioners revolve around a few areas including Operations, Technology, Legal, & Risk Mitigation.
- With regard to technology, it is essential that internal data processing systems can handle the relevant formats for electronic records, authenticate messages, and execute electronic signatures. In view of the fact that the rules are technology neutral, it is up to the parties concerned to decide the most appropriate method of processing.
- On the legal side, as far as is known, no conflict exists between the eUCP and any eCommerce laws globally, but banks would be advised to review internal client agreements.
- And for risk mitigation, whilst it is assumed that most internal policies will already cater for digitalisation, it may be useful to review handling guidelines in order to account for changes in processing practices for eUCP credits, as well as any additional risks deemed relevant to transaction processing.
However, it is the Operations area that is critical to ensuring that eUCP transactions are processed effectively.
- In order to gain optimal benefit, it is important to take into account the implications of the eUCP when issuing a documentary credit that will provide for presentation of electronic records, solely or in combination with traditional paper documents. Not doing so would potentially negate many benefits.
- The fundamental requirement, from which all else will evolve, is for the applicant to jointly agree with the beneficiary of the credit that presentation of electronic records will be permitted, and to determine which documents can be handled in this way. It is necessary, during this dialogue, that the beneficiary provide reassurance that it can present any required electronic records, and that such records will be in an acceptable format.
- It should be noted that, prior to finalising the format, it needs to be determined that such format is also acceptable to the issuing and nominated banks.
- The format of an electronic record is key to the entire process. As stated in eUCP article e5, an eUCP credit must indicate the format of each required electronic record and, if the format is not indicated, it may be presented in any format. It can be seen, therefore, that if a format is not stated, then the relevant banks (and ultimately the applicant and beneficiary) 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).
- It is incumbent upon the issuing bank to determine the workability of an applicant's instructions. This is particularly vital for credits that will be issued subject to the eUCP. Not only does the issuing bank need to determine and validate that the instructions are workable, it must additionally ensure that the bank itself is in a position to handle the credit.
- Depending on its role in an eUCP credit, a nominated bank (advising, confirming, other nominated bank) should ensure it is prepared to act in the nominated capacity under an eUCP credit.
- In particular, it is important to review the credit to ensure that the bank can meet any eUCP requirements.
The User's Guide also emphasises the importance of two existing ICC Guidance Papers:
www.tradefinance.training
