eUCP 600 (Version 2)

The ICC recently issued a supplement on the latest eRules for the Uniform Customs & Practice for Documentary Credits (eUCP 600). This is the second version (V2.0). Here, we summarise the key changes in the eUCP documentation, and how this supplements UCP rules.

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What is UCP?

The Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the issuance and use of letters of credit. The UCP is utilized by bankers and commercial parties in more than 175 countries in trade finance. Some 11-15% of international trade utilizes letters of credit, totaling over a trillion dollars (US) each year.

Historically, the commercial parties, particularly banks, have developed the techniques and methods for handling letters of credit in international trade finance. This practice has been standardized by the ICC (International Chamber of Commerce) by publishing the UCP in 1933 and subsequently updating it throughout the years. The ICC has developed and moulded the UCP by regular revisions, the current version being the UCP600. The result is the most successful international attempt at unifying rules ever, as the UCP has substantially universal effect. The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCP600, formally commenced on 1 July 2007.

ICC and the UCP

A significant function of the ICC is the preparation and promotion of its uniform rules of practice. The ICC’s aim is to provide a codification of international practice occasionally selecting the best practice after ample debate and consideration. The ICC rules of practice are designed by bankers and merchants and not by legislatures with political and local considerations. The rules accordingly demonstrate the needs, customs and practices of business. Because the rules are incorporated voluntarily into contracts, the rules are flexible while providing a stable base for international review, including judicial scrutiny. International revision is thus facilitated permitting the incorporation of the changing practices of the commercial parties. ICC, which was established in 1919, had as its primary objective facilitating the flow of international trade at a time when nationalism and protectionism threatened the easing of world trade. It was in that spirit that the UCP were first introduced – to alleviate the confusion caused by individual countries’ promoting their own national rules on letter of credit practice. The aim was to create a set of contractual rules that would establish uniformity in practice, so that there would be less need to cope with often conflicting national regulations. The universal acceptance of the UCP by practitioners in countries with widely divergent economic and judicial systems is a testament to the rules’ success.

CDCS

The Certificate for Documentary Credit Specialists (CDCS) is the leading qualification for documentary credit specialists. Recognised worldwide as a benchmark of competence for international practitioners, it enables documentary credit specialists to demonstrate practical knowledge and understanding of the complex issues associated with documentary credit practice such as:

• Documentary credits – types, characteristics and uses, including standby credits
• Rules and trade terms, including ISBP 745, ISP 98, UCP 600, URR 725 and Incoterms 2010
• Types and methods of payment / credit used in documentary credit transactions

CDCS was developed by the Institute of Financial Services and Bankers Association for Finance and Trade (formerly IFSA), in partnership with the International Chamber of Commerce (ICC). The qualification was first examined in 1999 and has seen a rapid growth in the uptake of the programme across the world.

The Certificate is examined in over 30 countries each year and is taught through distance learning and self-study over a four-month period. The CDCS assessment involves a three-hour multiple-choice examination of 70 questions, designed to test knowledge and its application to real-life situations. Once a practitioner has achieved the qualification, they have the right to add the professional designation of ‘CDCS’ after their name for a period of three years.

After the three-year period a process of Re-Certification is required where the professional has to provide evidence of Continued Professional Development to maintain the accreditation or re-sit the examination.

Qualification syllabus and specification can be found at www.CDCSinternational.org

eRules and the eUCP

To advance the digitalisation of trade finance practices , ICC issued new electronic rules (eRules); they came into effect on the 1st of July. The eRules will be continually monitored and updated to reflect future technological developments and trends that emerge in trade finance. ICC will ensure that the eRules remain applicable to banks and other trade finance institutions. Acknowledging the significance of these rules for the work of trade finance professionals, ICC made the full text of eURC and eUCP available online. ICC has also published an in depth guidance of the changes in the eUCP v1.1 to v2.0 and the newly drafted eURC v 1.0.

The content of the eRules will be continually monitored in order to ensure they work in the context of electronic documentation and trade. The eUCP will be continuously reviewed by trade practioners to feed back updates and monitor eUCP in practise.

In the following page we will provide you with a line by line summary of eUCP v 2.0 and key changes.

What changed in the electronic presentation for UCP (eUCP)?

Article e1

• Scope of the Uniform Customs and Practice for Documentary Credits (UCP 600) Supplement for Electronic Presentations (“eUCP”)
• Heading re-worded in order to add the shorthand rendition “eUCP”
• Minor structural changes
• Clarification that if an eUCP credit does not indicate the applicable version of the eUCP, it is subject to the latest version
• Addition of the requirement to add a physical location of a bank

Article e2

• Relationship of the eUCP to the UCP
• Minor structural changes

Article e3

• Definitions
• Minor structural changes
• Format of each term reflects that used in UCP 600
• Addition of “data processing system” to the “place for presentation”
• New definition for “Presenter”
• New definition for “Data corruption”
• New definition for “Data processing system”
• Definition of “Electronic record” expanded to include logically associated information
• Deleted the word “traditional” from the definition of “paper”
• Definition of “Received” now refers to a data processing system, and includes added reference to viewing and examination
• New definition for “Re-present” and “re-presented”

Article e4

• Electronic Records and Paper Documents v. Goods, Services or Performance
• New article

 Article e5

• Format
• Minor structural changes

Article e6

• Presentation
• Structural and grammatical changes
• Amend ‘beneficiary’ to ‘presenter’
• More precise explanation as to which banks are impacted
• Clarification that the notice of completeness acts as notification that the presentation is complete
• Clarification that the period for examination commences upon receipt of the notice of completeness
• A notice of completeness is not required in the forwarding of electronic records by a nominated bank to a confirming or issuing bank
• Additional methods are added in order to identify an eUCP credit
• In the event that the expiry date and/or last day for presentation are extended, it should be indicated in the covering schedule that this is in accordance with the rules

Article e7

• Examination
• Sub-articles moved from the previous article e7 (Notice of Refusal)
• Minor structural changes
• Expansion to nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank
• Clarification that the forwarding of electronic records by a nominated bank indicates that it has satisfied itself as to the apparent authenticity of the records
• Addition of a sub-article to address the inability of an issuing bank or confirming bank to access electronic records already found compliant by a nominated bank

 Article e8

• Notice of Refusal
• Minor structural changes
• Sub-articles moved for relevance to new article e7 (Examination)

Article e9

• Originals and Copies
• Minor structural changes

Article e10

• Date of Issuance
• Change of emphasis in that an electronic record must now be dated

Article e11

• Transport
• Addition of ‘taking in charge’ and ‘goods accepted for carriage’
• Minor structural changes

Article e12

• Data Corruption of an Electronic Record
• Title of article amended for preciseness
• Clarification of the role of the banks
• Minor structural changes

Article e13

• Additional Disclaimer of Liability for Presentation of Electronic Records under eUCP
• Minor structural changes
• Reference to a data processing system
• Banks are liable for their own data processing systems

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