By Kim Sindberg
A number of Trade Finance magazines have speculated in a coming revision of the UCP 600. They have even developed “wish lists to UCP 700” - i.e. lists of topics that could/should be included or changed in the UCP.
Today the ICC circulated an e-mail with the heading:
“Position of the Executive Committee of the ICC Banking Commission regarding a revision of the UCP”.
The purpose of the e-mail is to inform the National Committees that “the Executive Committee believes there is insufficient justification for the significant time and cost of a revision.”
Further the ICC makes the following invitation to the ICC National Commissions:
In the event that any National Committee is of the opinion that a revision is still warranted, we recommend that a request be sent to the ICC Banking Commission Executive Committee including a detailed business case and rationale that supports consideration of a revision.
This mean that it is now for the ICC National Committees to “push” for a revision – if they deem such needed.
The position of the ICC Banking Commission Executive Committee is further qualified in an attached document. This document offers the background information for the position taken. Basically they have analysed the ICC Opinions. Here the ICC concludes as follows:
As can be seen, 50% of the problems apply to the presented documents: it is a justifiable assumption that a greater understanding of ISBP 745 would help alleviate these problems and greatly reduce this percentage. As regards the remaining 50%, it is difficult to see how a revision of UCP would make much of a material difference as many of these causes are outside the scope of correction by the beneficiary.
The other part of the comments relates to the cost of such revision. It is for sure a fact that the cost/workload of a full revision is huge.
And with that; the good question is if there is indeed a need for a revision. On that issue one can argue both ways – of course.
Here I will emphasise one issue; namely the fact that May 2016 the ICC published the document “NOTES ON THE PRINCIPLE OF STRICT COMPLIANCE” (this document – as well as the issue has been thoroughly covered in the LCM Newsletter Trade Services Update - Volume 18, Issue 2, April—June 2016). Although not 100% clear from the ICC document, the only logical background for the document is that the UCP 600 compliance standard (primarily reflected in UCP 600 article 14 (a) and (d)) is not applied correctly.
This may seem like a “minor” issue – but in fact it s a core issue: How the documents are examined determine if the beneficiary is paid or not; and determine which standard the beneficiary is to comply with in order to get pay. In other words it is a question on whether the LC is a “payment instrument” or a “refusal instrument”. From my experience many beneficiaries consider it the latter.
So, revision or no revision – this issue simply must be addressed and solved. If that is via a “greater understanding of ISBP 745” or something else need to be determined.
My personal view is that I fully understand the reluctance to enter into a full-blown revision, but would suggest a revision that only focuses of the issue of “UCP 600 compliance”.
Another suggestion is that the ICC Banking Commission takes a decision on how to work with the UCP (as well as other ICC rules) going forward; perhaps making them more electronic, so that minor – and more focused – revisions are possible.