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Before ISP98 was adopted by the ICC Banking Commission in April 1998 and produced as ICC Publication No. 590, most every standby letter of credit was issued subject to UCP500, throughout the world. Even with ISP98 in existence, standbys in Japan continued to be issued based on UCP when UCP600 entered into force in July 2007. I remember that at that time when UCP was revised, we used to receive questions from customers of our branches as to what ISP98 was and what was the difference between ISP98 and UCP600, even after 10 years since ISP98 came into being. Though our overseas branches like in New York or Los Angeles may have issued standby credits subject to ISP98 at the request of American companies and under the approval of our Headquarters, there were actually no banking manuals for ISP98 for the big 3 banks in Japan to follow. Standby letters of credit under ISP98 were not issued at that time without official approval from our HQs and only for exceptional cases.
Around March 2009, our ICC Japan started translation of ISP98 in what was at the time the Otemachi building at the headquarters of the Mitsubishi UFJ Bank for whom I worked. I called and invited Yoshiharu Takahashi (who since has passed) of the Sumitomo-Mitsui Bank Corporation and Taturo Kamikawa of the Mizuho Corporate Bank, Limited. These gentlemen were my business rivals but also good friends and we have collaborated on translating several other documents of ICC Publishing. Although this work was paused for our translation of URDG758, we started it again. We met a lot of difficulties in translation but, with each challenge, we asked so many questions of Professor James E. Byrne at IIBLP. Each question he kindly answered profoundly. Without his help, we would have been lost and could not have published the Japanese translation of ISP98. We finally finished our translation in August 2011 and it was published by ICC Japan the following month after our negotiation with ICC Publishing.
In commemoration of completion of our translation, ICC Japan invited Professor Byrne to Japan to give a lecture on ISP98 in September 2011. Unfortunately in the days prior to the lecture, I suffered a serious health condition and was hospitalized for an extended period of time. I could not meet Professor Byrne when he came to Japan and asked Professor Katsuto Iida of Tezukayama University to fill in my place and translate Professor Byrne's lecture.
About 12 and a half years have now passed since completion of ISP98 translation into Japanese and the circumstances surrounding ISP98 have changed a lot. Previously when we heard reference to ISP98, we used to say to our customers that we did not recommend ISP98 and we asked them to change the practice rules to UCP instead of ISP98. But after completion of the ISP98 translation, we changed our policy at once and began to tell our standby letter of credit customers that they will get more benefits if they choose ISP98. We provided them with a brochure we made, showing the important points and helping them more easily understand ISP98, even if they do not thoroughly read ISP98. Each bank made various brochures and delivered them to customers, expanding business opportunities more than ever. Many customers understand ISP98 more easily now. Looking at standbys based on ISP98, we more clearly saw the necessary points in ISP98 and we tried to help our customers appreciate the advantages of standby letters of credit made subject to the rules.
ISP98 became more important after treatment of the rules was incorporated into each bank's manuals. Just from that time, ISP98 usage increased substantially. Some notable examples: A Japanese company's contract for selling machines to a Chinese company was supported by an ISP98 standby credit; a Japanese company's export of steel pipes to a Russian company at that time was backed by a standby under ISP98; a Japanese electric power company extended its operations abroad with other companies by jointly using standby letters of credit under ISP98; and a performing company contracted with a Hollywood film maker by utilizing a standby subject to ISP98 as part of a series of ongoing complex transactions.
Many contracts continue to be supported under ISP98 standbys as I write, Although demand guarantees are more commonly used in Japan than standbys by an estimated 8:2 ratio, standby usage is increasing and I feel that the current world of standbys has changed dramatically for the better compared to 12 years ago.
If Professor James E. Byrne should see this development, I wonder what he would say. And my colleagues who worked with me on the translation of ISP98 would clearly be pleased. It is my hope that ISP98 will be used everywhere and it will be a great advantage for everyone.
* Kunihiko Minakuchi is Director of the Association of International Business Advisers and is based in Tokyo, Japan. He formerly worked mainly in the International Business and Trade Business Operations Departments of The MUFG Bank, Ltd for more than 40 years until 2020.