ICC Digital Library Forum

„This is now the right time to start the process of reviewing the UCP”.

Having read the last posting in the topic of „Substitution of documents by First beneficiary“ inspired me to raise this question. Do you feel that now is the right time? I had quite strong feelings about the neccesity of the prompt revision of UCP500 some time ago ( when the Originality of documents were „big issue“ etc.) But now when ISBP are discussed, eUCP just introduced?

However I still think that it would be appropriate to start the process soon, which will nevertheless take at least two years to finish. Your opinions on this issue will be very welcome! And if you agree with the view that the revision is needed – any suggestions what might be tackled with?

Pavel Andrle

Dear Pavel,

WHY UCP 600 COMES SO LATE

In principle, we agree with your view that the UCP 500 should have been revised a couple of years ago, particularly after the "original document" dilemma.

Having said that, to be fair and balanced, one also has to think in the position of the ICC Banking Commission. It has to evaluate and access the entire affecting situations, such as the following:

(1) The e-commerce is still changing very fast and never settles down on an internationally accepted standard in process, protocol, and softwares. One ICC “E-Commerce” related Commission (sorry that we have no time to find out the exact name and it is not important here anyway) completed the URGETS Rules for e-commerce and had to be removed due to the objections from other Commissions, simply because by the time drafting of the URGETS Rules were completed, it was already out of date.

(2) If the UCP 500 were to be reviewed, it had to embrace a lot of e-commerce practices and protocols. And it may face the same problems and fate as the URGETS.

(3) Hence, the Banking Commission has to take a safer “wait and see” strategy to avoid the UCP 600 being complained on completion that it does not reflect the “current” e-commerce practices, by the time it is competed.

(4) But in the mean time, everybody, including your good self and I, is crying: “We are very hungry. Please give us the food! We wan to eat a new steak named UCP 600 ”.

(5) ”OK, Don’t’ panic, guys, we serve the starter first, and her is your new salad from the executive chef (by the name of eUCP) to keep you from starving!” responded by the ICC Kitchen.

(6) So it is a smart, safe and appropriate strategy for the ICC Banking Commission to use the eUCP to fill the gap and to test the responses from the trading community for the electronic part of the UCP 600, which is eUCP.

(7) If the eUCP is well received, then the e-commerce part of the UCP 600 is already more than half done. If it meets failure, then the UCP 600 Task Force knows what goes wrong and this would increase the change of success for the e-commerce part of the UCP 600.

(8) Now seeing the UCP is well received in the market place, it is now time for the ICC Kitchen to start cooking the UCP 600 steak.

We have to declare that the above statements are purely our personal views and speculations, if you will, and nothing more. They are posted here just for the purpose of creating a platform for further discussions and views from other members. In fact, we have other "more personal" views but they are only appropriate for exchange in the case studies in our workshops and certainly not suitable for an open forum like DC Pro.

www.tolee.com

[edited 4/10/02 6:00:37 PM]

Some personal thoughts on a revised UCP:

1. Most fundamentally, I understand that over half of presentations are discrepant, thereby calling into question the utility of the doc cr. Should we, as bankers, be looking to make compliance easier? One way of doing this would be make the document specific articles, e.g. invoices, insurance certificates and transport documents, less demanding. I , myself, have an open mind on the subject.

2. ‘Originality’: the current very poorly drafted sub-Article requires deletion or replacement. I am currently not convinced a provision on the subject is needed, but if one is to be included then I would favour inclusion of Rule 4.15c from ISP98.

3. ‘Non-documentary conditions’: while sub-Article 13c, as well as Position Paper No. 3, is clear, bankers seem unwilling to apply it. Again I am currently not convinced a provision on the subject is needed and believe the onus should be on issuing and advising bankers to make sure credits they process are technically perfect, without there being any provisions for when credits are not technically perfect. However, if provisions relating to ‘non-documentary conditions’ are to remain, then I believe they need to be more detailed and different. For example, that they should state that should documents evidence transgression of a ‘non-documentary condition’ then the documents are non-complying.

4. ‘Negotiation’: it is -to me- quite clear that despite sub-Article 10bii, and Position Paper No. 2, many doc cr bankers -quite bizarrely- do not understand the meaning of ‘negotiation’ (despite often being part the same department/division that deals with the negotiation of cheques or documents dealt with under doc collections). I believe it requires a more specific, and thus, restrictive definition, e.g. something like ‘examining a presentation for compliance and effecting its settlement prior to receipt of reimbursement from the issuing or confirming bank (as appropriate)’.

5. Article 1: I favour deletion of the word ‘expressly’ as its presence leaves scope for the argument that if a provision of a credit deviates from a UCP article, but does not make reference to that particular Article (i.e. by its ‘number’) being overridden, then the deviating provision is not effective, as the Credit does not ‘otherwise EXPRESSLY stipulate’. I would prefer something like ‘They are binding on all parties thereto, except where the Credit contains contrary provisions’.

Dear T.O.Lee,

I understand from your comments that you think that the next revision will also cover „the electronic presentation“ – so there will be no eUCP then? Am I correct in my assumption?

Or we might keep the „electronic presentation“ a bit apart and, having in mind most probable need to revise the related rules more often, answering these issues by next versions of eUCP? So there will be eUCP even after UCP600?

Regarding the most likely „targets“ in the next revision – I agree with Jeremy above. I would also like to see art. 28 being modified. I would recommend to divide it into three articles or at least parts. The road, railway and inland waterway documents are very different and we currently have some troubles with them in practice. For instance there is virtually no CIM showing signature or authentication of the carrier identified as such.

Pavel Andrle

Dear Pavel,

ONLY GOD KNOWS HOW THE UCP 600 WOULD END UP

The Task Force for UCP 600 has just been set up and not yet delivered their recommendations as to the contents of the revision, whether to include e-presentation.

Our personal speculations are that the UCP 600 should include e-presentation, which may be the mainstream in a couple years after its introduction, at least in USA and other fully developed countries.

The eUCP may also be updated to harmonize with the UCP 600 e-presentation part. In this way, ICC could have a chance to sell more publication for revenue. Nobody likes to kill a goose that can lay eggs, from commercial sense.

Our speculation is that in the ICC Kitchen menu, you may take the salad eUCP alone if you are not hungry and you may also take the five-course dinner UCP 600 that includes the salad.

At present only God knows how the UCP 600 would end up.

We would like to bet 1 to 1.5 for inclusion of e-presentation in the UCP 600. Our speculation is based on the fact that USA is now having more and more influence over ICC rules making in recent years (such as URR 525, ISP 98 and eUCP) and USA is the leading country for e-presentation.

We would make the recommendation that the UCP 600 should consist of two parts: (1) The paper presentation and (2) The e-presentation, which includes mixed presentation. The second part is eUCP Version 2.0

www.tolee.com

[edited 4/11/02 8:48:25 PM]

Dear Lee,

I follow your speculation above, I also think that to allow the e-UCP part to be revised more often would be wise, at least before the practice in electronic presentations develops.

Anyway, are there any other suggestions for modifications in the next revision of UCP, any other recommendations from other DC PRO participants?

Pavel Andrle

With the introduction of the ISBP (International Standard Banking Practice) ICC Document 470/951rev2, which at present is still a revised draft subject to revision and approval, most of the problems in UCP 500 should have been resolved.

Having said that, some of the propblems can only be resolved by re-drafting, such as Article 20 (b) and others.

In our consultancy career, we met a lot of those problems, including frauds. We would present our recommendations on “UCP 600” when we have the time for this. This is too big a job for one morning.

www.tolee.com

[edited 4/12/02 4:02:45 PM]

T.O.,

I would observe that ISBP will not resolve points 2 - 4 above. Also, I notice that even in the latest version (rev2 of 8 April) the contents relating to non-documentary conditions contradicts sub-Article 13c and Position Paper No. 3. If left unamended this will cause more problems, not less.

Jeremy

When eUCP was being introduced, it was issued as Version 1.0. This intimates that further versions are anticipated. In any pioneering venture such as this, it is unreasonable to expect that all e-commerce developments can be sufficiently anticipated to avoid the need for revision. Therefore before considering whether or not to include eUCP within UCP 600, one should allow time for eUCP to develop and mature, whilst assessing its use in volume terms and comparing contentious issues in relation to such volumes.

Only when it has been judged that substantial controversial issues have been dealt with by the subsequent versions of eUCP, and that the volume of DCs using eUCP is substantial should we consider its inclusion in UCP 600. Otherwise early inclusion of eUCP into UCP 600 may result in spoiling both. If such a decision is taken too early, it may be more appropriate to name the ensuing rules as UCP 666.

Laurence

Laurence,

We can bet 1 to 100 that there must not be "UCP 666" simply because "666" means devil. For the same reason, there is no flight number called 666 or 911, particularly after September 11 2001.

If we read the eUCP Version 1.0 Article e1 (a) carefully, we would understand that, for every new UCP version, there would be a matching or complementary eUCP version to go with it, like husband and wife. If you change the husband, you have to change the wife as well.

eUCP version 1.0 only works with UCP 500 from Article e1 (a) stipulation. So for UCP 600, we need eUCP version 2.0 to go with it.

In this case, we cannot have version 1.1 or 1.5. According to the “international standard IT practice”, for a minor change in a software, such as fixing the bugs, the figure after the "dot" in the version number is changed. For constructional or more substantial changes, the figure before the "dot" in a version number would be changed.

Applying this rule, from UCP 500 to UCP 600 is a substantial change, and therefore the eUCP to go with UCP 600 cannot be version 1.1 or 1.5. It got to be version 2.0 or 3.0. It all depends on how fast the eUCP has changed by the time the UCP 600 is ready to go effective.

www.tolee.com

[edited 4/15/02 7:37:19 PM]