The UCP 600 Revision – Now you see it. Now you don’t


I have noted that on the social media, and my inbox there is a question that keeps repeating:

 

Will there be a revision of the UCP 600?

 

And to quote Dylan Moran: “Ahhh I don’t know

 

However, at the recent meeting in the ICC Banking Commission – beginning April 2017 in Jakarta – the issue was on the agenda – and in this blog post I will relay the information given at that meeting – as far as I remember it …. so here goes:

6 October 2016 the ICC Banking Commission circulated a message to the NC’s basically saying that the decision has been made NOT to revise the UCP 600. However the NC’s were invited to revert back if they felt that there was a need for a revision. In such case it should be accompanied with a business case justifying a revision. The background for this requirement was that any UCP revision is really expensive and time-consuming: Drafting- and Consulting group members should dedicate time and money to the project. The entire NC’s and the Banking Commission should dedicate time to offer feedbacks. Once the revision is done, there should be appropriate training – and available training material should be updated. Systems should be updated etc. etc. etc. Expensive and very time-consuming.

During November there was a dialogue with the NC’s on the issue. The result was that a new request was circulated to the NC’s, where additional feedback was requested. This time going beyond the banking industry; i.e. to the exporters, importers, carriers etc….

The result of the whole thing was presented at the Jakarta meeting by Dave Meynell and Dan Taylor.

Here are some highlights from the presentation:

 

* Only one (1) NC supports a full revision. 3 NC’s supported a “review of individual sub-articles but not full revision”

 

* There were a number of arguments presented that supported a revision – for example:

- Too much room for interpretation in UCP 600

- Very high discrepancy rate

- Sub-article 22 (a) (i) should allow for a CPBL to be issued and signed by a carrier

- Sub-article 10 (c) should include a time limit (amendments)

- Sub-article 37 (c) should include a time limit (charges)

- Article 39 should provide a uniform format (assignment)

- A future UCP should include a definition of ‘All documents”

On top of that there were a suggestion to develop a simplified, user-friendly revision of the UCP. (I am not sure if this would be in addition to the current UCP 600?)

 

* There were also a number or arguments presented – that does NOT support a revision- for example:

- The issues raised are mainly of educational nature

- A key problem is insufficient knowledge

- It is better to assist parties in creating workable LCs

- Education is the better tool

- A Revision would cause uncertainty

 

* The issue of “Drafts” and “Negotiation” were mentioned as topics that create uncertainties, and it was suggested that both should be removed from a future UCP.

The counterarguments to that were:

- There is no rule in the UCP 600 that dictates that an LC must call for a draft and must be issued available for negotiation. I.e. don’t need it. Don’t call for it!

-  The statistics provided by SWIFT (ICC’s 2015 Global Survey) indicated that 72.3% of all LCs (issued by MT700) were available by negotiation (these would have all required a draft) and 6% by acceptance.

- Following above, simply removing “Drafts” and “Negotiation” would create a void – hence more uncertainty.

 

* Statistics of the ICC Opinions, DOCDEX Decisions and educational queries are fairly low; i.e. 3.5 issues per month.

 

On the basis of the above, the decision from the ICC Banking Commission was, that no UCP 600 revision would be initiated at this point in time!

 

However, a number of the issues / challenges / problems outlined above are real – and should be fixed.

 

Or saying it another way; it seems that the LC industry agrees on the diagnosis – but the ICC Banking Commission do not think that a UCP 600 revision is the cure!

 

Then what?

 

Part of the presentation was a 3-step plan that aims to cure the LC where it is broken:

 

1: Guidance; comprehensive and widely circulated training and guidance

I.e. a structure to offer (easy to access) guidance in respect of (for example) UCP 600, ISBP 745 as well as ICC Opinions and DOCDEX Decisions.

 

2: Access; review pricing and digital availability of UCP rules and practices

It is acknowledged that the access to UCP 600, ISBP 745, ICC Opinions and DOCDEX Decisions may be difficult and expensive. It was mentioned that the ICC Banking Commission will aim to make this material available – in electronic format – and free of charge.

 

3: Marketing; smart usage of information to achieve greater awareness by practitioners

It is acknowledged that there exist good technical solutions today that should be used to relay relevant information to the people who needs it.

 

And the track ends here!
It will be interesting to see how it all plays out. However, to recap:

 

Question: Will there be a revision of the UCP 600?

Answer: No UCP 600 revision would be initiated at this point in time!

 

I hope this clarifies, and no matter what happens that we all take care of each other and the LC!

 

Kind regards

Kim

 



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Viewer's Recent Comments

  • Abdulkader Bazara on 2017-04-24 03:18pm
    I am with those who recommend that we go for training and making the material accessible at a reasonable price. People who use LCs are from places that individuals cannot afford the current prices to attend training or even buy the rules. If we can have them available online, both the training and the rules, it will contribute a lot in a fairly better utilisation of LCs. I am willing to volunteer in the training and / or work with you on the training materials. I believe there are many other volunteers availabke as well. It just needs a leader and a plan.
  • António Neves on 2017-04-25 01:10pm
    Abdulkader is right. Spreading knowledge and promoting discussion is definitely the way to make trade finance people feel comfortable with rules and its interpretation. 3-step plan or not, would it be so difficult for the banking commission to sponsor a site like lcviews, whose work in the right direction remains priceless for the trade finance community? And yes, coordinated by Kim Sindberg who takes so good care of the LC...
  • antonio picchi on 2017-04-26 03:37am
    many bank clerks are not aware of ICC Opinions and Docdex decisions, some ISBP 745 too. We need an instrument to be available at a reasonable cost, even for banks where verify if we are right or wrong. A mandatory wording of l/c would avoid misinterpretations too!

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