The Scope of ISBP 745
During the Annual ICC Banking Commission Meeting in Beijing there was a panel discussing “practice”. One of the questions asked at this panel was if the application of ISBP 745 should be widened. This is indeed a valid question. Just take a look at this ISBP 745 overview:
Chapter / Section / # Paragraphs
PRELIMINARY CONSIDERATIONS / / 7
GENERAL PRINCIPLES / A /41
DRAFTS AND CALCULATION OF MATURITY DATE / B / 18
INVOICES / C/ 15
TRANSPORT DOCUMENT COVERING AT LEAST TWO DIFFERENT MODES OF TRANSPORT (“MULTIMODAL OR COMBINED TRANSPORT DOCUMENT”) / D / 32
BILL OF LADING / E / 28
NON-NEGOTIABLE SEA WAYBILL / F / 25
CHARTER PARTY BILL OF LADING / G / 27
AIR TRANSPORT DOCUMENT / H / 27
ROAD, RAIL OR INLAND WATER WAY TRANSPORT DOCUMENTS / J / 20
INSURANCE DOCUMENT AND COVERAGE / K / 23
CERTIFICATE OF ORIGIN / L / 8
PACKING LIST, NOTE OR SLIP (“PACKING LIST”) / M / 6
WEIGHT LIST, NOTE OR SLIP (“WEIGHT LIST”) / N / 6
BENEFICIARY’S CERTIFICATE / P / 4
ANALYSIS, INSPECTION, HEALTH, QUANTITY, QUALITY AND OTHER CERTIFICATES PHYTOSANITARY, (“CERTIFICATE”) / Q / 11
There are 298 paragraphs in ISBP 745 in total. The Preliminary Considerations and General Principles cover 48 of those. The rest (250 paragraphs) cover the rest: I.e. specific documents. So, taking that split; Almost 84 percent cover specific documents; and issues relating to the examination of those. You could even argue that the General Principles should also relate to the examination of the presented documents.
So, no matter how you twist and turn it, it seems like there is room for more “practice” regarding the other phases of the LC process such as “issuance”, amendment”, “confirmation”, “refusal” and “payment”.
It is however a fact, that most of the challenges and problems arising from the LC handling steem from the examination of the documents. Basically, circling around 2 issues:
1: Ambiguous, poor and sloppy drafting of the LC – which opens the examination of the documents to interpretation or pure guess work.
2: Lack of knowledge of the rules (UCP 600) and/or practice (ISBP 745 and Official ICC Opinions).
At least from that perspective one can conclude that 1) it is correct to focus on the document examination and 2) it could potentially make sense to focus more on the phase where the LC is issued.
At this point, I would like to take a “detour”.
A few years back (2016/2017), the ICC discussed if there was a need to revise the UCP 600. The conclusion (in short) was that there is no business case supporting a revision at this stage. However, due to the “gaps” the discussion revealed, the ICC launched a “3 phase rocket”, i.e.:
Guidance
More comprehensive and widely circulated training and guidance
Access
Review pricing and digital availability of UCP rules and practices
Marketing
Smart usage of information to achieve greater awareness by practitioners
The status of this is that the ICC have issued a couple of “guidance documents”. However, only has been issued after the “3 phase rocket” was launched; namely the “Guidance paper – The Use of Drafts Under Documentary Credits” (which by the way is highly recommended).
As far as I can see, no positive changes have been implemented in respect of “access”. The UCP 600 and ISBP 745 are still available in book form – and the full wording of the ICC Opinions are either accessible in books – or in ICC Library. The only change (as far as I can see) is that the price to access ICC Library has increased for non-ICC members after it was rebranded from DC-Pro.
I cannot recall having seen any marketing initiatives for the purpose of achieving greater awareness by practitioners.
In other words, the gaps identified during the discussion regarding a UCP 600 revision (guidance, access and marketing) has not really been addressed – hence not “decreased” and surely not closed (which in all fairness is nota quick fix).
So back to the issue at hand: Where I come from, we use to say, “first things first”. As argued above, there may indeed be a rationale in expanding the scope of ISBP 745. However, right now the main problem is not the application of the ISBP 745. It is that the ISBP 745 (and ICC Opinions for that matter) – do not reach the banks and persons that really need it. Guidance and access are needed.
In other words, before considering expanding the scope of the ISBP 745 (which is a fairly big task), the ICC should re-consider the “distribution strategy” so that the practice reaches the TF Officers that today do not have the proper access. In addition there should be emphasized focus on guidance and training – easily accessible.
The next step should not be to make new rules or new practice – but to proper “implement” the existing rules and practice… Bear in mind that UCP 600 and ISBP 745 are both fantastic – when applied correct.
And while implementing; always remember to take care of yourself and the LC.
Kind regards
Kim