lcviews CoronAdvice #6: Electronic presentations under LCs and Collections
The new blogpost in the segment “lcviews CoronAdvice” aims to address one of the questions frequently asked during the clovid-19 crises: Is it possible to make electronic presentations when the courier services are “disrupted”. The question is relevant to both LCs and collections – and has two dimensions:
One is simply presenting scanned (or faxed) documents (and then arranging for the release of goods outside the LC or collection).
One is to use the ICC eRules – for example eUCP Version 2.0 & eURC Version 1.0.
For the sake of good order, it should be mentioned that there may be other eRules relevant, such as URBPO, and the UNCITRAL Model Laws on Electronic Commerce, Electronic Transferable Records, and Electronic Signatures. Those are however not in scope for this “lcviews CoronAdvice”.
Let us split the issue up:
Is it possible to present scanned (or faxed) documents under an LC?
The answer is: It depends!
Most of the challenges right now (for example in sending documents to India) relate to LCs already issued. Those will, most likely, not allow for presentation of copy documents. Therefore, UCP 600 article 17 will apply. Sub-article 17(a) reads:
“At least one original of each document stipulated in the credit must be presented.”
[Emphasis added].
The consequence of this is that unless, the LC allows (or is amended to allow) presentation of copy documents this will constitute a discrepancy.
However, if the LC allows for presentation of copy documents – then a presentation of a scanned or faxed document will be acceptable.
In considering this solution, it is important to bear in mind that allowing for – as an example – a copy of a bill of lading is not a “technicality”. A consequence will be that the title document (normally used to obtain release of the goods) will not be part of the presentation, meaning that when paying under the LC, the applicant (buyer) will not get “access” to the goods as he normally would. The issue of the release of the goods must be taken care of “outside” of the LC. E.g. that the shipper (LC beneficiary) returns the bills of lading to the shipping line, instructing them to release the goods to the buyer. Or there must be established a shipping guarantee initiated by the buyer in order to obtain release of the goods without the original bill of lading (which will then be presented later).
This of course opens for a number of issues or questions:
1: Is this acceptable to the buyer and the seller, as the original bill of lading will not be handed over to the buyer when the LC is paid? What if the seller does not (although agreed) arrange for release of the goods to the buyer? What if the buyer is unable to obtain the shipping guarantee required to get release of the goods?
2: What about the presentation made under the LC? Shall the documents be forwarded from the nominated bank to the issuing bank by e-mail, or something else.
3: What about documents other than the transport document? Can they be used by the buyer in scanned or faxed form? Or is the original required – e.g. to arrange for import clearance.
In other words, it may well be possible to use scanned or faxed documents – but such decision has a string of consequences / issues that must be carefully considered. Therefore, in order to move on with this, a dialogue between the buyer and the seller – and the involved banks is essential.
Is it possible to present scanned (or faxed) documents under a Collection?
The answer is: It depends!
The URC 522 is based upon the assumption that paper documents are presented. As such, URC 522 does not make a distinction between original and copy documents. For that reason, the documents included in the collection may well be in scanned or faxed form.
In considering this solution, it is important to bear in mind that allowing for – as an example – a copy of a bill of lading is not a “technicality”. A consequence will be that the title document (normally used to obtain release of the goods) will not be part of the presentation, meaning that when paying under the collection, the drawee (buyer) will not get “access” to the goods as he normally would. The issue of the release of the goods must be taken care of “outside” of the collection. E.g. that the shipper (the principal to the collection) returns the bills of lading to the shipping line, instructing them to release the goods to the buyer. Or there must be established a shipping guarantee initiated by the buyer in order to obtain release of the goods without the original bill of lading (which will then be presented later).
This of course opens for a number of issues or questions:
1: Is this acceptable to the buyer and the seller, as the original bill of lading will not be handed over to the buyer when the collection is paid? What if the seller does not (although agreed) arrange for release of the goods to the buyer? What if the buyer is unable to get the shipping guarantee required to obtain release of the goods?
2: What about the documents presented to the remitting bank? Shall the documents be forwarded from the remitting bank to the collecting bank by e-mail, or something else.
3: What about documents other than the transport document? Can they be used by the buyer in scanned or faxed form? Or is the original required – e.g. to arrange for import clearance.
In other words, it may well be possible to use scanned or faxed documents – but such decision has a string of consequences / issues that must be carefully considered. Therefore, in order to move on with this, a dialogue between the buyer and the seller – and the involved banks is essential.
Is it possible to use eUCP Version 2.0 for LC presentations?
Again, the answer is: It depends!
eUCP Version 2.0 sub-article e1(b) reads:
“The eUCP shall apply where the credit indicates that it is subject to the eUCP (“eUCP credit”)”
This means that in order for the eUCP to apply, the LC must indicate that it is subject to those rules.
The consequence of this is that unless, the LC is issued subject to (or is amended to be subject to) the eUCP, the eUCP will not apply.
However, if the LC is issued (or amended) to be subject to eUCP then those rules apply.
Again, simply making an LC subject to eUCP is not a “technicality”. There are many issues to consider carefully.
For example, eUCP version 2.0 article e5 indicates that an eUCP LC must indicate the format of each electronic record. Likewise, eUCP version 2.0 article e6 requires that the eUCP LC must indicate a place for presentation of electronic records. What this means is that, the process must be carefully thought through, and based on agreements between the buyer and the seller and the involved banks.
If the “electronic records” to be presented are scanned; then the comments made above will also apply here: What then, about the “originals”.
If the intention is that the presentation must consist of an electronic bill of landing, then this must also be subject to a separate agreement; e.g. with the involved shipping line and perhaps a company facilitating this; like essDOC.
In other words, it is indeed possible to use the eUCP but such decision has a string of consequences / issues that must be carefully considered. Therefore, in order to move on with this, a dialogue between all involved parties is essential.
Is it possible to use eURC Version 1.0 for presentations under collections?
Again, the answer is: It depends!
eURC Version 1.0 sub-article e2(b) reads:
“The eURC shall apply where a collection instruction indicates that it is subject to the eURC (“eURC collection instruction”).”
This means that in order for the eURC to apply, the collection instruction must indicate that it is subject to those rules.
The consequence of this is that unless, the collection instruction is subject to (or is amended to be subject to) the eURC, the eURC will not apply.
However, if the collection instruction is issued (or amended) to be subject to eURC then those rules apply.
Again, simply making the collection instruction subject to eURC is not a “technicality”. There are many issues to consider carefully.
For example, eURC version 1.0 article e6 indicates that an eURC collection must indicate the format of each electronic record. Likewise, eURC version 1.0 article e7 requires that the electronic records alone must be accessible to the collecting bank when the collecting bank receives the eURC collection instruction. What this means is that, the process must be carefully thought through, and based on agreements between the buyer and the seller and the involved banks.
If the “electronic records” to be presented are scanned; then the comments made above will also apply here: What then, about the “originals”.
If the intention is that the presentation must consist of an electronic bill of landing, then this is also subject to a separate agreement; e.g. with the involved shipping line and perhaps a company facilitating this; like essDOC.
In other words, it is indeed possible to use the eURC but such decision has a string of consequences / issues that must be carefully considered. Therefore, in order to move on with this, a dialogue between all involved parties is essential.
The in initial question asked were: Is it possible to make electronic presentations when the courier services are “disrupted”.
The short answer is yes indeed, but any such arrangement will require express agreement between the involved parties – and the “new” process should be carefully thought through.
From the above it may sound very cumbersome to use the ICC eRules. The intention is not to give that impression. However, using the ICC eRules will require a re-design of the process that should be carefully considered. It will not be a quick fix to turn the process from using paper documents into using electronic records. I.e. the ICC eRules may not be the superhero saving the LC world during the covid-19 “attack”. However, the covid-19 crisis has illustrated more clearly than any of us would like to admit how vulnerable trade based on paper documents is. Therefore, buyers, sellers and Trade Finance banks should strongly consider implementing the ICC eRules in their future business. Likewise, the ICC will continue to promote and lobby for the usage of the ICC eRules.
We can only hope that the Trade Finance business is more ready when covid-19 version 2.0 knocks the door in…
Takeaways:
* If the LC or collection allows for presentation of copy documents – then a presentation of a scanned or faxed document will be acceptable.
* If the LC is issued (or amended to be subject to) eUCP then those rules apply.
* If the collection instruction is issued (or amended to be subject to) eURC then those rules apply.
* Any such arrangement (allowing for electronic documents) will require express agreements between the involved parties – and the “new” process should be carefully thought through.
Look out; more “lcviews CoronAdvice” to come.
Meanwhile – as always, take care of the LC – but take special care of each other during these difficult times.
Kind regards
Kim