As the year draws to a close, it is worth taking some time to reflect back on 2007.

The beginning of the year saw the distribution of the new UCP and ISBP booklets on a global basis. The approval of the ICC Banking Commission having been given in October 2006. The drafting of the Commentary to UCP 600 was in full swing and proving more difficult to write than the rules themselves. The Commentary being made available by the ICC in October 2007. 

The beginning of the year was also probably the time when most organisations looked to either provide or receive education with regard to UCP 600. January through June 2007 was a very busy time for many individuals involved in training staff and/or customers. In this edition of the newsletter you will see various photos taken at events where Gary Collyer and Coastline Solutions were involved. These spanned all the continents of the world. It is interesting to note that some countries are still requesting UCP 600 events that cover the content of each article and their application. What is clear from a number of questions that are being asked is that some of the training was not as it should have been. Banks and companies may wish to re-visit this and decide whether additional education is required.

     

     

     

I would like to share with you some data collected from UCP after the implementation date of 1 July 2007. Five questions were asked of the participants. The questions and the percentage responses are given below. I give the response for Country (A) – in red, which was held in the Americas in September 2007 and consisted of some 75 attendees and Country (B) – in blue, which was held in Asia in November 2007 and consisted of some 200 attendees.

(1) The UCP 600 came into effect on July 1 (a Sunday). How long did it take, to your knowledge, before all commercial letters of credit were issued subject to UCP 600, where your bank was the issuing bank?

1. First working day after the implementation date.	67%	70%
2. Within one week of the implementation date.	19%	8%
3. Within two weeks of the implementation date.	6%	3%
4. As of August 1, 2007	8%	0%
5. You are still issuing some transactions under UCP 500.	0%	19%
6. You are not issuing anything under UCP 600.	0%	0%

(2) The UCP 600 came into effect on July 1 (a Sunday). How long did it take, to the best of your knowledge, before all of the Commercial Letters of Credit you were receiving, as an advising or confirming bank, were subject to UCP 600?

1. First working day after the implementation date.	5%	41%
2. Within one week of the implementation date.	23%	12%
3. Within two weeks of the implementation date.	18%	6%
4. As of August 1, 2007.	5%	0%
5. You are still receiving some transactions under UCP 500.	49%	41%

(3) Sub-article 12 (b) has been the subject of much discussion both before and after the implementation date. As a nominated bank that may incur a deferred payment undertaking (or a confirming bank that must incur) are you:

(4) Article 35 of UCP 600 has introduced a concept that I am sure most of you would recognize prevailed under UCP 500 i.e., what happens when documents are lost in transit? The article does not go into the “how” honour or negotiation is to be made. Has your bank considered what action they would take if you were the issuing bank and documents were lost in transit?

(5) Over the last four years you have probably attended conferences and heard updates on the UCP 600 and you have been able to read the rules for yourselves. From your perspective:

The results show some interesting similarities and issues, especially as the two results that are shown were taken 2 months apart.

Whilst both sets of participants gave similar percentages in respect of how quickly they were issuing all transactions subject to UCP 600, they gave similar values in respect of still receiving transactions subject to UCP 500. Of the Asian audience 41% indicating they were still receiving UCP 500 LCs in November of this year. It is hoped that this reduce significantly in 2008 as it is in the interests of all parties to deal under one set of rules for all transactions as soon as is practicable.

With regard to sub-article 12 (b), despite the authorization that exists within the rules, the majority of banks were only willing to prepay on a case-by-case basis (see question 3).

Under article 35, the vast majority of banks would look for copies of documents in the event that the originals were lost in transit. The request for copies of documents is in line with the ICC position (see question 4).

Similar results were given to the question of UCP 600 or UCP 500? The banks seem to prefer UCP 600 but expected some of the problems that existed under UCP 500 to surface under UCP 600 transactions. Thankfully, none were of the opinion that UCP 600 was worse than UCP 500!!

As reported in the last newsletter, a number of exclusion clauses are being seen in letters of credit. It has to be said that most would equally have applied under UCP 500 as the language and/or the intent of the rule has not changed between the two sets of rules.

It is hoped that in 2008 that sense will prevail and that banks will limit exclusions to the minimum. It is hoped that in 2008, the usage of UCP 600 will give rise to more certainty in letter of credit transactions and that banks will apply the spirit of the rules in their day to day activities.

As we draw to a close, there is another "feisty" topic on the agenda for 2008. Those of you that have followed (or are part of) the ICC Banking Commission work, will know that four years ago a major discussion ensued with regard to bills of lading that bore the wording "The carrier may choose to deliver the goods to the consignee without presentation of an original bill of lading" or "If the carrier so requires, one original bill of lading must be surrendered in exchange for the goods". At the time of the discussion, the ICC Banking Commission was split as to whether banks should reject, on the basis that such wording affected (may affect) the position with regard to the title to the goods, or accept, on the basis that these words represented terms and conditions of carriage and banks do not examine such terms and conditions. The then Secretary General of the ICC instructed that the ICC could provide a position if the Banking, Transport and Commercial Law & Practice Commissions all agreed as to how to treat such bills of lading. No agreement was reached and thus no position stated. Much to the surprise of many people, the writer included, despite reports of banks rejecting and others accepting such bills of lading, no formal request has been made for an opinion – until now!

The whole question of documents of title was raised during the revision of UCP 500 and there was no consensus on the manner in which such bills of lading should be treated. Therefore, no reference was made in the rules. Now, a national committee of the ICC has raised a request for an opinion. Rather than have a similar debate at the next ICC Banking Commission meeting in April 2008, national committees have been requested to provide their stance on this issue by December 20, 2007 (although this may be extended until January 20, 2007). At the time of writing this article (December 14) only 4 countries had provided a response. Watch this space for further updates!

It just leaves me to wish you all a Very Happy Christmas and a Peaceful and Prosperous 2008!