Is eUCP Online Trade Finance Coming to a Bank Near You?

eUCPv2.0. On 1 July 2019, the long-awaited revised internet eRules and guidelines for online trade finance finally arrived for banks, importers, exporters, freight forwarders, chambers of commerce, customs brokers, logistics companies and carriers, to prepare and present electronic records for documentary letters of credit in lieu of or in conjunction with paper documents. 

ICC Commentary on eUCP Version 2.0 and eURC Version 1.0 . . . “It is inevitable that traditional trade instruments will, over time, inexorably move towards a mixed ecosystem of paper and digital, and ultimately, to electronic records alone. “ 

What is the eUCP? 

The International Chamber of Commerce Uniform Customs and Practice for Documentary Credits (UCP 600) Supplement for Electronic Presentation (“eUCPv2.0”), in effect 1 July 2019. eUCPv2.0 highlights include:

● The eUCPv2.0 supplements ICC Publication UCP 600 in order to accommodate the presentation of electronic records alone or in combination with paper documents.
● The eUCP shall apply where the credit indicates that it is subject to the eUCP (“eUCP credit”).
● The document shall include an electronic record
● Sign and the like shall include an electronic signature.
● May be presented in any format (unless specified) by the credit.
● A presentation requires a notice of completeness (new document).
● Any requirement for presentation of one or more originals or copies of an electronic record is satisfied by the presentation of one electronic record.

Bank guidelines for issuing eUCP credits

Documentary letters of credit are already issued electronically as SWIFT MT700 messages. It is the presentation of the required documents that
the eUCP Articles provide guidelines for.

The eUCP shall apply where the credit indicates that it is subject to the eUCP latest version. The credit must indicate a place for the presentation of electronic records (email address and/or URL). In addition, it must also indicate the physical location of the issuing bank, and the confirming bank, if any.

An eUCP credit is also subject to the UCP without express incorporation of the UCP. However, the credit’s document requirements need to be taken into consideration in light of the supplement’s additional guidelines.

A credit’s requirement for originals and copies of required documents is no longer applicable. Any requirement for presentation of one or more originals or copies of an electronic record is satisfied by the presentation of one electronic record.

The eUCP has a requirement for a ‘notice of completeness’ from the beneficiary and/or presenter. The receipt of the notice of completeness will act as notification that the presentation is complete and that the period for examination of the presentation is to commence.

Beneficiary guidelines for presenting eUCP negotiable documents

An eUCP credit must indicate the applicable version of the eUCP. It must also indicate the electronic address for presentation and the physical location of the issuing bank and any nominated and/or confirming bank. It must also indicate the format for accepting electronic records, such as PDF and version number.

The presenter is responsible for providing notice of completeness to the negotiating bank. The period for the examination will not commence until the bank receives this notice.

Each electronic record under an eUCP credit must identify the eUCP credit under which it is presented. This would include the invoice, packing list, transport documents, certificates and the like.

An electronic record means data created, generated, sent, communicated, received or stored by electronic means, that is capable of being authenticated as to the apparent identity of a sender and the apparent source of the data contained in it. And is capable of being examined for compliance with the terms and conditions of the eUCP credit.

Any requirement for presentation of one or more originals or copies of an electronic record is satisfied by the presentation of one electronic record.

The period for examination of documents commences on the banking day following the day the notice of completeness is received. An electronic record must provide evidence of its date of issuance.

An electronic signature, if required, means a data process attached to or associated with to indicate a person’s authentication of the electronic record.

In practice, the electronic negotiable document set under an eUCP credit can be a scan version (PDF) of the traditional paper negotiable document set. Ink signatures and copies are simply not applicable. The presenter only needs to add the ‘notice of completeness’ as an additional document.

eUCP Impact on Trade Finance

Presentation to the issuing bank. Under UCP 600 the presenter has the option of making the document presentation directly to any bank that is obligated under the credit, including the issuing bank. Sending the electronic negotiable documents directly to the issuing bank could reduce payment time from the world average of 24 days to 24 hours by eliminating couriers and multiple handing by advising, negotiating, confirming and reimbursing banks.

Couriers’ costs and time will be eliminated with the elimination of paper documents needing to be couriered between the presenter, to the negotiating bank, and then onto the issuing bank.

Realtime drafting and review of negotiable electronic records against the eUCP credit terms are now possible. The difficulty of constructing documents to comply with the letter of credit’s terms and conditions is time-consuming, costly, and prone to errors resulting in non-complying presentations and the loss of the bank’s conditional promise to pay. The invoice, packing list, quality certificate, transport document, SGG Inspection certificate, certificate of origin, fumigation and phytosanitary certificates (to name a few) have different sources and authors responsible for matching their data with the master credit, including its amendments. The presenter’s ability to review their documents prior to finalizing without the back and forth of drafts and revisions is a major advantage of compiling electronic records instead of paper documents.

Electronic re-presenting non-compliant documents by substituting or replacing the electronic record already presented, instead of sending a paper document by courier greatly decreases the time and complexity of providing final negotiable documents to the bank. Reducing and/or eliminating international bank trade finance service fees. Global trade flows are projected to reach US$24 trillion by 2026 generating revenues of US$48 billion to the international banking industry (2018 ICC Global Survey on Trade Finance). This revenue relies on technology from the past century; paper, brick and mortar, couriers and telex. Change the technology from paper to electronic records; from brick and mortar to the cloud; from couriers to attachments; and from telex to email, and the cost and time paradigm shifts from the banks to the trading partners. The end result could be payment time to exporters measured in hours and days instead of weeks and months. The payment cost could be reduced from a percentage of the presentation value to a flat fee. The multiple bank fees (issuing, advising, confirming, negotiating, and reimbursing banks) could be reduced to only the issuing bank which would also negotiate its own credit.

Marco Polo, CargoX, Trade information Network, TradeLens, we.trade, and e-Trade Connect to name a few. These systems all have their various technical advantages. However, the eUCP already provides the universal digital rules sought after; it is not technology-dependent and could be used by these offerings immediately.

YES, eUCP online trade finance is coming to a bank near you. The International Chamber of Commerce has brought trade finance documentary letters of credit to the Internet when if activated the eUCP version 2.0 for electronic records presentation in lieu of paper documents. Everyone involved with global trade owes thanks and respect to the farsighted vision of Dan Taylor, Bernard S. Wheble, and James E. Byrne as pioneers in bringing us eUCPv1.0 in April 2002.