URC and UCP Electronic Rules Update: ICC Issues eRules to advance the digitalisation of trade finance
The International Chamber of Commerce (ICC) announced that it has accelerated attempts to digitalise of trade finance by releasing two new sets of enhanced electronic rules (eRules), Uniform Customs and Practise for Documentary Credits (eUCP) and Uniform Rules for Collections (eURC 522). The new eRules came into effect on 1 July. They will be providing guidance for banks operating in today’s increasingly digital trade finance system.
Trade Finance Global reports on the key changes to both supplements of the UCP (eUCP) and URC (eURC) documents, and what this means for users of these eRules.
eRules, eUCP and eURC: How did it happen?
The ICC formed a Digital Trade Working Group back in June 2017, looking at ways to advance truly paperless and digital trade amongst banks and extending the current paper-based framework.
The aim of the Group was to identify strategies to overcome the constraints of digitalising trade finance — such as a reliance on paper-based practices, a lack of recognition of the legal status of electronic documents, uncertainty over standards, and a general lack of clear legal and regulatory frameworks.
As a result of the work of the Group, a mandate was received from the ICC Banking Commission Executive Committee to:
(1) Update the existing version 1.1 of eUCP to version 2.0 in order to ensure continued digital compatibility.
(2) Draft entirely new version 1.0 of eURC in order to ensure continued digital compatibility for the presentation of electronic records under Collections.
The eRules have been intentionally developed with version numbers in order that they can be updated regularly without impacting upon other existing ICC rules, thereby reducing the time required to develop any potential identified revision.
Why are eRules needed for UCP and URC, and what are the benefits?
Trade payment systems and finance have gone through many stages during the past hundred years. Letters of credit have been issued electronically since the advent of telegrams. However, the most accelerated changes have taken place during the past 25 years with the SWIFT electronification of the letter of credit (L/C) systems.
Although traders have sought to increase the speed of their transactions over the years, little could be done until the presentation process is electrified. The implementation of eUCP and the creation of eURC is only the first step in this process, that is only in its infancy stage. To fully understand the benefits of eUCP and eURC, the professionals in the sector should begin visualising the final functionalities of the. Namely, automated compliance checking allowing the letter of credit process to be “straight-through processed”.