Will the UCP 600 be revised?
At Trade Finance Global, many people ask whether the UCP 600 will be revised. The UCP 600 is a set of rules developed by the International Chamber of Commerce on the issuance and governance of Letters of Credit, which account for a significant proportion of global trade finance transactions.
The UCP 600 has taken over 3 years to develop.
When looking at the UCP 600, it is important to look at the market environment and general notes about the current guidelines. It is general consensus that UCP 600 will not be revised any time soon. Some of the reasons for this and general notes about the UCP are outlined below:
- there was a 14 year gap between UCP 500 and UCP 600;
- UCP 600 is doing relatively well and works most of the time, there have been a low number of disputes, usually centred around some ambiguous wording that could not be agreed when the UCP 600 was drafted;
The big question is, if it were to be revised,
- who would draft it and who in the market has the expertise to do so;
- revision would take time and be at a high cost;
- there is a lot of regulatory uncertainty in the market and policy would need to be drafted before any advancement of the documents;
- it is unknown what will happen to various sanctions that are operating in the market;
- the ISBP is used to clarify points and there are further opinions that do the same; and
- the system will never be perfect as there will always need to be compromise – it covers over 150 trading countries and needs to reflect the commercial and legal realities.
If you want to find out more about UCP 600 and why it exists, see our post here. At Trade Finance Global, our network and advisers can talk to you about arranging a letter of credit, UCP 600 and the contracts surrounding a trade finance transaction (see our page on Bonds, Guarantees and Letters of Credit).