The eUCP, the electronic supplement to UCP 500, ICC's internationally
used rules on letters of credit, came into force on April 1, 2002. Dan Taylor,
co-author of the Guide to the eUCP, is Vice Chairman of the ICC Banking Commission
and President of the International Financial Services Association (IFSA). Below
he responds to some questions concerning the new Guide.
Like most rules, the
eUCP is a set of general principles. Do you see the Guide to the eUCP as a necessary
complement to the eUCP, showing how these rules operate on a day-to-day basis?
Taylor: Unlike the case
for most ICC rules, there were no explanatory comments released with any of
the drafts of the eUCP except for the first draft. This was a decision made
by the task force because many of the initial responses received on the first
draft were directed at the comments rather than to the rules themselves! As
a result of our not including comments with the rules, there was a perceived
need for more detail on how the rules were derived and how they will operate
in practice. We have tried to address these needs in the Guide, and I believe
they will meet the needs of practitioners who will use the eUCP.
How is the Guide organized
in relation to the UCP and the eUCP?
Taylor: The Guide starts
out with a rather lengthy introduction that covers a wide variety of areas related
to the eUCP. These include background, general principles, automated compliance,
and the roles of the banks involved in the process. In addition, it covers,
in general terms, the question of risks, and the relation of the eUCP to the
law. Specifically, there is a section on how one should prepare to use the eUCP,
which includes all of the parties to the credit, and, in particular, preparations
at the issuing bank. After the introduction, the Guide follows the articles
of the eUCP. It goes in-depth into each article and its relation to the UCP,
as well as methods and technology that may be utilized in applying the article.
The Guide has cross references,
not only to the eUCP and UCP, but also to other rules such as International
Standby Practices (ISP98), the Uniform Rules for Demand Guarantees (URDG), as
well as legal statutes and treaties. What is the necessity and the benefit of
this extensive cross referencing?
Taylor: The cross references
to the UCP were obviously important because of the relationships b
etween the
eUCP and the UCP. We decided to also include cross references to other rules
in order to provide as much related information as possible. The cross-references
to laws and statutes were included because of the inter-relationships between
the eUCP and the law. While many of the laws relating to e-commerce are still
developing, we felt it important to cite them as representative examples of
legislation in the field.
The Introduction to the
Guide says: "electronic presentations are still in their infancy stage".
How long, in your view, before they become the rule rather than the exception?
Taylor: The electronic equivalents
for letters of credit have been in development in various forms over a number
of years. They are continuing to develop. Changes in technology have made this
evolution difficult, since the available technologies continue to change and
mature. In my view, the use of the eUCP will develop slowly over time as technologies
are adapted to the process and banks change systems and procedures to accommodate
the process. The use of any new set of rules requires that the users be educated,
and the eUCP is no exception. Within banks, significant analysis concerning
the impact of electronic presentation have to be completed to determine all
of the procedural, risk and system changes that have to be made. Once that analysis
is completed, implementation schedules must be created and the process started.
I believe we will begin to see banks utilizing the eUCP next year, and we are
likely to see a steady growth in electronic presentations over the next several
years.
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