Documentary credits to go online

Banks in UAE are readying themselves to introduce electronic uniform customs and practice (eUCP) for documentary credits from the first week of April, this year. International Chamber of Commerce (ICC) has asked the banks here to be in line with developments in the developed world, where the eUCP is already in place.

"However, the cyberlaw has to be enacted in the UAE before banks could switch to this system so that the transactions through this mode will be legally valid," said Munir Mahmood, operations & trade finance manager, Credit Agricole Indosuez (UAE branches).

ICC's rules governing documentary credits, used by banks worldwide to finance trade, or to transfer billions of dollars every year from buyers to sellers, now include an electronic supplement that caters to the growing number of documents that are presented electronically.

The developed countries like the U.S., Japan, Britain, France, etc have already been using the eUCP for some time now because these countries already have their cyberlaws in place. Once formally introduced, eUCP will be used when presentation of documents are made electronically or part-electronically or also in part-paper form.

In fact, uniform customs practice for documentary credits were first developed more than 60 years ago as per the ICC rules governing the documentary credits the world over.

The current version, which was issued in 1993, is known as UCP 500. The eUCP has been created to meet the demands of the market for the presentation of documents in the wake of the rapid development and evolution of electronic trade which has significant impact on current documentary credits and the ICC uniform rules.

According to Munir, all the articles of the eUCP are consistent with the existing UCP except for the electronic presentation aspect. "The changes have been made to address the unique issues related to presentation of the electronic equivalent of paper documents," he clarified.

The electronic supplement of eUCP consist of 12 articles whereby the main article covers corruption of an electronic record when issuing bank, confirming bank or an other nominated bank is unable to open an electronic document for technical reasons like virus attack.

Therefore, eUCP supplement article allows the bank concerned to seek the sender to re-present the document within a maximum of 30 days and if the sender fails to re-present the documents within this stipulated period, the bank can consider the documents not having been presented.

The article e1 states about the very scope of the UCP supplement for electronic presentation (eUCP), article e2 is about relationship and article e3 about definitions. The articles e4, e5, and e6 deal with the specific format, presentation and examination of documents and the articles e7, e8 and e9 are about the notice of refusal, original and copies, and date of issuance of documents respectively.

Transport, disclaimer of liability and corruption, and maintaining the electronic record after the presentation, are covered under articles e10, e11 and e12.