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#BCMeeting2019: Documentary Credit Practices

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Presentation provided at the Annual ICC Banking Commission Meeting by Hugo Verschoren on 11 April 2019.

Published in: Economy & Finance
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#BCMeeting2019: Documentary Credit Practices

  1. 1. Documentary Credit Practices: Controversy and Guidance
  2. 2. Donald Smith Principal Global Trade Advisory Ltd. Charlotte, NC USA Jia Hao Senior Product Manager Bank of China, Yangzou Branch P.R. China Hari Janakiraman Head of Trade Products ANZ Banking Group Ltd. Melbourne Australia Hugo Verschoren (moderator) Consultant goVer Trade Technologies Ltd. Antwerp, Belgium Documentary Credit Practices: Controversy and Guidance
  3. 3. • SYMPTOMS: Previous comments on this topic from 2017: • The majority of documentary problems are caused by: – Poor drafting of the credit; – Excessive and unnecessary data being added to documents; – Lack of attention to detail and management of the production, shipment and document collation processes; – Lack of understanding of documentary credit workflows and the principles of UCP 600 Step 1 – What is The Real Problem?
  4. 4. Parties do NOT understand the reason the LC exists: Movement of Goods and Payment • Simplifying UCP or Credits will not solve the lack of understanding of the underlying process which the LC exists to facilitate: • Applicant: Documents evidencing shipment of ordered goods; what the typical documents are and how they work and what their content should be • Seller: Assurance of timely payment through document prep and presentation • Banks: Financing and reimbursement Step 2 – Why Do These Things Happen?
  5. 5. • Education • Train your CLIENTS in LC basics: – What is a LC, How Does It Work, Completing Your Application Form, Basics of Creating Documents • Train your STAFF in Issuance, Amendments, Document Examination, AND HOW CREDITS and TRADE REALLY WORK • Visit and where necessary Train FREIGHT FORWARDERS like you train clients • Step 3 – Treatment AND CURE
  6. 6. • Increase access to UCP and ISBP 745 – Applicants, Beneficiaries, Forwarders and BANKERS • Take your staff on a trip to your Clients Factory, Port, Forwarders Office • 50% of the problems apply to the presented documents: it is a justifiable assumption that a greater understanding of ISBP 745 would help alleviate these problems and greatly reduce this percentage • It is very clear that significant attention must be paid to the distribution of, and education in, “ISBP” • AND WHY it Exists – this is a key issue moving forward Step 4 – HOW DO WE GET THERE?
  7. 7. Should the application of ISBP 745 be widened?
  8. 8. Can the existing ‘Opinions’ process be improved?
  9. 9. Is there a business case to develop a ‘lite’ version of UCP 600?
  10. 10. WHAT DO YOU THINK ABOUT DOCUMENTARY CREDIT PRACTICES?

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