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The International Chamber of Commerce (ICC) has launched its eagerly-anticipated new uniform rules on forfaiting (URF).

The rules, which were adopted during the ICC Banking Commission meeting in Mexico City last week, will take effect from January 1, 2013.

The URF, written by the ICC and the International Forfaiting Association (IFA) provides a set of rules for the sale of instruments used for financing trade – which include bills of exchange, promissory notes, documentary credits and invoice purchases, as well as newer instruments.

Barclays’ head of trade and working capital Tan Kah Chye tells GTR: “The URF was overwhelming accepted by the member countries of ICC. I believe it is a reflection of the commercial demand of a universally-accepted rule-based approach to forfaiting.”

“We believe that the URF will further help to promote trade between member countries, mitigate the risk of non-payments by importers and provide additional liquidity to the market place. The forfaiting market is already huge at US$300bn and we do expect this market to grow under URF and to benefit from a higher degree of efficiency.”

At the IFA conference in September this year, Silja Calac, head of trade risk management at UniCredit stressed the importance of clear rules in the forfaiting market, and hoped that the new URF rules would secure this and “revive the trade finance secondary market and draw in new investors”.

The new rules will be available in book form to purchase from the ICC from the beginning of next year but the broad contents are said to be well known within the market as the rules were the subject of an extensive consultation exercise.

Sean Edwards, deputy chairman of the IFA and a member of the drafting group, tells GTR about two of the key issues that were decided on at last week’s ICC meeting.

One of the key provisions will be the appropriate examination of documents for buyers and sellers in both the primary and secondary market. These will ensure that a transaction cannot be rejected on spurious grounds, while at the same time giving the buyer comfort that they have a commercially acceptable set of documentation.

Secondly, Edwards explains that “a descending scale of recourse has been implemented, starting with exporters who will be liable if, for example, the goods they sell are defective and this leads to payment problems to sellers in the secondary market who will in general terms, only be liable if they do not have title to the paper they sell, or fail to pass on information which they have received from previous sellers”.

He adds: “These clauses balance the non-recourse nature of forfaiting with the need to ensure that parties carry out their reasonable responsibilities in the transaction chain. This codifies what has been a grey area of forfaiting for some time. By so doing, it is hoped to avoid litigation, speed up resolution of disputes and encourage new entrants to enter the market.”

Over 400 participants attended the meeting on November 14, which was the first of the commission’s bi-annual meetings to be held in Latin America.