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At a meeting in Rome, the ICC’s Banking Commission has voted overwhelmingly to approve a new paper which it is believed will reduce the number of documentary credits rejected by banks.

The commission voted 57-8 to approve the International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP).

The ISBP has been written to help businesses which use ICC’s internationally accepted rules on letters of credit, the Uniform Customs and Practice for Documentary Credits (UCP 500).

Currently, discrepancies in credits found by banks in the understanding and application of the UCP have led to 60-70% of letters of credit being rejected on first presentation. As documentary credits are one of the chosen methods of payment for financing world trade, these rejections have been slowing trade and have led to costly disputes and court cases.

According to international trade finance expert, Martin Shaw, current discrepancies in the use of UCPs arise because of “personal opinions, different experiences among practitioners, different attitudes, subjective approaches and questions of interpretation.” The ISBP has been written as a supplement to the UCP 500, explaining how the rules are used in day-to-day practice.

“The ISBP does not amend UCP 500,” says Ron Katz, the Banking Commission’s policy manager. “It does, however, put meat on the bones and explains how the practices articulated in the UCP are to be applied by documentary practitioners worldwide.”

The ICC task force that developed the document spent months reviewing international best practice questionnaires before producing a final text. Long awaited by the letter of credit community, the ISBP contains some 200 paragraphs setting forth the steps document checkers should take when reviewing presented documents.

Among questions answered in the paper are the following:

Do drafts, certificates and declarations, if not stated in the credit, require a signature

  • Under what conditions can drafts drawn on the applicant be issued
  • What effect do on board notations have if they contain the words “shipped in apparent good order”, “laden on board” and “clean on board”
  • What will be deemed to be the date of dispatch on a multi-modal transport document
  • Does an air transport document have to indicate that the goods have been accepted for carriage

The printed version of the ISBP is expected to be ready in January. It can be purchased from ICC national committees in more than 70 countries or from the ICC bookstore online at www.iccbooks.com. Discounts will be offered for bulk orders.