URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade

URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade

URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade: Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credit -URR 725New Publication Number 725 to become effective October 1, 2008

Background to URR

The Uniform Rules for Bank-to-Bank Reimbursements (“URR”) were first published by ICC in November 1995 and came into force on July 1, 1996 as ICC Publication No.525. At the time, reimbursement authorizations had begun to be issued in currencies other than what had been the more common currency i.e., US Dollars and an international set of rules were deemed necessary. It should be noted that there had been Bank-to-Bank Reimbursement rules operating in the USA for many years and these formed the basis for the establishment of the principles to be considered in drafting URR 525.

From July 1, 1996 issuing banks were faced with the decision as to whether their reimbursement authorizations should be made subject to URR 525 or UCP 500 article 19. To encourage usage of the URR and reduce the possibility of any ambiguity as to the applicable rules, SWIFT modified their handbook to reflect that the issuance of an MT740 (Authorisation to Reimburse) would automatically apply to URR 525, unless otherwise stated.

After implemented of UCP 600 from July 1, 2007 ICC announced an updated version of its Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (URR) will take effect on 1 October 2008 known as URR 725, the update was necessary to bring the URR rules into conformity with the UCP 600. Today, the majority of credits are issued available by negotiation and the issuing bank provides reimbursement of a complying presentation at sight or on a future due date. URR 725 should not be seen as a revision of URR 525. It is an updating process that has followed the same manner as the eUCP i.e., to change the style to match that of UCP 600 article 13. The changes were approved by the ICC national committees at the ICC Banking Commission in April 2008.

Clearly, there are aspects of a reimbursement process that are not suitably covered by UCP 600 article 13. This is a deliberate position to encourage usage of rules that are specifically designed for the product. To expand the content of UCP 600 article 13 to cover more areas of reimbursement processes would serve no useful purpose.

The idea of having a set of rules is to establish a sense of certainty to a transaction. URR (525 and the impending 725) seek to achieve this. The content of UCP 600 article 13 covers the bare essentials without tackling the specifics. An issuing bank may find UCP 600 article 13 as more flexible due to its lack of content, but for the sake of establishing international practice serious consideration should be given to adoption of URR 725.

The Uniform Rules for Bank-to-Bank Reimbursements URR 527 constructed with 17 articles.

Uniform Rules for collection URC 522

The Uniform Rules for Collections URC 522 came into effect on 01 January 1996.

The ICC Uniform Rules for Collections are a practical set of Rules to assist bankers, buyers, and sellers in the collections process. The Rules have been prepared to resolve problems that practitioners have experienced in their everyday operations. The ICC Uniform Rules for Collections were first published by the ICC in 1956. Revised versions were issued in 1967 and 1978. This present revision ICC Publication 522 was adopted by the Council of the ICC in June 1995. Uniform Rules for Collection URC 522 is the most frequently used rule in documentary collection transactions.

It is different from the letters of credit, in the sense that the bank only acts as a medium for the transfer of documents but does not make any payment guarantee. The Uniform Rules for Collections, ICC Publication no. 522, shall apply to all collections where such rules are incorporated into the text of the “collection instruction” and are binding on all parties thereto unless otherwise expressly agreed or contrary to the provisions of a national, state or local law and/or regulation.

URC 522 underlines the need for the principal and/or the remitting bank to attach a separate document, the collection instruction, to every collection subject to the Rules – makes it very clear that banks will not examine documents, particularly not to look for instructions – addresses problems banks experience in respect of documents against acceptance (D/A) and documents against payment (D/P) – clearly indicates that banks have no obligation to store and insure goods when instructed.

What is a collection instruction?

Collection Instruction is a written and separate document in which exporter should supply to his bank along with the commercial and financial documents. Collection instructions are written in a cover letter format and normally should contain below points.

  • Governing rules for the collection: As an example “This collection is subject to The Uniform Rules for Collections, 1995 Revision, ICC Publication No. 522”.
  • Details of the bank from which the collection was receivedincluding full name, postal and SWIFT addresses, telex, facsimile numbers and reference.
  • Details of the principalincluding full name, postal address, and if applicable telex, telephone and facsimile numbers.
  • Details of the draweeincluding full name, postal address, or the domicile at which presentation is to be made and if applicable telex, telephone and facsimile numbers.
  • Details of the presenting bank, if any, including full name, postal address, and if applicable telex, telephone and facsimile numbers.
  • Total amountand currency of the documentary collection.
  • Documents to be supplied: URC 522 rules of the documentary collections define two main types of documents; a) financial documents and b) commercial documents.

The Uniform Rules for Collections URC 522 constructed with 26 articles.

International Standard Banking Practice: ISBP 745

The ISBP: International Standard Banking Practice is an International Chamber of Commerce (ICC) publication, which provides important guidance to documentary credit examiners and practitioners relating to the examination of documents presented against Letters of Credit. It is important to note that the ISBP cannot in any way change the UCP 600 rules which apply to Letters of Credit, but the ISBP is a valuable supplementary guide to UCP.

The first ISBP was formally approved in 2002 and this first version acted as a companion guide to Uniform Customs and Practice (UCP) 500 which were the current rules that governed Letters of Credit at that time. However, when the rules were revised to UCP 600 in July 2007, the ISBP was duly updated by the ICC publication No.681, thus aligning the ISBP with the newly updated UCP.

A fully revised version of ISBP, ICC publication 745 is now available published in June/July 2013. This revised guide is a substantial update to the former version and includes a number of new interpretations and new chapters, so it is an absolutely essential publication for anyone who is involved in Letters of Credit and the objectives were;

  • To encourages a uniformity of practice worldwide to reduce the number of credits rejected by banks owing to discrepancies.
  • To supply practices and interpretations that should be applied by documentary credit practitioners helping to reduce discrepant presentations.

What is the importance of international standard banking practice for documentary credits?

ICC defines the importance of new International Standard Banking Practice edition with these words “An invaluable source of practical information for trade finance professionals and academics, this revised edition of ISBP provides readers with the latest ICC approved guidelines for all parties to documentary credits.” ICC emphasize that ISBP is the best reference book in banking practices for international letters of credit documents subject to UCP 600. Use of ISBP has significantly reduced international discrepancies for documentary credits and is regularly used by banking, logistics, insurance, legal and corporate professionals and academics worldwide.  It is a great companion book with UCP 600.

Who can use International Standard Banking Practice – ISBP 745 in documentary credit transactions?

All professionals, banking, logistics, insurance, legal and corporate professionals and academics worldwide, who deal with documentary credits can use International Standard Banking Practice – ISBP 2013 as a 1st reference book on their daily routine.

What is new with the International Standard Banking Practice – ISBP 745 for documentary credits?

Previous International Standard Banking Practice which is called ISBP 2007 published in year 2007 by ICC was covering below trade documents:

  • DRAFTS
  • INVOICES
  • TRANSPORT DOCUMENT COVERING AT LEAST TWO DIFFERENT MODES OF TRANSPORT
  • BILL OF LADING
  • CHARTER PARTY BILL OF LADING
  • AIR TRANSPORT DOCUMENT
  • ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS
  • INSURANCE DOCUMENT AND COVERAGE
  • CERTIFICATES OF ORIGIN

In addition to above stated documents International Standard Banking Practice – ISBP 745 also covers;

  • PACKING LIST
  • WEIGHT LIST
  • BENEFICIARY CERTIFICATE
  • NON-NEGOTIABLE SEA WAYBILLS
  • ANALYSIS, INSPECTION, HEALTH, QUANTITY AND QUALITY CERTIFICATE

History of ISBP publications:

  • International Standard Banking Practice for the Examination of Documents under Documentary Credits – ISBP 2002 – ICC publication No: 470
  • International Standard Banking Practice for the Examination of Documents under Documentary Credits – ISBP 2007 ICC publication No: 645
  • International Standard Banking Practice for the Examination of Documents under Documentary Credits – ISBP 2013 ICC publication No. 745
  • The International Standard Banking Practice (ISBP) was first approved by the ICC Banking Commission in 2002 (Publication 645) and later updated in 2007 (Publication 681).
  • A new version of the ISBP (Publication 745) was approved by the ICC Banking Commission 17 April 2013.
  • The ISBP has evolved into a necessary companion to the UCP for determining compliance of documents presented under documentary credits.
  • All paragraphs have been rewritten for clarity. New paragraphs and new practices have been added. All in all ISBP 745 is more than twice the size of ISBP 681.

The professionals’ reference book to best banking practices for international L/C documents subject to UCP600, ISBP has already played a significant role in reducing international discrepancies for documentary credits and is regularly consulted by a wide range of banking, logistics, insurance, legal and corporate professionals and academics worldwide.

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URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade

URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade

URR 725, URC 522, ISBP 745: Their uses and Implication in Foreign Trade

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