Responding to the urgent need to address the disruptions facing the trade finance market as the world grapples with the coronavirus disease (COVID-19) pandemic, the International Chamber of Commerce (ICC) provided holistic guidance to the market, governments and regulators through two official publications.
The ICC memo to governments and central banks on essential steps to safeguard trade finance operations is a direct call to action to governments and central banks to remove any reliance on paper-based trade documentation through this unprecedented crisis and adopt the UNCITRAL Model Law on Electronic Transferable Records.
The international legal standards can be readily adopted in national laws to provide legal clarity for banks to accept e-documents and to expedite the financing of trade transactions and the release of goods.
“With many banks unable to handle trade finance paper documents in person due to COVID-19, there is a growing risk that the underlying trade in goods could be disrupted,” ICC’s director of finance for development Olivier Paul said. “ICC and its members are taking unprecedented steps to limit potential disruption to the processing of trade finance transactions. Yet, with the use of electronic trade documents in many jurisdictions either prohibited, or their legal status unclear, urgent government intervention is also required.”
The guidance paper on the impact of COVID-19 on trade finance transactions issued subject to ICC rules complements the memo with technical guidance with regard to the modification and adaptation of ICC rules within certain circumstances. It does not pronounce whether any set of events could amount to a force majeure event. Rather, in relation to ICC rules only, it provides indications on the factors that may be relevant in arriving at such a conclusion.
In turn, the paper reviews provisions from several ICC rules, namely the Uniform Customs and Practice for Documentary Credits (UCP 600) and its eRules (eUCP 600 2.0), the Uniform Rules for Demand Guarantees (URDG 758), the Uniform Rules for Collections (URC 522) and its eRules (eURC 522), the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (URR 725) and the Uniform Rules for Bank Payment Obligations (URBPO 750).
Re-disseminated by The Asian Banker