Directory Yet to Move the eUCP Usage Needle

A survey conducted by DCW reinforces the notion that the eUCP Directory to date has been unable to boost confidence in the rules supplement designed for electronic commercial credits.

Directory Yet to Move the eUCP Usage Needle

In October 2023, ICC announced public launch of an eUCP Directory on its website. Designed as a means for ICC member banks to showcase their ability to handle credits subject to the Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation (eUCP) and inform of any required parameters which must be followed for eUCP credits, the eUCP Directory currently includes postings for 20 banks (31 branches) in 15 jurisdictions.

Arranged on the eUCP Directory webpage by jurisdiction, it includes listings for 13 banks in China – Agricultural Bank of China; Bank of China; Bank of Communications; China CITIC Bank; China Construction Bank; China Everbright Bank; China Guangfa Bank; China Merchants Bank; China Minsheng Bank; China Zheshang Bank; Industrial Bank; PingAn Bank; Shanghai Pudong Development Bank – 11 locations of Société Générale in Belgium; France; Germany; Hong Kong SAR; India; Netherlands; Republic of Korea; Singapore; Spain; Switzerland; United Kingdom – and Jordan Islamic Bank (Jordan); MUFG Bank (Malaysia); Standard Chartered Bank (Singapore); Bank of China (Singapore Branch); DBS Bank (Singapore); Lloyds Bank plc (United Kingdom); and J.P. Morgan (USA).        

In an attempt to learn from banks’ experiences being included in the eUCP Directory over the past 18 months and the level to which their listings have generated interest in their handling of eUCP credits, DCW reached out to designated contacts at the banks listed in the directory for feedback. Eighteen banks offered responses, one bank failed to reply to multiple requests for feedback and one marketing representative conveyed their bank’s preference to “sit this one out”.

Mindful that most points of contact listed on the eUCP Directory are familiar with their respective bank’s eUCP activity but are not authorized to speak on behalf of their employer, DCW gave respondents the freedom to comment without attribution. Jon Boran of Lloyds Bank granted permission for his remarks to appear with attribution.

DCW expresses sincere appreciation to all those who participated. Special thanks to Jun Xu, Vice Chair of ICC Banking Commission Steering Committee, who diligently assisted with following up and securing responses from multiple banks, and Li Huang, Partner of Hylands Law Firm, who helped with formulating the questionnaire & accompanying message into Chinese. 

eUCP Credit Issuance

DCW: Since being listed in the eUCP Directory, has your bank’s issuance of eUCP credits risen dramatically, risen slightly, remained the same, or decreased?

Among representatives of the 18 banks choosing to respond, 11 banks (61%) indicated that their issuance of eUCP credits has remained the same and 5 banks (28%) said that issuance has risen slightly. Of those in this latter category, one bank official explained that in recent years “we have seen a slight increase in eUCP credits however I do not think we are at a stage where we can determine as to whether this increase has a direct correlation to [our bank] being mentioned in the ICC Directory. We as an organization have been promoting these rules internally just as much if not more.” At the other end of the response spectrum, one bank reported that there is “no volume for eUCP transactions” currently in their country and another financial institution said the stated function is not applied at their bank.     

eUCP Credit Advising

DCW: Has your bank’s volume of advising eUCP credits risen dramatically, risen slightly, remained the same, or decreased since your listing in the eUCP Directory?

As regards advising eUCP credits, responses were similar with 11 banks (61%) indicating that their advising of eUCP credits has remained the same. But just 2 banks (11%) said their advising has risen slightly while 5 banks (28%) signaled that they have not received any eUCP LCs to advise.

Lloyds was the only bank reporting more than a slight uptick. “Over the period we have seen a steady increase in the number of eUCP credits we have handled”, said Jon Boran, Head of Future Products, Core Trade Product, Corporate & Institutional Banking at Lloyds Bank. “While we do note an increase in bank’s willingness to handle or issue eUCP credits over the last year, this may not be directly linked to the eUCP directory and is more likely down to conversations we are having with our correspondent banks and the work we have done on the Enigio/TradeGo Digital Highway.”

Parameters for Handling eUCP Credits

Of banks articulating within their eUCP Directory entry parameters under which they handle eUCP credits, no respondents indicated encountering any resistance to their stipulations. As seen in the Directory, parameters identified by one or more banks include instructions such as acceptable platform(s) for presentation of electronic documents, required format for electronic documents, and policy regarding mixed presentation. “In general we have found that banks are comfortable with [our] parameters and transfer of non-possessable documents over email if backed up by an authenticated SWIFT”, said Boran who added that as of year-end 2024, Lloyds is now handling eUCP credits that allow for the presentation of electronic bills of lading.    

eUCP Directory Impact

DCW: Any comments, especially positive, about your bank’s experience being included in the eUCP Directory over the past 1½ years and whether it has generated interest in your bank’s capacity to handle eUCP credits?

Feedback received on this open-ended question included the following:

• “After being listed in the EUCP directory, our bank has continued to promote the implementation of EUCP related to the electronic bill of lading business and has continued to cooperate with multiple banks in the industry, further expanding the scale of business processing.”

• “In the past 18 months, the situation has remained basically the same as before, with no significant changes.”

• “Joining the eUCP directory has let the other banks know that [our bank] can open and receive L/Cs applicable to eUCP which is conducive to the timely conclusion of transactions between the two parties.”

• “Regarding to your questions, our issuance of eUCP credits and our advising of eUCP credits haven’t risen obviously. All remain the same since our bank being listed in the eUCP Directory.”

• “Since being listed in eUCP Directory, our bank’s issuance and advising letters of credit subject to eUCP roughly remained the same, and the business volume is about 20 per year.”

• “Since we can handle eUCP business, we registered on the eUCP directory after learning that the ICC has opened it. Whether the L/C issued follows the eUCP and the choice of the advising bank mainly depends on the business arrangements of our customers and their trading counterparties, and our bank respects the customer’s choice.”

• “[The eUCP Directory] has improved the practical operation ability of our bank to deal with EUCP L/Cs, increased customer satisfaction, and enhanced the competitiveness of our bank’s international settlement business. It has indeed increased the market’s attention to our bank’s ability to handle EUCP letters of credit.”

• “The use of eUCP under import letters of credit by our bank has increased compared to the previous period, primarily concentrated in bulk commodity imports, further enhancing our bank’s electronic document handling capabilities. Clients have provided positive feedback on our bank’s ability to process eUCP letters of credit, raising market attention.”

• “There are relatively few L/C businesses applicable to EUCP and most of the current mainstream L/C businesses are still applicable to UCP and paper documents.”

• “Ultimately it is very much an educational process whereby we showcase the value these rules can bring to our client’s transactions, especially where the clients are eager to simplify and leverage digital solutions to make the end to end journey a lot smoother for all those involved. Whilst I support the eUCP Directory, in my humble opinion I think it has struggled somewhat. We have relied on word of mouth and ICC National Committee announcements … . , In a nutshell we need to do a better job of getting the message out and raising awareness of the directory’s existence.”

• “We have not been approached by our Clients for any LCs to be handled under eUCP during the last >1 year.”

• “We have not received any inquiry from customers or other banks during the past 18 months. It seems that [our] inclusion in the eUCP Directory has not obviously enhanced the market attention to our eUCP processing capabilities.”

• “With an increased focus on digital trade and digital presentations, there has been more interest in the ICC e-rules, with Lloyds handling increased volumes under eUCP and eURC. This does not appear to be directly linked to the eUCP directory and we have only received a minimal number of queries linked to the directory.  As the volumes of eUCP increase, a reinvigorated directory will help banks navigate the e-rules landscape and understand which of their correspondents are willing to transact using the e-rules and under what parameters.” – Boran

Conclusion

Responses cast light on the fact that the eUCP Directory has largely idled listlessly since its 2023 debut and its impact has been negligible. Apart from a few encouraging responses from Chinese banks, the Directory thus far has yet to ignite broader use of eUCP, has been unable to boost confidence in the rules supplement designed for electronic commercial credits, and has not increased awareness of eUCP.

With limited exceptions, there is an overall sense that financial institutions are continuing to take an extremely cautious approach toward eUCP and the digitalization of commercial credits. How else to explain that the eUCP Directory is primarily comprised of a healthy number of Chinese banks, one major US bank, one leading UK bank, and a top-tier French bank (and ten of its branches)? Even among several trade product heads who served on eUCP drafting group efforts and others within the banking industry who continue involvement with ICC initiatives on commercializing eUCP, their respective banks are absent from the eUCP Directory.

Although not specifically asked in the questions posed to contacts at the eUCP Directory entrants, no respondent expressed any major concern about a particular aspect of the eUCP rules. Indeed, the eUCP since it first came into force in April 2002 has been revised on multiple occasions to keep pace with technological innovation and is widely considered to be structurally sound and appropriate for industry practice. Instead, there exists a lingering general unease among many trade finance banks about electronic presentation and an unwillingness to publicly promote their eUCP capabilities to corporates and counterparties desiring eUCP credits.

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