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This month we’re digging into the legal, operational, and regulatory tensions at the core of LC and guarantee practice.
The ICC Banking Commission returned to Dubai, UAE, for its 2025 Annual Meeting on 17 February. The one-day event was organized by ICC UAE and hosted by Dubai Chambers. In addition to those participating in-person, others attended virtually.
In welcoming participants to the city and the venue, ICC UAE Secretary General Hassan Al Hashemi emphasized Dubai’s key role in pursuing the meeting’s theme, “Connecting the Trade World; Shaping the Future”. Al Hashemi noted Dubai was hosting the Banking Commission Meeting for the third time (2009, 2014) at a point when the world of trade is evolving at an unprecedented pace. He added that Dubai Chambers is also striving to open avenues for expansion of trade and that it operates three chambers: commerce; digital economy; and international.
In delivering opening remarks, ICC Banking Commission Vice-Chair Surath Sengupta cited two instances he believes really propelled world trade forward: same-size containerization and bank-formulated rules governing LC practice. Now, Sengupta contends, the industry has a real opportunity to advance trade further. Reflecting on the Banking Commission’s purpose, Sengupta said heated debate and discussion are part of the formula for revitalizing the Commission toward a common purpose. Sengupta stressed the importance of the Commission’s recently crafted definition of trade finance as a means for helping specialists in other industries understand what it entails, including support of services. In reinforcing its role to promote trade finance, the Commission will deepen its engagement with leading international organizations and enhance its operating model.
Speaking on the vision of “The UAE as a Hub for International Trade Finance”, Jamal Saleh, Director General of the UAE Banking Federation referenced UAE’s best-in-class infrastructure and its aim to elevate trade. Presently, UAE is among the world’s Top 20 in trade and aspires to be Top 10. With more than 60 banks, UAE possesses great capacity to finance trade, but Saleh remarked the country does not want to do it “the old-fashioned way”. UAE has launched a test ecosystem with other countries and its Central Bank Digital Currency (CBDC) strategy is now in its second phase. The UAE Banks Federation (UBF) has utilized technology to address know-your-customer challenges and has eKYC processes which can be updated and amended as necessary. Saleh acknowledged there will be some hiccups. The UAE has introduced “Sanadak”, an ombudsman unit now responsible for consumer complaint-handling duties previously under the purview of the Central Bank. UAE is also striving for 20% of its GDP to come from digital sources; it is now at 10%.
Addressing the meeting’s theme, “Connecting the Trade World; Shaping the Future”, Stefan Tryggvason, CEO of China Systems Corporation, reflected on the monumental role of ICC in the UAE. Founded in 2004, the ICC UAE National Committee laid a foundation and continues to shape the future of trade through innovation and collaboration in confronting challenges. Tryggvason, who has lived in the country since 1982, has seen UAE become one of the world’s fastest-growing trade centres. Although “game-changer” is an overused label, digitalization is just that, and Tryggvason credited the ICC Digital Standards Initiative as a main pillar for transforming the trade landscape going forward.
In the meeting’s first working session, a panel of ICC Banking Commission Vice Chairs discussed ICC’s role amid prevailing trends impacting trade finance. Bhriguraj Singh of HSBC opened by identifying major trends including the re-shaping of supply chains, fluctuating order cycles, dealing with shocks effecting inventories, and the meteoric rise in services trade.
Hari Janakiraman of ANZ explained ICC has a role to play in the shift from paper documents to data points. The industry has come a long way from the Bank Payment Obligation (BPO) and emerging technologies like CBDCs has challenged ICC to think about what it can do, for instance, in the sending and receiving of payments. In considering the future of trade, payment is not the transaction. Digitalization can handle the things around the trade and making the trade happen.
Asked how ICC can enhance adoption of its existing rules and create new rules, Jun Xu of Bank of China cited the widely-used UCP as ICC’s crowning achievement in the formulation of effective neutral rules and said that ICC needs to listen to the industry for direction as to avenues for future rule-making. Louise Taylor-Digby of SWIFT added that an integrated strategy is needed to address pivotal areas such as regulatory concerns, financial crime, and sustainability.
In a Q&A period that followed, ICC needs to be attuned to developing countries and the fact that billions of people lack internet access. Panelists commented that ICC is contemplating how to improve representation and its promotion of various forms of trade finance can be the lubricant that makes trade work. In recent years, ICC has tried to diversify the Banking Commission, especially in reaching out to the global south, and recognizes the need to continue such efforts.
Responding to concern that the draft is an unnecessary document which can hinder trade credits, panelists concurred it has no place in LCs unless required by applicable regulations. ICC has taken concrete steps to discourage use of drafts through its guidance papers.
As regards trade loans, one attendee made a plea for added emphasis and greater standardization. Panelist agreed, stating this demonstrates the need to explain why trade finance is safer than working capital loans. ICC’s formal definition of trade finance is a good first step in the right direction. Trade loans have been proven to have lower credit loss and ICC is grappling with how to accentuate this in its Trade Register. About standardization, it is an uphill battle due to legal considerations and banks’ approaches to the business.
For one attendee, what’s missing from Banking Commission events is dialogue with regulators since trade finance is so challenged by Basel Committee initiatives. While the ICC Trade Register is an attempt to address this, panelists said ICC needs to make it more meaningful to regulators by having more banks contribute to the Trade Register. At present, only commercial banks can submit data. One multinational development bank representative asked if MDBs can supply data to the Trade Register.
Other panelists admitted it is a difficult environment in which to operate, citing the steady transition from LCs to open account, regulatory pressures, and geopolitical strains. In particular, a 30-40% drop in correspondent banking has compounded the problem, leading to LCs being advised through multiple banks which increases costs.
Another attendee pointed out that the bulk of trade finance is focused on post-shipment and carries lower risk, but what can be done by the industry to solve the pre-shipment financing quandary which is always the bottleneck? As pre-shipment financing involves the taking on of performance risk, panelists said this information needs brought to light so that trade finance can be shown as safer and attain better capital treatment than loans.
As for ICC addressing Islamic Trade Finance issues, representatives acknowledged ICC needs to engage more and added a huge information gap exists that needs to be overcome.
Dr. Marc Auboin, Counsellor at the World Trade Organization (WTO), shared insights into his organization’s collaborative efforts with MDBs to increase trade finance. He noted that a 10% export credit increase can lift trade by 2%. During the pandemic, the WTO and MDBs stepped up to provide USD 35 billion in trade finance per year. Today, trade is up 25% compared to pre-pandemic levels. According to Auboin, there is no de-globalization trend overall (neither going up, nor down). In the past, some 80% of trade was covered by trade finance. Nowadays the estimate is in the 50%-60% range. As for the intake of trade finance, in Vietnam supply chain finance is only 1% of the total trade finance portfolio; in Mexico, it is 10%. The figures demonstrate the margin of progression in emerging markets is huge.
WTO and MDBs are attempting to work together to boost interest in trade finance, especially SCF, including factoring and reverse factoring. But LCs are still used and maintaining the 20% credit conversion factor rule has been important, although some jurisdictions have opted for 50% or 100%. Citing the estimate that half of world trade is supply chain trade, Auboin emphasized that SCF is very important for WTO and it is working to expand SCF through capacity-building and collaboration with MDBs who should be a part of the Trade Register effort, he added.
ICC Opinions are handled and discussed on a quarterly basis. In this session, just one was reported upon. It remains unresolved and subject to further review.
Draft ICC Opinion TA949 deals with questions around a commercial LC calling for “one copy of surrendered B/L”. When sent out to ICC National Committees for comment prior to the meeting, 15 NCs agreed with the draft opinion, 12 NCs disagreed, and 1 NC indicated it was unfamiliar with surrendered B/Ls.
Under the LC detailed in the Query, three original B/Ls were presented. They did not feature a “surrendered” stamp, but they did show wording indicating “Original Bill Surrendered at Origin”. The presentation was refused and two discrepancies were cited: “Surrendered bill of lading not presented in copy (but 3/3 originals)” and “The surrendered bill of lading does not contain a surrendered stamp”. The Query asked whether each discrepancy cited is valid. For an LC calling for “one copy”, the Query also asked whether a copy (not the original) must be presented and requested ICC to opine how “surrendered” is to be shown or indicated on a B/L.
At the meeting, ICC Technical Advisors Farideh Tazhibi and Saibo Jin explained that the TA Team carefully studied all written feedback from NCs and grouped the comments in five categories.
Given the diversity of comments, the apparent lack of experience with surrendered B/Ls, and the impact of the surrendering of bills of lading, the Technical Advisory Team decided that it will seek written comments from transport industry organizations. It added this is not to be taken as encouraging document examiners to look beyond the face of a document to determine compliance, but instead a means to provide education to banks. Consequently, Draft Opinion TA949 will be postponed until the TA Team has the requisite feedback to advance further.
In brief discussion in Dubai, attendees reinforced that bankers are to examine documents on their face for compliance and referenced the danger of considering legal issues. Some attendees opined on the cited discrepancies and others said they eagerly await response from the transport industry.
Quickly updating on other areas, ICC Banking Commission Policy Manager Tomasch Kubiak informed of the current status of Technical Advisory Briefings: 12 TABs have been issued; two others are at draft stage with the TAB Team. Draft 2.0 of the ISBP Revision was sent to NCs in January 2025 and feedback is requested by 31 March. Regarding the ISBP Education Project, NCs have provided initial feedback and follow-up sessions to evaluate it are being arranged. The next quarterly meetings to address ICC Opinions will take place in July 2025 and in October 2025 (possibly in Singapore).
Speaking on the topic, ICC UAE Director Vincent O’Brien said the banking community really needs to reach out to the shipping industry regarding a sensible approach toward B/L use. Who sees the necessity of 3/3 bills of lading? Historically there were good reasons for issuing B/Ls in more than one original but not so now, although the practice largely remains unchanged. O’Brien contends the two sides blame each other. Banks wonder why carriers still insist on bills of lading in a set of 3 originals, while carriers maintain it is banks that keep insisting on presentation of “Full set 3/3 original bills of lading” in LCs.
Furthermore, a B/L functions as a document of title, but what does “title” mean? There is the presumption that it denotes ownership, but that can be dangerous. In considering “one original accomplished”, all others are null & void. As LCs typically call for three bills of lading, the transport industry continues issuing them in threes. A document of title entitles the lawful holder to take possession of the cargo. The actual transfer of ownership is typically articulated as an intention of the parties in the contract of sale. If only one B/L is needed for release of the cargo, it would make life easier and will have a huge impact on advancing digitalization in this area. Trying to figure out digitalization of a digital record which has three originals is “mind blowing”.
O’Brien gave one example of the Evergiven large container vessel; B/Ls or Waybills issued as one original for this infamous vessel which got stuck in the Suez Canal for six days could have removed 400,000 pieces of paper with just one ship. ICC UAE has advanced dialogue with the National Association of Freight and Logistics as well as the Institute of Chartered Shipbrokers with the objective of formulating a position paper to be endorsed or issued by the ICC for implementation by global stakeholders.
Breaking from usual remarks about the DSI, Pamela Mar, Managing Director of the ICC Digital Standards Initiative, spoke about how the DSI intends to reach its objectives. The DSI Roadmap involves four steps that are to be taken simultaneously: Standards; Trust; Legal; and Capacity. On the legal front, DSI is on track for 2/3s of the global economy to be in jurisdictions already having law aligned with the UNCITRAL Model Law on Electronic Transferable Records (MLETR) or countries committed to attaining MLETR adoption. In this regard, Mar commended the European Bank for Reconstruction and Development (EBRD) for making a big difference.
Mar then shared thoughts on a draft idea for achieving Interoperability. She commented that several hundred data elements are not needed if less than 200 are core data elements; if a small percentage of those are deemed “mission- critical” but not standardized, then major problems will arise for trading internationally. It is still being determined what needs validated and by what means.
As MLETR and law based on or influenced by it require a reliable method be used for an electronic transferable record, the DSI has partnered with Canada’s Digital Governance Council to launch a tool to assess the reliability of digital services and networks. To date, Enigio AB, Secro Inc., and CargoX Ltd. have been issued verification statements for their respective solutions. The DSI’s efforts are not just to drive efficiencies, but to have a bigger impact on solving other problems in the world.
Srividya Subramanian, Traydstream’s APAC & META Regional Head of Sales, began by citing the persistent “paper problem” hindering trade finance and Traydstream’s strategy for confronting it. The approach started small with Optical Character Recognition (OCR) software used for trade documents and led to advancements into large language models. As trade documents are inherently complex, Traydstream encountered hard lessons along the way that technology alone does not deliver the perfect solution. Transforming the trade finance process requires human and machine.
To effectively deploy artificial intelligence, it needs to pick up data points from some 420 trade documents. No single AI application can handle this. Multiple levels of AI are required and it is a combination of models that gives the desired result. AI needs to be used mindfully and trained to attain the right results. For instance, users want to hover over a discrepancy for the explanation of the relevant rule or clause. Trained properly, AI can do so and it does not forget.
In terms of attacking the much-publicized trade finance gap, AI can help the industry standardize, streamline, and analyze intelligently what to present to the human element regarding distribution and assets.
Faruk Ahmed, DMD & Head of Trade Services at The City Bank Bangladesh, then spoke of his bank’s digital journey partnering with trade finance solutions provider, China Systems. Ahmed explained that City Bank is fully paperless on the import side, but it has proven more difficult on the export side to incorporate technology functions, in no small part due to central bank regulations.
Shyam Anver, Senior Program Manager at China Systems, said his company delivered the technology know-how and Ahmed brought the bank know-how which led to greater automation in a dynamic trade market like Bangladesh. According to Ahmed who estimates his bank handles more than 1,200 trade transactions per day, the biggest difference China Systems has made to its operations is that local businesspeople are making fewer trips to the bank because they can apply for trade finance through the online portal China Systems built for them.
Pamela Mar of ICC DSI then introduced ICC Banking Commission Vice-Chair Merlin Dowse of J.P. Morgan’s Global Trade Finance Product Management unit to discuss the effort underway to determine which portions of key trade documents and data elements (KTDDEs) are to be considered part of a Bank Defined Data Set. With the involvement of 30 bankers, Dowse and the group looked at 33 trade documents to identify what data is fundamental to banks’ processes and evaluate if banks could get data files directly from sources.
For the three instrument types – LCs, Supply Chain Finance, and Collections – Dowse asked the group members from where do they attain the data and whether certain data needs to be in certain documents. In the case of LCs, banks expect to get some 471 data elements. The group did a “deep-dive” into the Bill of Exchange and Promissory Note and how they could be digitized.
Among its findings, the group determined there are many documents not regularly used or needed in a trade finance transaction. As the naming of certain data elements across types of documents varies, Dowse said sticking to one common name would be advantageous. Since several data elements are duplicated in multiple documents, identifying the “golden source” for a particular data element should be considered. The group also uncovered a few gaps. For instance, when there is no reference to currency in the KTDDEs. Additionally, the group suggested consideration should be given to data elements related to title (possession) and endorsement of negotiable instruments.
As for recommendations and next steps, Dowse highlighted the importance of attaining data directly from the source, so as to reduce reliance on OCR. While acknowledging that harmonization is a challenge, he said the group encourages the adoption of existing KTFFE standards to enable interoperability between existing platform solutions and networks. The group also suggests a unique identifier (“TF” labelling) to recognize documents and elements relevant for trade finance. Dowse also added the effort will “challenge the rules” such as eURC and eUCP to determine whether any revision is in order. To close, Dowse urged trade finance specialists to offer feedback, promote the KTDDE standards, and actively pursue ways to “remove the paper”.
In the Q&A period that followed, attendees emphasized the importance of simplification, particularly for the sake of SMEs, and the need to involve other industries like customs and shipping in the push towards greater digitization. Other commenters questioned whether commercial LCs are still needed in an increasingly data-driven system. Defenders pointed out the main benefit of LCs is to mitigate risk. Ultimately, corporates will figure heavily in determining what trade finance services they want and the pace of the digitization movement.
In an open brainstorming session, ICC DSI Chairs and ICC Banking Commission Vice-Chairs discussed what their organizational units should be doing together.
ICC Banking Commission Vice-Chair Maria-José Llabot, Head of International at Banco de Cordoba, reported that some progress has been made in Argentina, but overall the private sector is already dealing with e-documents and is much more in front of the public sector. Advocates for digitization are attempting to raise awareness and garner support from Argentinian government ministries.
ICC Banking Commission Vice-Chair Claudia Gomez, Head of Documentary Trade at Santander Corporate & Investment Banking, reported that adoption of MLETR in Europe has been piecemeal. In Spain, movement has stalled. She said a game-changer would be getting China, US, and EU all on-board. Pamela Mar added that the EU Free Trade Agreement includes MLETR and attaining an EU Directive would be significant because EU commitment brings release of funding.
Oliver Wieck, Chair of the DSI Legal Reform Advisory Board, said coordination in Europe is a major challenge and asked who is supposed to achieve it. Gomez said industry has to lobby for the EU Directive. Wieck added that while Germany, France, and the UK have MLETR-aligned legislation in place, others have not yet followed.
Stephan Wolf, Chair of the DSI Industry Advisory Board, referenced the billions of trade documents floating around and said the trade world needs to get to machine-readable data. He cited the transition of SWIFT and China’s Cross-border Interbank Payment System (CIPS) to ISO 20022 and added it would be great to have this happen in the trade world.
A representative from Colombia said their country does more electronic transactions than checks or cash, however efforts toward adoption of legislation consistent with MLETR are dependent on government which moves at a sluggish pace. Reporting on Mexico, an attendee said there has been some advances but secondary regulation work remains.
Mar explained that progress is being made in most every country and that DSI relies on local NCs and the ICC Banking Commission to figure out a viable approach. DSI has a target list but cannot go everywhere and needs a means to prioritize and determine where countries are ready and focused.
Wieck added there is a role for ICC to play in formulating rules and standards, but the challenge remains that banks and corporates are looking at each other to go first. The Banking Commission has produced eUCP and electronic presentation is already engrained in URDG, but it has been difficult to “get the ball rolling” within the business community. Wieck expressed hope that eGuarantees will make a difference with companies.
Other commenters suggested that China coming on board could open opportunity for other jurisdictions to follow. In China today, the vast majority of negotiable instruments and bills of exchange are electronic, as are quite a high percentage of domestic LC transactions and commercial bills of lading. To a large extent, China’s big banks have their own systems in place and corporates have their own way to comply.
For countries like UK and France which are MLETR-aligned, some commenters urged trade finance specialists to engage with buyers and sellers and build on partnerships in order to capitalize on domestic and international opportunities.
At the meeting’s close, Mohamed AbuHamra, Chief Operating Officer, Digital Technology of DP World and ICC DSI Managing Director Pamela Mar signed a Memorandum of Understanding (MOU). Through the agreement, the entities seek to align to empower digital trade and pursue areas of mutual benefit.
Since a draft was included in the presentation at issue in ICC Opinion TA.948, it prompts important questions about examination not only under UCP but also under bills of exchange law.
Three Draft Opinions will be addressed at the next session of ICC Banking Commission’s quarterly discussion of Opinions on
Contemporaneously with its release of its latest Draft Opinions on 6 June 2025, ICC issued a one-page memorandum note regarding
At a meeting of Asia-Pacific Economic Cooperation (APEC) Ministers Responsible for Trade in Jeju, Republic of Korea, 15-16 May 2025,
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