2023 ICC Banking Commission Technical Meeting 24-25 October 2023: Executive Summary

The ICC Banking Commission held its 2023 Technical Meeting as a hybrid event in-person in Paris and virtually via Zoom. Three separate portions of the event open to Banking Commission members and ICC National Committee representatives took place. A session on the Docdex Rules and Procedures followed by the latest quarterly ICC Official Opinions Session took place on 24 October prior to a Plenary Meeting on 25 October.

Docdex Rules and Procedures
In this session designed to provide an overview of the Docdex rules, revisit the procedure, and insights from experts recently assigned to Docdex cases, information was shared about the Docdex process followed by discussion about the value of Docdex decisions.

Most requests for a Docdex decision are made by one party and the other party may or may not provide their views on the matter. And because it is uncommon for both parties to agree a Docdex decision will be binding on them, are such non-binding decisions valuable? One commenter suggested that ICC member banks should actively use the Docdex mechanism to resolve possible disputes. In that respect, a Docdex clause would be inserted in a trade finance instrument to make it binding for the parties to apply for a Docdex decision and conform to the outcome. Even if parties agree to resort to the Docdex process and accept the ensuing decision, the decision is not “enforceable” if they later fail to obey the decision. Docdex is not an arbitration award, therefore it is not easy to enforce an agreement to respect a Docdex decision as binding. Most likely when such Docdex decision is refused, full litigation might be needed.

Notwithstanding this matter, it is clear that Docdex decisions in practice are very valuable. There are many instances of parties amicably resolving their dispute based on the Docdex decision. There are also occasions when courts have referenced Docdex decisions and based their decisions on them. Other benefits to Docdex include the fact that decisions are formulated by leading industry experts, rendered within a very reasonable timeframe, and at a low cost.

One commenter suggested that Docdex is not suitable for all situations involving fraud allegations, breach of sanctions, or more complex disputes. The Docdex process might also be abused through the providing of select or distorted information, so whether it is the proper dispute solving mechanism may depend on the circumstances.

Another attendee asked whether there were any Docdex decisions based on instruments or services not subject to ICC rules. Among specialists present, no one could recall any Docdex case which did not relate to an instrument incorporating one of ICC rule sets.

Official ICC Opinions Session
Four ICC draft opinions were reviewed at this session for which 28 ICC National Committees (NCs) contacting ICC in advance of the Meeting agreed with the draft opinions, save one exception.

ICC Draft Opinion TA.931 – The submitted query involved a party acting as advising bank under a commercial LC confirmed by another bank. After receiving a notice of refusal citing several discrepancies, the advising bank resolved all but two. The discrepancies it challenged dealt with the confirming bank’s contention that the presented invoice did not show “CONFIRMATION IT IS AS PER QUOTATION NO. [number] DATED [date]” and that the presented shipping company certificate was short 1 original. Advising bank claimed that the invoice clearly referred to the quotation within the goods description and that the credit failed to require express wording. Advising bank also maintained that the credit, before or after it was amended, was not clear in requiring two separate documents. The advising bank queried ICC whether these two discrepancies are valid.

The opinion found that the presented invoice stating it is issued “… under [Quotation number] dated [date]” satisfied the credit’s “confirm” requirement, conformed with UCP600 Article 18(c), and so the discrepancy is not valid. As regards the certificate, the opinion determined the other disputed discrepancy was not valid as the beneficiary had provided two certificates – one to address the original credit’s certificate statements and the other to address the amendment’s certificate statements, even though only the latter certificate was needed.

During discussion at the meeting, one commenter objected to the portion of the draft opinion’s Analysis quoting from UCP600 Article 10(c) and also stating: “Since the presentation complied with the amendment, for this query, the banks should deem it as notification as acceptance of the amendment.” The commenter said it should not be stated that the amendment is deemed to be accepted and to say so may contradict past ICC Opinions. Other commenters expressed support for this position. It was decided that the wording in question would be removed. The retained portion of the last paragraph of ICC Opinion TA931’s Analysis states: “In relation to the second question, the presented certificate complied with the terms and conditions of the credit, as amended. The beneficiary had made a presentation which complied with both the credit and the amendment.”

ICC Draft Opinion TA.932 – The submitted query deals with a documentary collection matter in which a remitting bank sent a URC522 collection and instructions to a collecting bank to deliver documents against payment. According to the query, the collecting bank released the documents to the drawee without receiving payment. The query asks ICC to opine whether the collecting bank is liable to compensate and pay the full amount to the remitting bank plus interest.

The opinion’s Analysis referred to ICC Opinion R863/TA821 (2015) which references URC522 Articles 1(b) and 1(c) and emphasizes that a bank has no obligation to handle any collection instruction that it receiving, but that if it elects not to handle a collection instruction, it must inform the sending party without delay. In this instance, by delivering the documents to the drawee, the collecting bank has, in effect, handled the collection. Consequently, the collecting bank is responsible under the content of the collection instructions if it is unable to return the original documents presented. As for any payment obligation and interest, these matters are outside the scope of URC522.

It was pointed out that this type of issue has been addressed in several past ICC Opinions. At least one NC commented in writing that ICC should take a stronger stance against banks that chronically act contrary to ICC rules. This has been proposed in the past from time to time and ICC has consistently stated it cannot take such measures.

In discussion, comments focused around whether reference to URC522 Article 7 (Release of Commercial Documents) should be added to Opinion TA932. This had been carefully considered by the Technical Advisors who opted against it since Article 7, notwithstanding its title, only addresses collections containing bills of exchange and this query does not involve a bill of exchange. Commenters agreed the discussion illustrates the deficiency of URC522 Article 7 and that it would be a good candidate if the rules were to be revised.

ICC Draft Opinion TA.933 – The submitted query involves a UCP600 LC requiring presentation to occur within 21 days after the date of shipment. According to the date on the negotiating bank’s cover letter and the date on the bill of lading, presentation occurred 22 days after the date of shipment. The negotiating bank’s cover letter included the statement: “We hereby certify that all terms and conditions of this credit have been complied with and that we endorsed the drawn amount on the reverse of the credit”. The query asks whether the issuing bank can consider this a late presentation.

Due to the negotiating bank’s cover letter certifying that the terms and conditions of the credit have been complied with, such certification is sufficient to satisfy the requirement of UCP600 Article 29(b) and the opinion concluded that the issuing bank cannot consider this as late presentation.

Discussion focused on whether UCP600 Article 14(b) was applicable instead of UCP600 Article 29(b) in answering this query. One commenter suggested that because it is not clear from the query that the expiry date already elapsed, Article 29(b) would not be applicable and reference to Article 14(b) needs included. But it was determined that Article 14(b) is not strictly applicable. The Analysis points out that the issuing bank making an assumption that the presentation period was extended due to the nominated negotiating bank being closed on the last day for presentation may not be a valid assumption.

ICC Draft Opinion TA.934 – The submitted query involves a UCP600 LC under which presentation by a nominated bank resulted in two discrepancies identified by the issuing bank. The first discrepancy indicated that the presented CMR document was a copy for sender instead of an original for shipper as required by the LC. The second discrepancy posited that the presented EUR1 certificate violated the LC’s condition that all documents must be in English because it contained a word not written in English language. The query asks whether the two discrepancies are valid.

The opinion determined that, on the basis of the facts provided in the query, the presented CMR was signed by handwriting and stamped by the carrier, in accordance with UCP600 Article 17(b).

The opinion also found “the issuing bank could quite clearly determine that the presented document satisfied the purpose of an EUR1 certificate, in that it fulfilled its required function … .” The opinion concluded that neither discrepancies were valid.

In the discussion, one NC representative asked for removal of the explanatory wording for the EUR1 certificate in the analysis that their NC found too specific and inappropriate for inclusion in the opinion. From the TA team’s standpoint, they saw no problem with the wording and since no other NC asked for it to be removed, it was retained. Another commenter asked why UCP600 Article 14(f) was not mentioned in order to address the need for a document to fulfil its function. This idea was turned away as UCP600 Article 14(f) was considered irrelevant for purposes of addressing this query and explaining a CMR document.

Technical Advisory Briefings – An update was then given on the status of the Banking Commission’s Technical Advisory Briefings initiative. To date, seven Technical Advisory Briefings have been published and TAB-8 on the topic of handling certificates under documentary credits subject to UCP600 is expected to be released by the end of 2023. Topics projected for coverage in future TA Briefings include: Presentation of documents directly to issuing bank; Amendments; and Issuing Bank charges. Meeting attendees were reminded that requests for future briefings can be sent to ICC for consideration. Observing most of the briefings thus far have focused on commercial LCs, one attendee encouraged ICC to strike a balance by taking up more matters dealing with guarantees. Specialists were urged to submit guarantee topics.

Opinions in 2024 – The Banking Commission’s quarterly treatment of ICC opinions will continue on 23 January, in April (date to be determined), 2 July, and in October (TBD). Deadline for ICC’s receipt of queries for the January 2024 session is 14 November 2023. The technical advisory team has indicated it has already received five queries.

Plenary Session
Prior to updates presented by leaders of various ICC working groups, the meeting’s Plenary Session began with opening words from Lynn Ng, ICC Banking Commission chair. In her introductory remarks, Ng emphasized the importance of individual accountability for advancing ICC objectives to make trade possible and to foster a trustworthy business environment. Although practice rules can seem complicated at times, the spirit of the rules is important and essential to the promises that bankers make. LCs are issued to facilitate trade; not to deceive through use of inoperable clauses. When there are questionable acts, they should be called out. At the same time, trade dealings are not always black and white. When challenging situations and disputes arise, Ng urged attendees to apply their knowledge, strengthened through experience and ICC programs, to resolve differences.

Digital Standards Initiative
Pamela Mar and Merlin Dowse updated attendees on the work of ICC’s Digital Standards Initiative (DSI). In March 2023, the group released its Key Trade Documents and Data Elements (KTDDE) findings containing digital standards analysis of seven of the most commonly used key trade documents: Commercial Invoice; Packing List; Bill of Lading; Cargo Insurance Certificate; Warehouse Receipt; Certificate of Origin; and Customs Declaration. Collectively, these documents comprise DSI’s “Batch 1” of key documents. Its work will advance with “Batch 2” (14 documents) and “Batch 3” (16 documents). In breaking down its analysis of Batch 1 documents, the group sought to determine which data elements are critical and what data is needed from these documents. The effort identified 267 data elements from the seven key trade documents, of which 32 core data elements yielded key shareable data (that is, data occurring in two or more documents) across 10 categories. The group seeks to test the relevance of the sharable data against actual practices and data needs in trade finance.

Lead members of three sub-groups focused on defining the data and documents required to process documentary collections, commercial LCs, and supply chain finance & open account then reported their observations and recommendations based on their analysis to date. For collections, key findings included the observation that most of the data is required for compliance and sanctions screening while very little data is required for processing documentary collections. Consequently, the recommendation was made to review KTDDE data elements according to these two separate processes. For commercial LCs, data sets for processing are not always found within the seven “Batch 1” key documents and instead may be contained, for example, in the LC application, Export LC MT700, or KYC data profiles maintained in bank systems. As a result, additional documentation beyond that of the “Batch 1” documents is required to furnish important data sets needed by banks. For supply chain finance (SCF) and open account (OA), the sub-group reviewed payables finance, receivables discounting, and pre-shipment finance. These SCF techniques typically have fewer required data fields compared to traditional trade products and, for the most part, SCF and OA require data only, not physical documents. Additionally, some data is gleaned from documents contained in “Batch 2” of the KTDDE documents. This sub-group recommends engaging corporates to refine data prior to KTDDE completion and waiting for the final list of KTDDE documents before advancing to publication.

Moving forward, the DSI will undertake a series of six KTDDE Proofs of Concept with the three- pronged goal of testing the relevance of the shared data elements set actual trade & trade finance practices, pinpointing potential gaps in data needs, and incorporating relevant feedback into the ongoing KTDDE work.

ICC-SWIFT Initiative
Sharad Sinha then provided an update on the ICC API working group’s joint effort with Swift to create application programming interfaces (APIs) for trade finance products. The initiative first aims to formulate open API standards covering the entire lifecycle of guarantees and standbys and deliver efficiencies to these instruments. Significantly, the approach being taken is aligned with the mandatory fields of Swift MT 7XX standards while also positioning it for adaptation to the ISO20022 framework in the future. As to next steps, the group will collaborate with various industry bodies to advocate for adoption and commercialization of the APIs.

Financial Crimes and Risks Policy
James Yates, Chair of the ICC Financial Crime Task Force, followed with an update on his group’s year-to-date work and its outlook for 2024. In July 2023, the Task Force addressed matters relating to its two areas of focus by releasing two papers, “Dual-use goods and proliferation financing” and “Price checking of goods and services in trade transactions”. As regards dual-use goods, the paper set out six key challenges. Yates pointed out that one of these challenges — lack of standardization — contributes heavily to another – high false positive rates. To confront these and other challenges, there is no “silver bullet” and banks are using a combination of approaches and tactics. Ultimately, the onus is on countries’ export agencies to control trade of dual-use goods. The task force is prepared to work with them.

In the area of price checking, two challenges were identified: the lack of reliable price reference points and the existence of legitimate reasons for price variations. For meeting these challenges, use of historical data is quite limited. Manual review and escalation by staff when questionable pricing and other risk indicators are detected is the top recommended approach. Moving forward in both these areas, one of the most promising strategies to employ will be utilisation of automated detection and technology. For 2024, the task force is planning to focus on fraud risk management and AML in trade finance.

Guarantees
Andrea Hauptmann then reviewed past work and current ongoing projects of the Guarantees Task Force. Established in 2003, the task force was instrumental in drafting URDG758 (2010), articulation of ISDGP (2021), and supporting the sweeping Swift changes to the MT 760 series for guarantees effective in 2021. Its current projects include addressing the complexities of customs guarantees, compiling text of local law and practices pertaining to guarantees, exploring how to draft guarantees using AI and handle e-guarantees, contributing to the review of ICC draft opinions involving guarantees, and advocating for appropriate treatment of guarantees in EU regulatory measures as CRR (Capital Requirements Regulation) and BRRD 55 (Article 55 of the Bank Recovery and Resolution Directive).

Standards for Sustainable Trade & Trade Finance
Raelene Martin and Tomasch Kubiak of the ICC Secretariat next presented an update on the framework aimed at defining common and coherent standards for sustainable trade. Martin first recapped the key priorities of “Wave 2” effort and then reported on major updates from the past year in the areas of scope, modes of assessment, sustainability dimensions, components of trade, and transition to a “graded scale” for conveying degrees of sustainability. The Wave 2 framework features four trade components – use of proceeds, seller, buyer, and means of transport — that are assessed for their sustainability. Martin then touched upon the elements used for assessing each of the components before identifying limitations of the Wave 2 framework and areas of focus for future waves. The Wave 2 framework was recently launched to banks and pilot participants and is projected for wider release at COP28 in late November 2023.

ISBP
In mid-2023, ICC released a new iteration of International Standard Banking Practice for the Examination of Documents under UCP 600 (ISBP 821) which ensures alignment of ISBP with ICC Opinions approved through January 2023. In July 2023, it was also announced that feedback received from ICC National Committees in second quarter 2023 on the future of ISBP failed to deliver a strong enough mandate to proceed with in-depth work, but suggested that something should be done. Consequently, the matter was referred to the ICC Banking Commission Steering Committee (SteerCo).

From this background, ICC Banking Commission Senior Technical Advisor David Meynell informed attendees that the SteerCo has determined that it would be appropriate to review ISBP 821. In this regard, the SteerCo has granted approval for a small working group to be created for purposes of evaluating ISBP 821 to assess existing content in line with current market practice and, to the extent it is relevant, such review is to consider digital practices. Work will commence in November 2023, an informal interim update will be given in January 2024, and a final report will be provided by the Working Group during the April 2024 ICC Banking Commission Plenary Session. ICC NCs will then be given the opportunity to comment and decide on potential next steps, if any.

During a brief Q&A period that ensued, one commenter asked if there are any plans to utilize AI in the ISBP review process. Meynell is bullish about the possibility and believes that AI could be quite effective based on his recent experiences using ChatGPT.