The Road Map to a Draft-less UCP

For the International Chamber of Commerce (ICC), the bill of exchange (BoE) – also called a draft – has been a stumbling block for a long time. Try as one might, the many complications that drafts present to the users of the UCP rules are yet to be resolved in a satisfactory manner. Some trade finance specialists opined that the draft was not a ‘document’ for purposes of examination under a letter of credit subject to UCP600. Other practitioners felt that a draft did not provide any benefit to LC operations. A segment of the trade finance community expressed discomfort at the very mention of ‘draft’. The ICC has neither accepted the draft as a standard requirement, nor have they been successful in casting it out from LC practice. The bill of exchange continues to baffle many in the trade finance industry to this day, presumably because the laws governing bills of exchange in various countries have not been understood well enough by a section of the trade professionals. This article is an attempt to resolve the confusion and place bills of exchange laws and the UCP in their proper perspectives.