^{One of the main activities of the International Chamber of Commerce (ICC) is the development of e-rules to support traditional Trade Finance Instruments, i.e., documentary credits and documentary collections.}

^{The eUCP was initially published as version 1.0 on 31 March 2002, and a revised version (1.1) was released in conjunction with the implementation of UCP 600 in July 2007. This provided updates to align the rules with the changes in terminology in UCP 600.}

^{This was followed by version 2.0 of eUCP and version 1.0 of eURC in July 2019, with the intent of ensuring continued digital compatibility for the presentation of electronic records under documentary credits and collections.}

The Recent Update of the eRules

^{During 2023, both eUCP (covering documentary credits) and eURC (covering documentary collections) were updated. TSU reached out to ICC Senior Technical Advisor David Meynell to better understand why these two sets of rules were updated and to get a status update and discuss where these rules are going.}

^{To put the e-rules into context, David Meynell explains that the focus of the eUCP and the eURC (eRules) is concentrated upon the presentation of electronic records (documents), solely or in combination with paper documents, and not on the issuance of an eUCP credit or an eURC collection instruction. The rules are structured to align with UCP 600 and URC 522 and, as such, follow a logical progression.}

^{Both the eUCP and eURC were updated during 2023. According to David Meynell, the latest versions (eUCP 2.1 and eURC 1.1) were updated to ensure alignment with the UNCITRAL Model Law on Electronic Transferable Records (MLETR), particularly in respect of electronic transferable records. Accordingly, existing definitions were updated, and new definitions were added. The key change highlights that an electronic transferable record means an electronic record that contains the information that would be required in the equivalent paper document, such as a negotiable bill of lading or an assignable insurance document.}

^{The content of eUCP and UCP can be considered as meeting four distinct requirements for electronic presentation:}

<sup>1. Articles of UCP 600 that are not present in eUCP, such as those relating to undertakings and obligations of the banks.
2. Articles of eUCP concerning electronic records that enhance, but do not conflict with, those in UCP 600 concerning paper documents.
3. Articles of eUCP concerning electronic records that differ from those in UCP 600 concerning paper documents.
4. Articles of eUCP that change the nature of the UCP 600 rule, whether relating to electronic records or paper documents.</sup>

^{Existing ICC rules, such as UCP 600 and URC 522, while invaluable in a paper world, provide limited protection when applied to electronic transactions. The eRules provide numerous benefits:}

^{• Safeguarding applicability and guaranteeing relevance in a constantly evolving digital trade world
• Explicitly and unambiguously supporting the usage of electronic records
• Shared understanding of terminologies and objectives
• Uniformity, consistency, and standardization in customs and practice
• Extending the mitigation of risk from a paper environment to the electronic milieu
• Conformity and congruence as opposed to divergent local, national, and regional practice
• Enabling trade finance between regions and countries regardless of underlying economic and judicial structures}

^{It is important for David Meynell to emphasize that this alignment was not a revision nor an update of the eRules. It was solely an alignment with MLETR with respect to electronic transferable records.}

‍The Usage of the eRules

^{It is relevant to try to understand the usage of the eRules; however, David Meynell underlines that, unfortunately, market information is not available on actual volumes. At this stage, all feedback is anecdotal. Nevertheless, it is fair to state that while there is a gradual increase, no significant breakthrough has yet been achieved in terms of critical mass in comparison to traditional methods. It would appear that the eURC has experienced even lower usage, although David Meynell is aware of a few financial institutions and fintechs that are active in this area.}

^{A reflection by David Meynell is that adoption has been cautious, with factors influencing uptake including the readiness of businesses to transition to digital processes, legal and regulatory environments, and the perceived risks and benefits of electronic documentary credit submissions. Nonetheless, areas with more advanced digital infrastructure have shown added willingness to integrate eUCP standards into their operations.}

^{Many businesses, particularly SMEs, are often not fully aware of the benefits of eUCP and eURC or how these rules could be implemented in their operations. Awareness and training (education, workshops, and seminars) are key considerations in enhancing take-up.}

^{The trade finance industry is traditionally conservative, and there is a natural resistance to changing established practices that are perceived as stable and reliable, especially when it involves complex and sensitive financial transactions; the “inertia of tradition,” as he has always called it. Concerns, justified or not, also exist in respect of data privacy, fraud, and the security of digital transactions, which can deter companies from adopting electronic documentation practices.}

^{The legal recognition of electronic records and signatures varies by country and, to date, this has significantly impacted the adoption of eUCP and eURC. Efforts are being made to harmonize legal standards across jurisdictions to ensure electronic documents and signatures are universally recognized.}

^{David Meynell continues by saying that, while there is a clear trend towards digitalization in global trade, the full-scale adoption of eUCP and eURC is still developing. As more businesses and banks recognize the efficiency and security benefits of electronic processing in trade finance, and as legal frameworks evolve, adoption rates will increase. It is only a matter of time before we see a “domino” effect in the usage of the rules.}

^{Increasing the uptake of eUCP and eURC requires addressing both practical and perceptual barriers in the trade finance industry. By improving legal frameworks, enhancing technology, and providing adequate education and incentives, the adoption of digital trade finance tools will be accelerated, bringing greater efficiency and security to international trade transactions.}

The eRules and Other Initiatives

^{There seem to be many industry initiatives aiming to make trade more electronic. MLETR has been mentioned, but there are others. TSU asked David Meynell to address some of the initiatives available and how they support the ICC eRules.}

^{Here is his reply:}

^{These initiatives, including MLETR, the UNCITRAL working group, and various ICC and SWIFT efforts, are designed to work synergistically with eUCP and eURC rather than merely running in parallel.}

^{MLETR aims to enable the legal recognition of electronic transferable records, ensuring they have the same legal status as their paper counterparts. By providing a legal framework for electronic transferable records, MLETR supports the broader acceptance and implementation of eUCP and eURC. It ensures that electronic documents presented under these rules can be legally recognized and enforced.}

^{The UNCITRAL Working Group on Negotiable Transport Documents focuses on developing standards and legal frameworks for electronic negotiable transport documents, such as electronic bills of lading. By creating a standardized legal environment for electronic transport documents, this initiative facilitates their use in trade finance transactions governed by eUCP and eURC. It helps ensure that electronic transport documents can be seamlessly integrated into electronic presentations under documentary credits and collections.}

^{The ICC and SWIFT are developing API standards to enhance the interoperability and efficiency of trade finance instruments, such as guarantees and standby letters of credit. These API standards aim to create a standardized method for exchanging electronic trade finance documents. This interoperability is crucial for the effective implementation of eUCP and eURC, enabling smooth communication between different systems and platforms involved in trade transactions.}

^{The ICC Digital Standards Initiative seeks to establish global standards for the digitalization of trade finance, promoting interoperability, security, and efficiency. By developing and promoting digital standards, this initiative directly supports the objectives of eUCP and eURC. Standardized digital processes and documents ensure that electronic presentations are consistent, secure, and legally recognized across different jurisdictions.}

^{All these initiatives aim to harmonize the legal and technical frameworks required for electronic trade documents, which is critical for the success of eUCP and eURC. They collectively work towards providing legal certainty and reducing the risk of disputes, which encourages broader adoption of electronic documents in trade finance.}

^{By standardizing technological requirements and processes, these initiatives help integrate different systems and platforms, making it easier for stakeholders to adopt electronic presentations. There is significant collaboration among these initiatives to ensure they complement each other. For instance, the ICC often works closely with UNCITRAL and other international organizations to align their standards and frameworks. These efforts involve extensive engagement with industry stakeholders, including banks, corporates, legal experts, and technology providers, to ensure practical and widely accepted solutions.}

^{In summary, these various initiatives support and enhance the eUCP and eURC by providing the necessary legal frameworks, technical standards, and industry collaboration to facilitate the widespread adoption of electronic trade documents. Their coordinated efforts aim to create a cohesive and efficient digital trade environment.}

^{Both the eUCP and the eURC are available on the ICC website free of charge.}

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