An article-by-article analysis of eUCP variant 2.0 and eURC version 1.0 to explain for the new guidelines.
|Definitions||UCP 600||eUCP Version 2.0|
|Definitions||Where not defined or amended in the eUCP, definitions given in UCP 600 will continue to apply||Where terms are also used in UCP 600, definitions are updated for application to an electronic record|
|Scope||Paper documents (and electronic records if strictly defined, although UCP 600 only provides limited protection)||Electronic records alone or in combination with paper documents|
|Application||UCP 600||UCP 600 & eUCP Version 2.0|
|Relationship||UCP 600||In event of conflict, eUCP prevails|
|Presentation of only paper documents||UCP 600||UCP 600|
|Documents examined on their face||Review of data within a document in order to determine that a presentation complies with international standard banking practice and the principles contained in UCP||Electronic records are examined only for the data received and not the reality that such data represents|
|Document||The term suggests format in a paper medium: unless specifically allowed under the terms and conditions of a UCP 600 credit, it is expected that all presentations under such a credit be in a paper format||Adds the term ‘electronic record’ to the meaning||Place for presentation||The place where the documentary credit is available||Extends the phrase to include an electronic address||Data Processing System||Not necessarily used||A computerised or an electronic or any other automated means used to process and manipulate data, initiate an action or respond to data messages or performances in whole or in part||Electronic signature||Not specifically defined: article 3 highlights that ‘a document may be signed by handwriting, facsimile signature, perforated signature, stamp, symbol, or any other mechanical or electronic method of authentication’||Data attached to an electronic record with the intent of identifying the signer and authenticating the record||Format||Unless specifically stated otherwise, expected to be paper||The protocol by which data is organised, the version of that format, or the shorthand name by which that protocol is recognised and described||Paper document||Unless otherwise stipulated, assumption is that all ‘documents’ are in a paper medium: however, as is often the case with UCP 600, this fundamental assumption is not stated expressly and, instead, the term ‘document’ is used||Refers to a document in a paper medium, the type of document which is expected to be presented under UCP 600||Authentication||The process by which the validity of the representations and the paper documents containing them are ascertained: under UCP 600, the level of authentication of paper documents is facial||Identifying the person sending a message and the source of the message, and associating the person authenticating with the content of the message authenticated||Goods, Services or Performance||Banks deal with documents and not with goods, services or performance to which the documents may relate||Also addresses electronic records||Notice of completeness||Not applicable||Presentation does not take place until the presenter provides a notice of completeness to the nominated bank, confirming bank, if any, or to the issuing bank||Time for examination||Once presentation is made to an issuing or confirming bank, the time for examination commences||Electronic records may be presented separately and, even if paper documents are presented in one lot, they must be coordinated with the electronic records: the time for the examination of documents does not commence until the notice of completeness is received||Period for examination||Maximum of five banking days following the day of presentation to determine if a presentation is complying||Remains applicable||Approach by the issuing bank to the applicant in order to seek a waiver of discrepancies||UCP 600 sub-article 16 (b) (Discrepant Documents, Waiver and Notice)||Remains applicable||Notice process for discrepant documents||UCP 600 sub-article 16 (b) (Discrepant Documents, Waiver and Notice)||Remains applicable||Disposition of documents in event no instructions received subsequent to notice of refusal||Paper documents can be held or returned||Paper documents can be held or returned||Originals and copies||UCP 600 sub-articles 17 (b) and (c)||Any requirement for an original is satisfied by the presentation of one electronic record: in the event of a requirement for multiple copies, the condition will be fulfilled by presentation of one electronic record||Date of issuance||Requirement for a document to be dated is with respect to the identification of certain dates on transport and insurance documents. In addition, there are expectations that other documents, such as statements or certifications, must contain a date. ISBP 745 goes into more detail as to documentary requirements under UCP 600. Credits may also contain a specific requirement that a document be dated||Effectively dates electronic records, with the result that all such records must be dated: if there is to be any other way of determining the date of issuance then this will be for the eUCP credit itself to determine||Date of shipment or dispatch or taking in charge or a date the goods were accepted for carriage||Contains elaborate rules for determining the date of shipment or dispatch that are individualised according to the type of transport document involved||Date of shipment is the date in the electronic transport record indicating shipment or dispatch or taking in charge or the goods were accepted for carriage. If there is no date indicating shipment or dispatch or taking in charge or goods accepted for carriage, the date of shipment or dispatch is the date of issuance of the electronic transport record unless there is a notation evidencing shipment or dispatch or taking in charge or goods accepted for carriage||Data corruption||No rule for paper documents that are lost or rendered unreadable by a bank after they have been received; most banks have procedures in place that minimise the consequences of such loss and there is no perceived need for such a rule. These procedures involve refusing payment based on discrepancies in the documents that are presented, requesting a substitute document, or indemnifying the applicant for any harm that may result from the lost document||Provides a method by which corrupted data may be re- presented; based on the assumption that all electronic records are replaceable||Disclaimers||Contains several disclaimers that are also relevant to an eUCP credit||Additionally, disclaims banks’ liability for any divergence from the realities represented in authenticated electronic records||Force Majeure||States the force majeure events for which a bank assumes no liability or responsibility||Extended to cover the inability of a bank to access a data processing system, or a failure of equipment, software or communications network|
This article addresses several issues concerning the examination of electronic or mixed presentations under the eUCP, including the examination of electronic records contained on external systems, the implications of the nomination of correspondent banks, and the inability of a bank to examine an electronic record presented in a required or permitted format.
Under UCP 600, once presentation is made to an issuing or confirming bank, the time for examination commences.
Presentation can also be used to refer to the presentation of an individual document or documents, but less than all those required by the credit; and is so used in the eUCP. Under the eUCP, electronic records may be presented separately and, even if paper documents are presented in one lot, they must be coordinated with the electronic records. To monitor these documents and give notice within five days of the first document presented would create an onerous burden on banks, increase the costs and risks, and frustrate mass processing of electronic records. As a result, eUCP sub-article e6 (c) (Presentation) changes the point at which presentation occurs. It requires that the presenter notify the bank that presentation is complete by giving a notice of completeness. Accordingly, the time for the examination of documents under the eUCP does not commence until the notice of completeness is received as eUCP sub- article e7 (a) (i) provides. eUCP sub-article e7 (a) (ii) highlights that if the time for presentation of documents or the notice of completeness is extended (as provided in sub-article e6 (e) (i)), the time for examination commences on the next banking day following the day on which the bank to which presentation is to be made is able to receive the notice of completeness at the place for presentation. Similarly, under UCP 600 article 29 (Extension of Expiry Date or Last Day for Presentation), there is an extension of the time for presentation in certain circumstances and it is assumed that the examination would commence at the end of the extension period.
eUCP sub-article e7 (b) relates to external sources of documentary information. It:
> alerts banks using the eUCP that there can, in the ordinary course of examination under the eUCP, be a reference to an external source;
> provides that such a reference is not unusual and requires no special permission in an eUCP credit;
> implies that a bank must examine the external source indicated in a document in order to examine the presentation properly; and,
> indicates the consequences of the failure of the indicated source to provide access or the necessary information.
As outlined in the former ‘ICC Guide to the eUCP’ (ICC Publication No. 639), bankers trained
in the UCP system may be hesitant to access external systems in examining documents
because they have been trained to believe that references to external systems are contrary to documentary credit practice. Reference to an external system touches on the independent nature of the documentary credit undertaking which is intimately linked to the propositions that the credit transaction is separate from the underlying transaction that gives rise to it, that the parties are not concerned about performances, and that it is improper for a bank to base its refusal to honour on factors external to the documents presented as they appear on their face. The conflict, however, is apparent rather than real.
Despite appearances, references to external systems under the eUCP do not compromise the principles that underlie the doctrine of independence. As is indicated in eUCP article e13 (Additional Disclaimer of Liability for Presentation of Electronic Records under eUCP), an examination of an electronic record under the eUCP is an examination of the data as it appears.
The notion does, however, introduce a new dimension to the understanding of independence. References to external systems are not departures from the doctrine of independence because the examination would still be of the data contained in this external system in the same manner as if it had been presented directly and not of the realities represented. While the external system may contain some features that improve the linkage between the representations given in the electronic records presented and the realities that they represent, the examination will take what is stated in this source on its face without regard to its origin. What is still being examined is a representation rather than a reality.
The eUCP does not indicate which external systems may be used other than a reference to ‘a hyperlink to an external system
or a presentation indicates that the electronic record may be examined by reference to an external system’. This approach supports the need for the rules to be technology-neutral. eUCP sub-article e7 (b) (i) highlights that when there is a reference to an external system in documents presented under an eUCP credit, the data at that source becomes the electronic record that is to be examined.
External systems—Accurate information.
It should be noted that the reference to this external system may either be by paper document or electronic record.
In view of the fact that an examiner must be in a position to access any external system indicated in a presentation in order to examine the documents, a presenter must provide accurate information about location and any necessary access information. eUCP sub- article e7 (b) (ii) warns that failure to ‘provide access to the required electronic record at the time of examination shall constitute a discrepancy”’ A failure to provide access can occur in two ways: it can result from the failure of the external system to operate or from the refusal of an operating system to allow the examiner to access the required data. Although the eUCP does not specifically state that providing improper access to information would constitute a discrepancy, this result is implied by the use of the phrase ‘failure of the external system to provide access.’ Assertion of either of these failures as a discrepancy raises issues of proof that must be carefully considered. The failure, of course, must not be due to the inabilities
of the bank’s own systems. The only exception to this approach is stated in sub-article e7 (d) (ii).
Under an eUCP credit, a bank examines presented documents for compliance with the terms and conditions of credit. Compliance under UCP 600 sub-article 14 (d) (Standard for Examination of Documents) does not require literal or mirror image compliance for most data in documents. Even the description of the goods needs only ‘correspond’ as stated in UCP 600 sub-article 18 (c) (Commercial Invoice). This principle also applies to the data in an electronic record. However, data clearly intended to be machine-read, such as external source addresses or access codes, is different. An error, even in the placing of a full stop
or another keystroke, may be fatal in seeking a URL or other electronic address. The issuing bank is not required to guess as to where the error in such data might be.
Exclusion or modification of sub-article e7 (b).
It is possible that a bank may not want to access an external system in the course of examination, and will accordingly request exclusion or modification of eUCP sub-article e7 (b). However, it is doubtful that doing so would actually make a reference to an external system non-conforming unless the credit actually contained a term specifically prohibiting such reference. It is far more appropriate if, before considering such a tactic, banks take cognizance of the benefits of using external systems. Such systems not only increase the reliability of an electronic presentation but also potentially reduce the risk of fraud in the underlying transaction. Usage of such systems can be positive for all parties involved in a transaction. If, however, a bank has a concern with regard to the limitation of its own systems to access certain types of external data, then it would be far more beneficial
to provide any required specifications regarding the format of any external system, or the limitation of submission of electronic records by external systems, rather than a formal exclusion.
eUCP sub-article e7 (c), by placing the risk of failure to specify a format on the issuing bank, follows from eUCP article e5 (Format) which provides that an eUCP credit ‘must indicate the format of each electronic record’. Article e5 assumes that the issuing bank will designate a format that a bank is able to access. Sub-article e7 (c) so provides, indicating that the failure to indicate a format, or indication of a format that cannot be accessed is not a basis for refusal of the electronic record.
This sub-article underlines the importance of giving due consideration in advance to the format to be required in the credit.
Nominated banks and authentication.
The eUCP provides that an ‘electronic record’ must be capable of being authenticated as to the apparent identity of a sender and the apparent source of the data contained within it and as
to whether it has been received in complete and unaltered form. The rules further provide that
an electronic record that cannot be authenticated ‘is deemed not to have been presented’. If a nominated bank forwards an electronic record, the issuing bank may be unable to authenticate it from its original source. It must, in that case, rely on the bank that has first received the electronic record to authenticate it. Electronic records sent by a bank, whether or not it is acting on its nomination to honour or negotiate, to the issuing bank should also be authenticated between these two parties.
The rules provide that the forwarding of electronic records by a nominated bank, whether or not it is acting on its nomination to honour or negotiate, ‘signifies that it has satisfied itself as to the apparent authenticity of the electronic records’.
This provision does not change the rule of UCP 600 sub-article 12 (a) (Nomination), which provides that mere nomination does not constitute any undertaking by the nominated bank ‘except when expressly agreed to by that nominated bank and so communicated to the beneficiary’. Under the eUCP, however, if a nominated bank elects to forward the documents, its action does have the limited significance of indicating that the documents have been checked for apparent authenticity.
The eUCP does not address the liability of the bank for failure to check the authenticity. Whether a nominated bank wishes to accept this responsibility must be considered. Should the nominated bank decide not to forward the electronic records and any paper documents, and instead either return them to the presenter or indicate that it is holding them, the time at which the notice of completeness was presented to the nominated bank will nonetheless be deemed the time of presentation for purposes of determining compliance with any deadlines in the UCP, eUCP, or the credit.
Examining information transmitted with an electronic record.
The transmission of an electronic record may also include information that is not immediately apparent or visible on a screen. Described as ‘message-related information’, these can be the equivalent of a message envelope containing such items as headers and trailers, transmission path, and information related to the message authentication. Such information may also indicate a history of changes that have been made to the data. For purposes of examining the data contained in the electronic record, the appearance of changes to the electronic record would not be a basis for refusal. The examination must be based on the data contained in the electronic record in the final form in which it has been transmitted and not on preparatory steps.
On the other hand, the bank may have other reasons to examine message-related information in the course of an examination.
It may do so in order to determine the date that the electronic record was sent under eUCP article e10 (Date of Issuance), the person to whom to return the electronic record under UCP 600 sub-article 16 (c) (iii) (c) (Discrepant Documents, Waiver and
Notice), and/or the address of the sender or information related to authentication. Having to resort to message-related information does not violate the independence of the credit, because it does not involve examination of underlying facts related to the underlying transaction.
Other provisions in the eUCP impacting examination.
The eUCP contains other provisions that may have an impact on the examination of electronic records and documents presented. These include:
> Inability to authenticate an electronic record or electronic notice of completeness.
While the issuer may know that an unauthenticated electronic notice of completeness or other electronic record has been sent,
it is more likely that the relevant department will not even receive the document. If it did not receive an authenticated notice of completeness, the bank would have no obligation to commence examination under eUCP sub-article e6 (c) (iii). Even if it did receive an unauthenticated notice, the bank would not have received a proper notice. If a bank receives a notice of completeness but a required electronic record has not been authenticated, the discrepancy would be an ‘unauthenticated record’ if the relevant department knows of it or, if it does not, a missing required document. If an electronic record has not been authenticated, the bank has no obligation to examine it further, and should
it contain other discrepancies, is not precluded from raising them if it should later be re- presented and authenticated.
It would benefit the presenter to be sure that its communication ‘system’ is able to accurately identify messages that are not received in an acceptable form.
> Failure to identify the eUCP credit.
If the issuing bank can identify the credit under which an electronic record or paper document is sent, it cannot claim that the presentation has not been received. On the other hand, it may choose to send a reply message to the presenter of the document asking to which credit the document relates, although such a reply is not required by the eUCP. The message is not to be construed as a notice of refusal or an acknowledgment or receipt of the referenced document for purposes of examination under the eUCP credit.
> Expiry or other deadline extended.
When eUCP sub-article e6 (e) (Presentation) operates to extend a deadline with respect to an electronic record, a bank may not claim that the credit has expired or that the presentation is defective for that reason.
> Wrong mode of notice of completeness.
When the credit requires that a notice of completeness be presented as an electronic record, the presentation of the notice as
a paper document may not be a discrepancy and may
not be defective even if received after the expiration of the credit if eUCP sub-article e6 (e) (Presentation) is applicable. Where the issuer is unable to receive the transmitted electronic record, sub-article e6 (e) (iii) permits the presenter to give the notice of completeness in a paper mode. This rule would apply even if the credit specified that the notice must be in an electronic record—unless the credit also expressly excludes this provision of sub-article e6 (e). The sub-article also provides that the paper substitute is timely if sent by the presenter (as opposed to being received by the bank) before the presenter should know that the bank’s systems are again operative.
> Originals or copies.
A claim that one of a set of originals or copies is missing would not be a valid basis for
dishonour under eUCP article e9 (Originals and Copies).
An issuing bank would need to refer to eUCP article e10 (Date of Issuance) with respect to undated electronic records if their date of issuance was required or significant under UCP 600, the credit, or international standard banking practice.
> Dates of shipment on transport documents.
An issuing bank would need to refer to eUCP article e11 (Transport) with respect to transport
documents that do not indicate a date of shipment or dispatch or that bear a notation.
> Notations to transport records.
When there is a notation to a transport record, an issuer would need to refer to eUCP article
e11 (Transport) in addition to the applicable transport article of UCP 600.
Time for examination.
The eUCP does not contain a specific rule referencing the time within which examination of documents must occur. UCP 600 articles 14 (Standard for Examination of Documents) and 16 (Discrepant Documents, Waiver and Notice) remain applicable with respect to the time for examination. Under these articles, the bank has a maximum of five banking days following the day of presentation to determine if a presentation is complying.
Compliance determined by a nominated bank.
The eUCP addresses a possible situation in which a nominated bank can access a specified hyperlink or external system,
but the issuing bank or confirming bank is unable to access the same hyperlink or external system. In such circumstances,
and when a nominated bank has determined that a presentation is complying and makes presentation of the electronic records
to the issuing bank or confirming bank, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when a specified hyperlink or external system does not allow the issuing bank or confirming bank to examine one or more electronic records that have been made available between the nominated bank and the issuing bank
or confirming bank, or between the confirming bank and the issuing bank.
The rules provide a correlation with UCP 600 article 35 (Disclaimer on Transmission and Translation). In both UCP 600
and the eUCP, the inference is that if a presentation is considered to be complying by a nominated bank, but is not accessible
to the issuing or confirming bank, then the issuing or confirming bank must still honour, negotiate or reimburse. UCP 600 article
35 does not expound upon the course of action to be pursued in the event of documents being lost in transit nor does it explain how to negate such a risk. This is a matter of practice, not for the rules to clarify, and is consequently left for the parties concerned to agree on an appropriate approach. The same applies to an ‘electronic record’ scenario in a credit subject to the eUCP. The underlying fact is that one party must bear the consequences and, in order to be consistent with UCP 600, it is considered that this is the correct approach both in intent and understanding.
As is the case with UCP 600 article 35 (Disclaimer on Transmission and Translation), there is a need to establish the rights of
a presenter that has presented a compliant presentation, but something goes awry after that presentation has been made.
As with UCP 600 article 35, in view of the fact that the issuing bank is obligated to honour a complying presentation, it is immaterial whether or not a nominated bank has honoured or negotiated. Unlike a presentation under the UCP, where copies of presented documents may be held with the nominated bank or obtainable from the presenter, this is not necessarily the case
for electronic records. The wording of eUCP sub-article e7 (d) (ii) is reflecting a position if the issuing bank (or confirming bank) cannot access one or more electronic records. In practice, such events should be rare.
However, it should also be noted that an issuing bank, when issuing its eUCP credit, should be aware of the entities that will be issuing or making available electronic records for review and usage by an applicant. With this in mind, the issuing bank should be satisfying itself as to the platform, form of hyperlink or external system where the electronic records will be made available.
If there is any doubt, the bank should not issue the eUCP credit in the form requested by the applicant.