ICC rules to facilitate the widespread digitalisation of trade finance

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London, 13 November 2018

By David Meynell, Senior Technical Adviser to ICC Banking Commission 

In April 2018, the ICC Banking Commission provided the ICC Working Group on Digitalisation in Trade Finance with a mandate to proceed with the revision of Uniform Rules for Bank Payment Obligations (URBPO) to address the evolution of technology and increasing digitisation in trade and trade finance.

The Working Group undertook a detailed analysis of the current and future requirements of a payment obligation and it was determined that revising the URBPO to achieve technology independence in the current construct would be extremely complex.

As such, in October 2018, the Working Group obtained a mandate to draft a new set of rules that will be agnostic in nature with regard to the technology that will be used to facilitate the widespread digitalisation of trade finance. These new rules will address the gaps in digital trade, focusing on payment undertakings as they relate to transactions at the open account end of the risk spectrum and the use of data to determine how such undertakings move from a conditional to an unconditional state.

The drafting group is additionally tasked with looking at characteristics of undertakings not currently covered in the URBPO, such as confirmation, assignment and transferability, to see how they may be incorporated into the new rules.

It was agreed that the URBPO would be left in its current state to support existing and potential new users who find the TSU/ BPO construct as effective for their purposes. The new rules will be independent from, but remain compatible with, the ongoing use of the BPO in its current state. Therefore, reliance on the existing URBPO will not be compromised in any way.

Historic participants are changing as bank consortia and new FinTech solutions anchored by new technologies such as DLT are increasingly penetrating this space. It is recognised that if their participation is not addressed, we will reinforce the digital islands that have been formed as a result of the rapid digitisation of the trade finance market place. This may result in the economic benefits from digitisation of trade not being fully realised and, as a consequence, negatively impact small and medium sized entities.

This approach affords the Banking Commission the opportunity to take a leadership position in the digitisation of trade and trade finance and fill a gap in the current technology revolution by remaining relevant in the future of Trade Finance whilst reinforcing its acknowledged respected position in the development of associated trade rules.

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