Kim:

From your bio in "who's who in LC world" I can see that you are "Product Manager, Trade Finance, Samba Financial Group". Could you please give a few lines about your background - and current responsibility?

Abdulkader:

I have twenty-seven years of banking experience out of which over 20 years in trade mainly in trade operation.  I was managing the Trade Operation of the Western Region and the Country Letter of Credit Centralized Processing Unit.  I have moved to the product management unit in 2002.  My current position title is Assistant General Manager and my functional title is Trade Product Manager.  Main function as Trade Product Manager involves the following:

a)      Play advisory role for the trade operations and corporate banking division. 

b)      Involved in the drafting of policies and procedures

c)      Structure complicated transaction for LC’s, Guarantees etc, coordinate with our legal
   department as and when required.

d)      Look after the revenue and volume of trade products in general and find ways to increase
    them by coordinating with our trade products sales managers.

e)      Involved in the automation and enhancement of our system related to trade.

f)       Coordinate in the enhancement and delivery of e-banking in relation to trade products
    such as letters of credit, guarantees, shipping guarantees and collections.

g)      Involved in the preparation of other trade finance products, e.g. bills discounting etc.

h)      Prepare and conduct customers’ seminar.

Kim:

From the description of your function it seems that you have one of those somewhat challenging jobs – where you must have the helicopter view – and also be able to analyze a deal in detail. I will start “from the helicopter”: For the last 2-3 years the one task within the LC community that have gathered most attention is of course the UCP 500 revision. How is this dealt with in Saudi Arabia? Do you have a national committee?

Abdulkader:

Our national committee is not active.  However, a couple of trade finance bankers in Saudi Arabia are active in updating themselves on the UCP draft revisions.  They are able to receive copies of the draft revisions through their own sources.  I may consider myself one of the lucky in obtaining copies of all the draft revisions except draft 5.  I look forward to receive a copy of draft 7 ones issued.

Kim:

Sad to hear that your national committee is not active. I know that you have seen the latest UCP draft (March 2006). What is your general view on this one? Is it better than UCP 500?

Abdulkader:

This is a difficult question to answer.  Nevertheless, I have a pessimistic and optimistic view. 

The working group has taken a long time to complete the revision. The sad thing is that I don’t think it will be a complete document. A panacea, as expected, to cure almost all issues so far surfaced.  In fact, new expressions and technical terms have been added that would start generating series of opinions.  Since not all ISBP paragraphs have been incorporated, it is expected that a new ISBP maybe issued. To me, this would be a bit absurd. We can’t start with something that we all know is incomplete – it needs a baby brother or sister, not yet born, to complete it.

On the other hand, nobody can deny that a lot of work has been done.  We could call it a revolution; the UCP 500 is revised word by word.  The language is made simpler. Articles were regrouped in a better way.  Attempts to define most of the technical terms were made.  Some of the ICC opinions and ISBP paragraphs were incorporated.  To conclude, yes it is better but not the expected revision.  As in any revolution, the changes would need polishing and sometimes reforming to fit in any existing system.

Kim:

More on the revision: Some of the issues discussed in connection with the revision have proven highly controversial. These are issues like:

• Deferred Payment Undertakings – and the right of the nominated bank to prepay or purchase before maturity.
• Defining “negotiation”
• Whether the absence of notification of an amendment from the beneficiary will deem the amendment accepted or rejected.
• Whether data in one document must be identical to that on another

What is you view on these – and what do you think about the direction that these issues seem to take in the UCP 600?

Abdulkader:

Deferred Payment Undertakings:  I would agree with those who have the opinion that the nominated bank should not be deprived from the right to prepay or purchase draft accepted or a deferred payment undertaking incurred by the nominated bank.  This is already evident in article 12 (b) of UCP Revision – Draft March 06.  I don’t think any more changes will come.  Though this could also imply that the issuing bank has the same right as that of the nominated bank since, logically, it can not give the nominated bank a right more than it has, it is not explicitly stated in any of the articles that the issuing bank could prepay or purchase such obligations.

Negotiation: - I believe the definition given is improved and it is not restricted to drafts but it also includes documents (deferred payment undertakings). I’m not supporting the idea of adding the expression “without recourse” to the definition.

Acceptance or rejection of an amendment from beneficiary: - I’m one of those who believe that the beneficiary should be responsible enough to notify his acceptance or rejection of an amendment.  At the minimum, the beneficiary should confirm his acceptance or rejection of such amendment at the time of presentation of the first set of documents from the date of his / her receipt of the amendment.  It should not be left to the bank to decide whether the beneficiary has accepted or rejected the amendment based on the documents presented. The documents presented may not relate to the amendment in question.

In this regard, I don’t think there will be any change in the new UCP Revision.

Data in one document must be identical to that on another: - I’m in agreement with article 14(d, e, & f) & article 18 (c ) of UCP Revision.  It is not practical to have identical data in documents presented.  Documents presented under an LC may have different purpose and may also be issued by different parties independent of each other.

Kim:

Again - based on the UCP 600 March 2006 draft – can you share with us the provisions that you are most fond of – as well as the provisions that you personally would like to change the most.

Abdulkader:

I have a hate and love relationship with some articles.    I would rather cover few of these with you.

Article 2.

It provides good definition of key terms and this is very important but at the same time there are some terms like “Honour” & “negotiation” which have brought up controversial discussion by experts.  Although I agree that we cannot have a definition of such terms that satisfies everyone from different aspects, the difference in interpretation of such terms (negotiation and / or honour) may lead to confusion and would negate one of the main purposes of the revision i.e. maintaining the integrity of letters of credit as payment mechanism and thus reducing the number of rejection of presentations.

Article 7 & 8

If we compare article 9 a (iv) with article 9 b (iv) of UCP 500 we will find them to be identical as to the responsibilities of the issuing bank or the confirming in relation to credits available by negotiation.  However, the new rules provides different responsibilities for the issuing and the confirming bank in relation to LC available by negotiation with a nominated bank when such nominated bank does not negotiate.  Article 7a (v) states that the issuing bank pays at maturity while article 8a (vi) provides that the confirming bank has to negotiate, meaning prepay or purchase.  This may put the two banks (issuing and confirming bank) in two different footings.  In an LC that is available by negotiation with a nominated bank other than the confirming bank, the LC may call for a draft drawn on the confirming bank.  Thus by virtue of the definition of Negotiation, the LC issuing bank may negotiate the draft but not the confirming bank. If there is no draft requirement under the LC, then any of the parties (LC issuing bank, confirming bank or the nominated bank) should be able to negotiate.

Article 10

This is one of the articles that we thought it will provide clear-cut rules as to how to handle notice of advice of an amendment and when an amendment is to be considered as accepted by the beneficiary.  This still falls short of our expectation.

Article 12

This article allows the nominated bank prepay or purchase drafts or documents under acceptance or deferred payment LC’s.  Thus prepayment or purchase is not limited to LC’s available by negotiation.  Though this may, in my opinion, has cleared many controversies, it has to somehow make cross-reference to the definition of honour or negotiation to avoid any conceived contradictions. Based on this article we may add point (d) under the definition of honour preceded by “OR” which reads as follows:  or d) at the bank’s option, to prepay or purchase drafts drawn by beneficiary and / or documents.

The issuing bank, confirming bank or nominated bank, at its option, may advance the beneficiary under LCs available by sight (purchase takes place only when draft drawn on a bank other than the nominated bank), acceptance or deferred payment as the case maybe whether the draft is drawn on such bank or not. If this recommendation or similar one is accepted, there may not be a need of the term Negotiation. 

Article 19

I believe the requirement for identifying a “carrier” as a carrier must be modified in line with the market practice.  I have noted that not in all case would a carrier be identified as a carrier.  This requirement may, in my opinion, be one of the main causes of rejection of documents.

Article 35

This is again a good addition to the UCP but it has to also cover documents not honoured or negotiated by the nominated bank but lost in transit.  Of course here we are talking about conforming documents.  The reason behind not honouring or negotiating could either be due to the choice of the nominated bank or that of the beneficiary.

Kim:

These answers reveal a very deep knowledge and interest in LC rules and practice. Looking at Saudi Arabia – is it possible to say anything in general about the level of knowledge and interest amongst the LC specialists / LC officers or whatever you call them (these hardworking people that spend one day after the other scrutinizing one set of documents after the other)?

Abdulkader:

In Saudi Arabia there is high interest amongst the LC specialist / LC officers on the UCP practices. The problem is that the number of specialist is low.  Not many newcomers to the field.  I have even checked with some of the young generation who stayed for one or two years in this field and then left.  Their answers was that the subject is interesting, challenging and needs a lot of work and attention but they said, “if we put the same effort on another field we are better off financially, have a better career development and have enough time for our family.”

Kim:

Then I am glad that you have chosen to stay in the business!

I guess then that you have a huge task in training the staff. How do you go about that? Do you use electronic tools (like DC-Pro), do you send the staff on courses, or do you do in-house training?

Abdulkader:

We have our training center, Center of Banking & Finance (CB&F), where staff is trained.  Most of the staff will first get on job training and then are sent to the training center for a full-fledged training. I do most of the advisory and consultation thing, things they don’t usually encounter in the training center.  Sometimes I also conduct training for staff but I usually take care of customers’. 

Kim:

Sounds very structured – I am sure many banks could learn a lot from that.  We are coming to the end of the interview; talking of training do you have some good tips, methods etc. to share with the readers?

Abdulkader:

An ideal training for newcomers should, I believe,  consists of:

a)     Academic subjects by qualified trainers that are not only well versed with the knowledge of trade but have the skills required to deliver. Language used should be simple and if possible a lot of visuals to be used.  Where possible provide examples commonly known to the audience.  Things they see and hear on day-to-day basis. For example if you are in the Middle East, talk about something happening in the Middle East and not some thing happening in the Americas etc.  One more thing on the academic training is prepare the trainees ahead of time by providing them with literature on the subject.  That should, at least, be two to three weeks before the training starts to enable them get acquainted to the subject and may also help them to have sometime to make their own research and prepare questions.

b)     Field survey to make the newcomers live the actual work environment related to trade. One of the good trainers I know in Saudi Arabia used to take the trainees to the seaport to make them see firsthand what actual shipping, stevedoring, containers, loading, unloading etc constitutes. I believe part of the training to newcomers in the field should consist of a one-day visit to forwards / shipping agents, insurance companies, customs office etc as part of the training. This type of visit will leave a lasting impression and memories on the trainees.  It will also make them understand how important their job is and how much they really contribute to the development of trade in their country.  I sincerely believe that, above all, this will make them proud and self-esteemed employees.

Kim:

Thank you