ICC Should Be Educationist, Not Cashier

Kim Chritensen Suggests Ways and Means in talk with Ravi Mehta

[LC VIEWS Newsletter No. 69, November 2006]

Thinking what ICC does, what it should do

Ravi Mehta, Ph.D.

Q1: UCP regulates LC practice. UCP educates LC users and suppliers. It facilitates LC-based global trade. UCP is indispensable. Low-income countries are the main users of LC. The small businesses are the main consumer of LC services. Therefore, they need UCP. But do they get it? Can they afford it? No. Therefore. to make UCP accessible and affordable the ICC should upload it on its website for free downloading. But the ICC instead sells it for money. And the way it markets UCP may not be well known and therefore small traders especially in low-income countries may remain UCP-illiterate. To promote UCP- literacy, do you think the ICC should change its approach to marketing of UCP - that is, should it de-commercialize UCP?

In general before going in to the specific questions, I would like to stress one point point. You may well criticize the ICC for charging money for their services, etc. It goes without saying that the ICC is a big organization, and money is of course needed to drive such organization. I have no idea whether or not it is driven “cost effective” – but if the ICC were to deliver their services for free, then they would need another “source” to finance their activities. In general I would be in favor or providing all ICC services for free – not for my own sake, as I am so fortunate to have access to those, but for the sake of the “LC customers” (buyers and sellers) and for the sake of the banks in the developing countries. If that is the goal, then I think that the main task would be to suggest ways to provide alternative funding for the ICC. The reason that I say this is that I am sure that only few of us (if any) would really want for the ICC to close down their activities. You will often see a number of people criticizing the ICC for a number of reasons – some more reasonable than others – but at the end of the day, I think that most LC practitioners would agree that the ICC are doing a big job facilitating trade … also for the benefit of the developing countries.

Now coming back to the first question, I should say: no doubt! The UCP should be available on the internet for free – for exactly the purposes that you mention. The way that this works now, is that some invest a lot of money in these rules – while others are not willing to do so. The result of this is that the level of knowledge will get more and more diversified. This is surely a potential source for problems – and gives very uneven arguments/discussions.

Q2. Where the ICC clarifies queries on UCP it sells the clarifications through paper-based priced publications instead of making them freely and easily available online. It is the duty of the ICC to clarify. The clarification is education. The clarification is UCP application facilitation. Therefore, the question arises whether the sale of clarifications justified? The ICC should not capitalize on the user’s problems in understanding UCP. First confuse with imperfect UCP, then clarify and ultimately make cash with sale of clarifications - is this “cash and carry” right approach?

Q3. It is said that ICC charges fees for formation of a national committee. The national committee is the cow that ICC milks. When it holds an event in the country of a national committee it becomes a parasite on the body of the national committee. Most of the national committees are inactive- dormant. May be because the ICC tries to milk the cow without feeding it. Is this policy right - is it not exploitative?

Q4: Participation in ICC events is education. But the ICC charges participation fees. The fees may be exorbitant in some cases. Should not the participation be free? There are efforts and agreements to eliminate trade tariffs. Similarly, there should be attempt to eliminate trade education tariffs.

Q5: It is understandable that ICC needs money to run its organization and activities. Instead of priced sale by the ICC let there be aid from the developed countries for funding ICC in order to make ICC's educational publications and events free in the interest of global trade promotion. What do you think of this alternative - will it work?

It depends on who in the developed countries are to pay more! I doubt that the banks in the developed countries are prepared to do so. Many already spend much money on ICC activities. I need only mention the members of the “UCP Drafting Group”. Their organizations have really spent huge amounts of money in order for them to do this task.

My thinking is that you should work on finding alternative – and this may be one – but it need to be worked at. Just as it needs more thinking to find other alternatives. Some other ideas to work on could be:

• Make a website with all relevant LC information financed by ads. I am sure there will be many “hits” on the page.
   
• Make a website with different “service levels”:
   
• one for free giving the basic information – and
   
• another one that you are to pay for containing some additional services; e.g. access to ask questions directly to experts, and
   
• another focused directly to exporters and/or importers giving practical tools when making the LC application or producing the documents … at a low/reduced price.

There may be may others – only the imagination sets the limit! I sincerely think that the ICC need to think this way, as their current approach – as indicated by your questions – will not work in the long run.

Mr. N.D. George Head of Loans, Agency, Trade & Forfaiting Operations

When was the last time that you received "free education"? Does it not begin from kindergarten? What ICC charges for these publications and their seminars are peanuts when compared to the cost of getting the same education from a management school or an "expert". The reason why institutions especially banks find ICC services expensive is is due to their penny wise pound foolish approach to business.

If a trade finance guy puts up a recommedation to subscribe to DCInsight, for example, at around USD500 per year there is a good possibility it may not get through in some banks because those banks have either no budget or are in the cost saving mode. Nevermind, but after rejecting the request, the same person may give no second thought to incurring entertainment expense far in excess of USD500.00

Mr. Marek Dubovec Research Attorney

Thank you for sending me Kim's interview on the educational role of the ICC.

I am not a member of any national ICC Committee, therefore, I would not be able to provide you with insights about the functioning of respective Committees and their ties to the ICC. Let me offer you some "outsider" perspective. Maybe, we are sometimes too critical about the "passive" role of the ICC. I would like to shift the focus on national committees and their educational function. Local exporters rarely look to the ICC for guidance rather they rely on local counsels and national committees. In a way, I see the role of the ICC as a supporter of national committees. Just like central governments delegate power to locally established governments who know the locals, so should the ICC be more active in providing this kind of indirect assistance. Sometimes it is very disappointing to see that two national committees in neighboring countries are so different. Take the example of the Czech Republic and Slovakia. The Czech national committee is doing a fantastic job in promoting trade through seminars, conferences and by publishing books. They also very actively participate in the UCP revision process. In contrast, the Slovakian Chamber of Commerce that is supposed to bear similar responsibilities is doing "nothing". Since the translation of the UCP 500 over a decade ago in Slovakia, no book on letters of credit has been published to interpret the rules and guide the bankers. Across the border, Pavel Andrle by himself has published a number of books and articles on LCs. My point is that even if the ICC made their rules freely accessible on the websites and lowered its fees for seminars, it may not have the desired effects, because local merchants are not accustomed to consult directly with the ICC. If the national committe is doing a bad job, why should they trust their "parent" organization in Paris? Many national committees do not realize the value that they can get from participation in seminars and conferences. The ICC should focus on "passive countries" and better communicate the benefits it offers. The way to more efficient business does not lead through the ICC to such an extent as through the national committees. I agree with Kim that what I called "passive" national committees should be treated differently from the ones that regularly participate. On the hand, they may be offered some temporary incentives, but on the other the ICC should be more active in providing assistance to those committees. At the end, whether it is the UCP, the URDG or the URR, those rules are written for all countries.

Mr. CHEN Jee Meng operational risk executive

Yes, it would be extremely beneficial if the ICC were to assume the role of Educationist.

But in practical terms, I find that the "educationist" proposition is unlikely to succeed because funding is a real issue.

In addition, the provision of expert advice in relation to practical but complex trade issues is but a significant cost to reckon with.

Perhaps, like what KIM had suggested, provision of "tiered" services. (i) Tier 1 - Open to Public. Availability of basic information at no cost. The creation of a "public" forum - hopefully, availment of insightful solutions at zero cost. (ii) Tier 2 - Premium membership at a "low cost where expert and/or dedicated opinions can be harnessed.

Yet, even with a Tier 2 structure, the platform may not be good forum to discuss intricacies.

Parties always have some information to "hide". Asymmetric information distorts analysis and decision-making.

This reminds me of a famous European master artist who charged 1000 bucks for an 'autograph'. "The swift strokes of my master signature took me decades to master." So, who is willing to avail solid advice at low cost?

Indeed, "think-out-of-the-box", there are possible educational alternatives that the ICC may pursue. Till then... ...