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The beauty of
new UCP, after cosmetic surgery (revision), is its simplicity and clarity.
So we bankers expect that the traders now will no more have reluctance but
enthusiasm to use UCP
Editor’s note: We
were given to understand that this time for UCP revision traders, insurers,
freight forwarders would be involved in the drafting process as a draft
maker and not as a draft commentator. But this did not happen. The bankers,
LC suppliers, did the job. The new UCP is by bankers. The LC users, traders,
had no say in UCP making. Therefore, the question arises whether new UCP
could be helpful to traders, whether it takes care of their needs, problems
and expectations. LC VIEWS asked Kim Christensen to tell us. And, he says…
Ravi, I guess you could have asked the same question
for UCP 500 – so there are really two ways to answer:
1) is the UCP as such good for traders?
2) will there be any difference in that when the UCP
600 are in force as of 1 July 2007?
So to answer them separately:
1) Is the UCP as such good for
traders?
First of all the UCP is a set of rules that you can
choose to use if you want to. Whether or not it is helpful to traders mainly
depends on one thing: the trader! If the trader uses the LC instrument, but
has only little knowledge of the UCP rules and the practice that follows
with it – he may be in for some nasty surprises, and he will certainly not
consider this consequence helpful to their business. If on the other hand,
if his knowledge of the LC instrument and the UCP rules is good, then he may
effectively navigate through the cliffs and rocks, and make sure that he is
paid once goods are shipped. My general view is that the UCP is a good – but
complex – set of rules, and that the value any trader will get from it
depends on the basic knowledge he has of it – i.e. how much the trader is
interested in investing in obtaining relevant knowledge.
2) Will UCP 600 make a difference
when it comes into force in force as of 1 July 2007?
The main differences as I see it are the following:
• The language has been significantly improved in
the UCP 600. This means that non-bankers will have an easier time reading
the rules and understanding the rules. The sentences are simply constructed
in a more direct, logic and simple way. The new concept “Honor” also points
in that direction, in the sense that where the rules would mention “payment,
deferred payment and acceptance” the UCP 600 just says “Honor”. The removal
of “unless otherwise stated” and”unless stipulated in the credit” and the
general insertion of the term “unless expressly modified or excluded by the
credit” also makes the articles easier to read.
• The UCP 500 has been pulled in different
directions by Position Papers, Decisions, Opinions and the ISBP. This makes
it rather hard for non-bankers to read different sources. Many of those are
now implemented into UCP 600 as a single source.
So my view is that one may have many reservations
towards the UCP 600, but there is no doubt in my mind that it is a better
set of rules than the UCP 500 for non-bankers – particularly traders.
To conclude, the new UCP is good, easy to
understand. The beauty of new UCP, after cosmetic surgery (revision), is its
simplicity and clarity. So we bankers expect that the traders now will no
more have reluctance but enthusiasm to use UCP. If they are still reluctant
it is their choice, but the choice would be a wrong business decision.
Knowledge acquisition is a business necessity.
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