banking regulations

eUCP Version 2.1 Article e13: Additional Disclaimer of Liability for Electronic Records – CDCS Guide

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Article e13: Additional Disclaimer of Liability for Presentation of Electronic Records under eUCP

a. By satisfying itself as to the apparent authenticity of an electronic record, a bank assumes no liability for the identity of the sender, source of the information, or its complete and unaltered character other than that which is apparent in the electronic record received by the use of a data processing system for the receipt, authentication, and identification of electronic records.

Explanation: This clause outlines that a bank is responsible for verifying the apparent authenticity of an electronic record it receives. However, the bank’s responsibility does not extend beyond the visible aspects of the record. In other words, the bank does not need to verify the identity of the sender, the origin of the information, or ensure that the electronic record has not been altered beyond what is apparent in the record itself. The bank’s responsibility is limited to what it can see and verify using its data processing systems.

Example: Suppose a bank receives an electronic invoice from a supplier. The bank checks the invoice’s authenticity based on its content and the sender’s details visible in the record. However, the bank does not investigate the actual identity of the person who sent the invoice or verify if the invoice was altered before reaching them. As long as the invoice appears authentic within their data processing system, the bank accepts it at face value and assumes no further liability regarding the sender’s identity or the record’s integrity.

b. A bank assumes no liability or responsibility for the consequences arising out of the unavailability of a data processing system other than its own.

Explanation: This clause states that a bank is not liable for issues or consequences that arise from the unavailability or malfunction of data processing systems that are not under its control. In essence, the bank is only responsible for its own systems and cannot be held accountable for problems caused by systems operated by other entities.

Example: Imagine a situation where a bank is supposed to process an electronic record from a transaction partner. If the transaction partner’s data processing system is down and the record cannot be transmitted or processed as expected, the bank is not responsible for this issue. The bank’s liability is confined to its own systems and operations. If the bank’s system is functioning properly, it cannot be held accountable for failures or issues that occur because of the partner’s system being unavailable.

eUCP Version 2.1 Article e8: Notice of Refusal Explained – CDCS Guide

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Article e8: Notice of Refusal

“If a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank, provides a notice of refusal of a presentation which includes electronic records and does not receive instructions from the party to which notice of refusal is given for the disposition of the electronic records within 30 calendar days from the date the notice of refusal is given, the bank shall return any paper documents not previously returned to that party, but may dispose of the electronic records in any manner deemed appropriate without any responsibility.”

Explanation and Example

Clause: “If a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank, provides a notice of refusal of a presentation which includes electronic records”

Explanation: This clause refers to a situation where a bank involved in the letter of credit process (either a nominated bank, a confirming bank, or the issuing bank) issues a notice of refusal. This refusal pertains to a presentation made under the letter of credit that includes electronic records.

Example: Imagine a scenario where a nominated bank receives a presentation from the beneficiary, which includes both electronic records and paper documents. If the bank finds issues with the presentation and decides to refuse it, it must notify the beneficiary of this refusal.

Clause: “and does not receive instructions from the party to which notice of refusal is given for the disposition of the electronic records within 30 calendar days from the date the notice of refusal is given”

Explanation: Once the bank has issued the notice of refusal, it waits for instructions from the party (usually the beneficiary or the presenting party) on how to handle the electronic records. If no instructions are provided within 30 calendar days from the date of the notice, the bank will proceed according to the article’s provisions.

Example: The nominated bank sends a notice of refusal to the beneficiary on January 1st. If the beneficiary does not respond with instructions on how to handle the electronic records by January 31st, the bank will take action as described in the next part of the article.

Clause: “the bank shall return any paper documents not previously returned to that party”

Explanation: The bank is required to return any physical paper documents that were part of the presentation and have not yet been returned to the presenting party. This ensures that the presenting party receives all physical documents related to the refused presentation.

Example: If the presentation included a shipment invoice and a bill of lading, and these paper documents were not yet returned to the beneficiary after the refusal, the bank must send them back once the 30-day period has elapsed.

Clause: “but may dispose of the electronic records in any manner deemed appropriate without any responsibility”

Explanation: For the electronic records, if the presenting party does not provide instructions within the 30-day period, the bank is free to handle the electronic records as it sees fit. The bank does not bear any responsibility for how these records are disposed of.

Example: Suppose the bank receives no instructions from the beneficiary on what to do with the electronic records after 30 days. The bank might choose to delete or archive these records according to its policies. The bank is not held liable for any consequences arising from its disposal of the electronic records.

eUCP Version 2.1 Article e7: Examination of Electronic Records – CDCS Guide

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Article e7: Examination

a. i. The period for the examination of documents commences on the banking day following the day on which the notice of completeness is received by the nominated bank, confirming bank, if any, or by the issuing bank, where a presentation is made directly.

Explanation: This clause specifies when the examination of documents should start. The process begins the day after the bank receives the notice of completeness. This notice indicates that the documents presented under a letter of credit (LC) are complete and in order.

Example: If the notice of completeness is received on Monday, the examination period begins on Tuesday. If documents are presented directly to the issuing bank, this rule still applies.

ii. 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 the examination of documents 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.

Explanation: If an extension is granted for the presentation of documents or the notice of completeness, the examination period starts the next banking day after the bank can receive the notice at the presentation place.

Example: If an extension is granted until Wednesday and the notice is received on that day, the examination period starts on Thursday, the next banking day.

b. i. If an electronic record contains a hyperlink to an external system or a presentation indicates that the electronic record may be examined by reference to an external system, the electronic record at the hyperlink or the external system shall be deemed to constitute an integral part of the electronic record to be examined.

Explanation: When an electronic record includes a hyperlink or reference to an external system, that external information is considered a part of the electronic record being examined.

Example: A digital invoice includes a link to an external database for detailed transaction information. This linked information must be reviewed as part of the invoice examination.

ii. The failure of the external system to provide access to the required electronic record at the time of examination shall constitute a discrepancy, except as provided in sub-article e7 (d) (ii).

Explanation: If the external system is inaccessible when the record is being examined, it is considered a discrepancy, meaning the documentation is not compliant.

Example: If the external system linked to a shipment’s electronic record is down during the examination, this would be considered a discrepancy unless covered by exceptions outlined in sub-article e7 (d) (ii).

c. The inability of a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank, to examine an electronic record in a format required by an eUCP credit or, if no format is required, to examine it in the format presented is not a basis for refusal.

Explanation: A bank cannot refuse to process a document simply because it is unable to examine it in the required format, as long as the document meets the credit’s terms.

Example: If a bank is unable to open a file in a specific format but the document’s content is accurate and complete, the bank cannot reject it solely due to format issues.

d. i. 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.

Explanation: When a nominated bank forwards electronic records, it indicates that it has verified the authenticity of these records, regardless of whether it is honoring or negotiating.

Example: A nominated bank that sends electronic records to a confirming or issuing bank confirms that it has checked these records for authenticity.

ii. In the event that a nominated bank determines that a presentation is complying and forwards or makes available those electronic records to the confirming bank or issuing bank, whether or not the nominated bank has honoured or negotiated, 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.

Explanation: If a nominated bank finds a presentation compliant and forwards the records to the confirming or issuing bank, the latter must honor, negotiate, or reimburse the nominated bank even if some records are inaccessible through links or external systems.

Example: If the nominated bank provides all required electronic records but some records are inaccessible due to a broken link, the issuing or confirming bank must still process the payment or reimbursement based on the compliant records.

eUCP Version 2 Article e1: Scope and Application Explained – CDCS Guide

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Article e1: Scope of the Uniform Customs and Practice for Documentary Credits (UCP 600) Supplement for Electronic Presentations (“eUCP”)

a. “The eUCP supplements the Uniform Customs and Practice for Documentary Credits (2007 Revision, ICC Publication No. 600) (“UCP”) in order to accommodate presentation of electronic records alone or in combination with paper documents.”

Explanation:
This clause establishes that the eUCP is an addition to the existing rules outlined in UCP 600. It is designed to handle situations where electronic records are presented either by themselves or together with physical documents. Essentially, it extends the traditional UCP 600 framework to cover electronic documentation.

Example:
Suppose a documentary credit traditionally required paper documents for presentation. Under eUCP, a company could now present its shipping documents electronically via a secure online platform, as long as the credit allows for electronic submissions in conjunction with or instead of paper documents.

b. “The eUCP shall apply where the credit indicates that it is subject to the eUCP (“eUCP credit”).”

Explanation:
This clause specifies that the eUCP rules will be applicable only if the credit explicitly states that it is governed by the eUCP. This means that the use of eUCP is not automatic; it must be clearly indicated in the credit terms.

Example:
If a letter of credit (LC) includes a statement such as “Subject to eUCP Version 2.1,” then the provisions of eUCP apply. Without this indication, the presentation of electronic records would not be governed by eUCP.

c. “This version is Version 2.1. An eUCP credit must indicate the applicable version of the eUCP. If not indicated, it is subject to the latest version in effect on the date the eUCP credit is issued or, if made subject to the eUCP by an amendment accepted by the beneficiary, the date of that amendment.”

Explanation:
This clause addresses the specific version of eUCP that applies to the credit. If the version is not stated, the latest version at the time of issuance or amendment will apply. This ensures that all parties are aware of which rules govern the credit, avoiding confusion about which version of eUCP applies.

Example:
If an LC does not state “eUCP Version 2.1” but was issued on January 1, 2024, it would be governed by the latest eUCP version available as of that date. If an amendment indicating eUCP Version 2.1 was accepted on February 1, 2024, then Version 2.1 applies to the credit.

d. “An eUCP credit must indicate the physical location of the issuing bank. In addition, it must also indicate the physical location of any nominated bank and, if different to the nominated bank, the physical location of the confirming bank, if any, when such location is known to the issuing bank at the time of issuance. If the physical location of any nominated bank and/or confirming bank is not indicated in the credit, such bank must indicate its physical location to the beneficiary no later than the time of advising or confirming the credit or, in the case of a credit available with any bank, and where another bank willing to act on the nomination to honour or negotiate is not the advising or confirming bank, at the time of agreeing to act on its nomination.”

Explanation:
This clause requires that an eUCP credit specifies the physical locations of the issuing bank, nominated bank, and confirming bank. If the credit does not include these locations, the banks involved must provide this information to the beneficiary by certain deadlines. This requirement ensures transparency and clarity regarding the locations of the involved parties.

Example:
If an LC issued under eUCP does not state the location of the issuing bank, the issuing bank must inform the beneficiary of its location when advising or confirming the credit. Similarly, if the nominated bank or confirming bank’s locations are not mentioned in the credit, these banks must provide their locations to the beneficiary as soon as they confirm or advise the credit.

URR 725 Article 16: Charges in Reimbursement Transactions – CDCS Guide

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Article 16 – Charges

a. “A reimbursing bank’s charges are for the account of the issuing bank.”

Explanation: This clause stipulates that when a reimbursing bank incurs charges while processing a reimbursement claim, these charges are to be covered by the issuing bank, not the reimbursing bank.

Example: Suppose Bank A (the issuing bank) authorizes Bank B (the reimbursing bank) to pay a reimbursement claim for a letter of credit. If Bank B incurs a fee for processing this claim, Bank A will be responsible for paying that fee, not Bank B.

b. “When honouring a reimbursement claim, a reimbursing bank is obligated to follow the instructions regarding any charges contained in the reimbursement authorization.”

Explanation: This clause requires the reimbursing bank to adhere to any specific instructions given by the issuing bank concerning charges when processing a reimbursement claim.

Example: If Bank A’s reimbursement authorization specifies that Bank B should deduct a particular fee from the reimbursement amount, Bank B must follow this instruction when it processes the claim.

c. “If a reimbursement authorization states that the reimbursing bank’s charges are for the account of the beneficiary, they shall be deducted from the amount due to a claiming bank when reimbursement is made. Where a reimbursing bank follows the instructions of the issuing bank regarding charges (including commissions, fees, costs or expenses) and these charges are not paid, or a reimbursement claim is never presented to the reimbursing bank under the reimbursement authorization, the issuing bank remains liable for such charges.”

Explanation: If the reimbursement authorization specifies that the reimbursing bank’s charges are to be borne by the beneficiary, these charges will be subtracted from the reimbursement amount due to the claiming bank. However, if the reimbursing bank incurs charges based on the issuing bank’s instructions and these charges are not paid, or if no claim is presented to the reimbursing bank, the issuing bank will still be liable for these charges.

Example: Suppose Bank A’s authorization directs Bank B to deduct its charges from the reimbursement amount due to the beneficiary. If Bank B follows this instruction, the charges are deducted from the payment made to the beneficiary. If Bank B’s charges remain unpaid or if no claim is made to Bank B, Bank A is responsible for covering those charges.

d. “All charges paid by the reimbursing bank will be in addition to the amount of the authorization, provided that the claiming bank indicates the amount of such charges.”

Explanation: This clause indicates that any additional charges incurred by the reimbursing bank will be added to the total amount authorized for reimbursement, provided the claiming bank specifies these charges.

Example: If Bank B pays $500 in charges to process the reimbursement, and the reimbursement authorization was for $10,000, Bank B can claim $10,500 from Bank A, assuming Bank A was informed about the $500 charge.

e. “If the issuing bank fails to provide the reimbursing bank with instructions regarding charges, all charges shall be for the account of the Issuing bank.”

Explanation: When the issuing bank does not provide specific instructions on how to handle charges, it is responsible for covering all such charges incurred by the reimbursing bank.

Example: If Bank A does not specify how to handle charges in its reimbursement authorization, any fees incurred by Bank B will be covered by Bank A.

URR 725 Article 15: Force Majeure – CDCS Guide

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Article 15 – Force Majeure

Clause: “A reimbursing bank assumes no liability or responsibility for the consequences arising out of the interruption of its business by Acts of God, riots, civil commotions, insurrections, wars, acts of terrorism or by any strikes or lockouts or any other causes beyond its control.”

Explanation:

Article 15 of URR 725 addresses the concept of “Force Majeure,” which refers to exceptional circumstances that prevent a party from fulfilling its obligations under a contract. In this context, it specifies that a reimbursing bank is not liable for any consequences resulting from certain uncontrollable events that disrupt its business operations.

Example:

Imagine a reimbursing bank involved in a letter of credit transaction. If a severe earthquake (an Act of God) strikes and damages the bank’s infrastructure, making it impossible for the bank to process or reimburse transactions, Article 15 absolves the bank from liability. Similarly, if a bank’s operations are disrupted due to a violent riot or a war in its location, the bank cannot be held responsible for any delays or non-performance caused by these events.

To further illustrate, consider a situation where a bank is supposed to reimburse a beneficiary under a letter of credit, but due to a general strike (a strike or lockout), the bank’s operations are halted. According to Article 15, the bank is not liable for failing to meet its reimbursement obligations during this period of interruption.

In essence, Article 15 provides protection for reimbursing banks against claims related to their inability to perform due to extraordinary and unforeseen events beyond their control.