This ICC compendium comprises a set of four updated guidance papers on trade finance providing best practices on the usage of documentary credits and compliance with ICC Banking Rules.
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In accordance with existing ICC Banking Rules, the compendium contains guidance for trade finance practitioners on:
- requirements for on board notation;
- the principle of strict compliance;
- use of drafts under documentary credits;
- simple documentary credit format.
Recommendations in respect of the requirements for an “on board notation”
These recommendations, in respect of articles 19, 20, 21 and 22 of the UCP 600 Rules, guide banks in the correct interpretation and application of the UCP 600 Rules in relation to on board notations for bills of lading, sea waybills and charter party bills of lading, and for multimodal or combined transport documents, where the first part of the carriage (as required by the credit) is by sea. The publication also includes an explanatory flowchart.
Notes on the principle of “strict compliance”
The issue of “strict compliance” has continually surfaced with respect to the examination of documents presented under documentary credits. Many discussions have been generated in trade finance debates with respect to the interpretation and application of this doctrine. This note serves to clarify the discussion with evidence supported by relevant ICC Opinions and ICC DOCDEX cases.
The use of drafts under documentary credits
The guidance paper focuses on the best practices around the use of a draft outlining past and current usage of drafts in relation to documentary credits. Recognising that as per article 2 of the UCP 600 Rules, a draft is optional for negotiation to occur under a documentary credit by negotiation, the paper emphasises that drafts serve no useful commercial purpose for credits available at sight.
Simple documentary credit format
Simple documentary credit is a value-added option in well-established relationships between an applicant and a beneficiary. As such, this guidance paper provides references to best practices to achieve a straightforward, uncomplicated documentary credit format. It also includes an overview of the SWIFT MT700 fields alongside their comment and clarifications of definition to enable trade finance practitioners to more effectively leverage the framework.
For additional information on guidance papers, best practices and notes on trade finance practices linked to ICC Banking Rules, questions can be sent to Tomasch.firstname.lastname@example.org.