Electronic Communications/Communication Guidelines and Standards
|Unit 4.9-Electronic Communications|
Communication Guidelines and Standards
Uniform Customs and Practice (UCP) for Documentary Credits
International standards of letter of credit practices were established for bankers by the International Chamber of Commerce. Historically, the UCP has been revised about every ten years to keep up with changing practice; the most recent revision, UCP600, was completed in 2006 and was put into effect July 1, 2007. Although the UCP defines rights and obligations of the various parties in a letter of credit transaction, it is not law, so any given letter of credit is subject to the UCP only to the extent indicated in the letter of credit itself. The UCP outlines the appropriate methods of communication and transmission of the documents (banking, commercial, and transportation).
Uniform Customs and Practice – Electronic Supplement (eUCP)
The ICC recognized the opportunities for using technology and began working on standards for electronic communication and transmission of documents. The electronic supplement to UCP 500 went into effect in April 2002. The eUCP provides a general framework of principles for dealing with the electronic documents (shipping, customs clearance and banking documents) being presented in letter of credit transactions. This document outlines the steps to authenticate documents and presentation requirements as well as the steps to take if a document is corrupted. The creation of this supplement shows the need and willingness of the ICC to maintain its currency in the world of business since changes in technology tremendously affect business.
SWIFT (Society for Worldwide Interbrain Financial Telecommunication) is a computer-based standardized message writing system that connects world-wide participating banks primarily for the purpose of communicating payment information. When an issuing bank instructs an advising bank by an authenticated teletransmission to advise a documentary credit or an amendment to a credit, the teletransmission will be considered to be the operative instrument. This system not only provides the communication network but also is a means of authentication. Without the assurance that a document or request is authentic, no action will be taken. SWIFT is also used as the means of transferring funds between banks. This system is known as an electronic funds transfer, wire transfer or, in short, a TT.