Letters of credit – Guaranteed reimbursement?

Consultation on a product that guarantees reimbursement of UK confirming banks under letter of credit arrangements has started. The Export Credits Guarantee Department seeks views on such a scheme. Export finance has recently become harder to obtain and more expensive. The ECGD propose to launch the Letter of Credit Guarantee Scheme (provisional title). The LCGS would take the form of a master guarantee issued to participating UK banks, under which those banks cede to the guarantee potential exposure which they would incur by virtue of confirming letters of credit issued by overseas banks in favour of UK exporters. In respect of individual transactions ceded within the limits of the master guarantee, ECGD would guarantee repayment to the confirming bank of sums owed to it by the issuing bank.  Replies to the consultation paper are sought by 3 July 2009.

OECD strengthens its position against bribery in export credits

On 20 December 2006, the Organisation for Economic Co-operation and Development (OECD) published a council recommendation on bribery and officially supported export credits. The council recommend what action its members can take to combat the bribery of foreign public officials in international transactions with export credit support. The recommendation supersedes OECD’s action statement on bribery.

UCP 600

A new UCP will be issued in July 2007: UCP 600.

In a seminar on 7 December 2006 at the barristers’ chambers 2 Temple Gardens, Paul Downes pointed out ten Traps for the Unwary in the new UCP. These include:

• Art.1: not clear if the SWIFT inclusion by reference applies
• Art 2: Banking Day: the definition is not what was intended
• Art 10(f): A time limit for rejection of amendments will be disregarded
• Art 14 (f): Inspection certificates for useless goods may be acceptable
• Art 14 (j): Wrong addresses are acceptable provided correct country – but not for transport documents.