ICC to revise guidelines on L/Cs

Leony Aurora , The Jakarta Post/Jakarta

In a bid to keep standards for customs and practices in issuing and using letters of credit (L/Cs) up-to-date with current developments, the International Chamber of Commerce (ICC) is preparing to revise the existing standards.

The ICC Indonesian chapter invited the country's import and export players, including banks, on Wednesday to gather input for the new draft of the internationally recognized Uniform Customs and Practice for Documentary Credits, more commonly known as the UCP 500.

"The main point is for us to secure our national interests," said Saul Daniel Rumeser, who represented Indonesia in the ICC consulting group. "For example, we can try to speed up the settlement of payment," he added.

An L/C is issued by a bank to guarantee that its customer -- the buyer, or importer -- can pay the seller, or exporter. The instrument is commonly used in trade between firms in different countries.

To receive payment, the exporter must provide the product documents listed on the L/C, which must be checked by the issuing bank. Rules and language of the L/C are spelled out in the UCP 500.

The UCP 500 is by itself not legally binding. However, as it is included in the L/C, it becomes part of the contract.

"Based on experience in court (when disputes occur), judges rule based on the UCP," said JB Kendarto, managing director of Bank Mandiri, which hosted the meeting.

The ICC will welcome input for the draft until the end of this week. Comments and suggestions, however, can only be admitted via the country's national committee.

The practices on L/Cs were first standardized by ICC in 1933 and have been revised every 10 to 15 years. The last revision was in 1993. The current draft, which will be called UCP 600, is expected to be finalized by the end of next year.