What is urc522?
URC stands for unified riles of collections. These a rules which sets guidelines as to how debts, owed money and assets are to be collected. These rules were set to resolve the daily issues being faced by practitioners. According to this, the principal and remitting bank should attach a separate document, collection instruction, to every transaction according to the rules. It makes clear that banks are not required to examine documents and look into instruction.
These rules basically outlines what banks should do with documents against acceptance (D/A) and documents against payment (D/P). URC 522 states that banks are under no obligation to store and insure goods when instructed.
- Documents against acceptance: It is an arrangement between the exporter and the importer which states that the importer should not be given the documentation that confirms that he is the owner of the imported goods unless the Bill of lading has been paid for, or both of them has come to some sort of agreement. URC 522 explicitly state that the importer must accept a time draft given to him by the bank via the exporter. The importer should sign that time draft agreeing to pay the exporter at a future point of time. Once this has been done, then only the ownership documents are handed to the importer by the bank.
- Documents against payments: This document is used similarly but in the side of the exporter. This document represents an agreement between the bank and the exporter stating that the importer is not to receive any document of ownership unless the bill of exchange is paid for or preparations for the payments have been made. The URC 522 explicitly state that the buyer should make full payment on the goods which they have imported only after which the documents of ownership will be given to them by the bank.
Why electronic representation for urc522 is needed?
According to existing guidelines given by ICC under the URC522 provide protection to transactions of good and services overseas. But when it comes to electronic transactions, URC 522 rules falls short. They are limited in number thus doesn’t cover the whole ambit of issues that could occur in online transactions.
As trade is being digitalised by numerous innovations that are being done in this field, and the industry moving towards open bank interoperability, it is quite inevitable that digital trade finance will be adapted more. As a consequence of this, ICC has come out with new rules and guidance to supplement the URC 522. These recently updates rules are called eRules.
With the implementations of eRules we can expect evolution of electronic presentations and automated compliance checking systems. This would be breakthrough in the world of documentary credits.
The technology landscape is continuously evolving and getting disrupted with new age technologies like Internet of Things, Smart contracts, Artificial Intelligence, Distributed Ledger technologies, Due to this the world of digital trade finance also sees rapid changes, These eRules have left space so that they can accommodate and adapt according to new technologies.