UCP600 Revision: A Tune-Up Opportunity for this Old Vehicle Called the “Letter of Credit”

Letters of credit have been around for decades, probably since the 19th Century or earlier. We are now in the 21st Century and they’re still around. However, I wonder whether that will still be the case in the 22nd Century. But who cares. By that time, I don’t think I will be around anymore to check documents!

Turning to the present, a revision of UCP600 offers the opportunity to simplify letters of credit, make them easier to use and more transparent. I’ve been on the sales side of my bank for more than 20 years and in many disciplines. I have met hundreds of corporates, many of them users of LCs. When talking to them, most corporates look at me and sigh: ‘A very useful and strong instrument. But so complicated, not user-friendly, such an administrative burden’. And indeed, corporates will abandon LCs as soon as they are able to find an alternative that is viable for them.

I’m convinced that something has to be done. In the era of the Bank Payment Obligation (BPO), Supply Chain Financing, Electronic Bills of Lading, and other innovations beginning to take root, I don’t know how long this old-fashioned vehicle can keep chugging along!