Letter by Mr. John Danilovich, Secretary General of the International Chamber of Commerce
In partnership with the International Trade & Forfaiting Association (the “ITFA”), the International Chamber of Commerce (the “ICC”) has developed the first ever global rules for forfaiting, the Uniform Rules for Forfaiting, ICC publication No. 800 (the “URF 800”). The URF 800 is a set of standardized terms and conditions applicable to a forfaiting transaction when the parties indicate that their forfaiting agreement is subject to these rules. The URF 800 drafts were reviewed and commented upon by over 500 members of the ICC Banking Commission and ICC National Committees in 92 countries before adoption by the ICC Banking Commission at its biannual mee ting held in Mexico in November 2012. The URF 800 came into effect on 01 January 2013.
A result of a three and half year joint effort by the ICC and the ITFA, the URF are the first ever global rules for forfaiting and have been developed to take into acco unt the legitimate expectations of all relevant sections with the aim of becoming the standard set of rules applied within the forfaiting market worldwide in all developed countries as well as many emerging markets. The current market size of forfaiting is estimated to be close to USD 300 billion per year.
Forfaiting is a trade financing technique based on discounting of an exporter’s receivables payable at a future date without recourse to the exporter. The “without recourse discounting” benefits the exporter immensely by eliminating risks typically associated with an international trade transaction such as country risk, commercial risk, interest risk and currency rate risk, improving cash flow of the exporter and enhancing exporter’s competitive advantage by offering attractive credit terms to the importers/buyers.
Comprising of a total of 14 articles, the URF 800 cover the entire gamut of a forfaiting transaction starting from the origination of a forfaiting transaction in the primary market and the trading of the forfaited asset in the secondary, market providing access to a deep and liquid market which can provide much needed funding to producers, manufacturers and exporters and also assist banks in managing their portfolios and credit exposures.
We are submitting to you the full URF 800 text along with a summary note on forfaiting. ICC trusts that UNCITRAL will appreciate the efforts made by ICC to promote international trade through forfaiting as a flexible and creative alternative to traditional trade financing, helping exporters to cover the political, commercial and transfer risks in an export transaction, especially involving emerging markets/developing nations and thus facilitating international trade which is now well recognized as an engine for economic development and growth.
Therefore, as with previous requests for endorsement of ICC rules, we hereby request formal endorsement of the URF 800 by UNCITRAL. We hope to receive a favourable response to this request.