Global trade
Trade and supply chain finance are key catalysts of international trade expansion, allowing companies to mitigate risks in the import and export of goods and services, and operate with security and predictability.
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- Role of global rules in trade
- Access to trade finance
- Anti-money laundering and compliance protection
- ICC Banking eUCP
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Tomasch KubiakPolicy Manager | Global Policy Team | Banking CommissionContact by email
Why are rules and guidelines necessary for banks and other financial institutions to facilitate world trade?
Banks and other financial institutions help companies engage in world trade, mitigating risks so that goods and services can flow across the globe in a smooth and secure manner, which is especially fundamental for small-medium sized enterprises (SMEs).
ICC produces universally accepted rules and guidelines to help business access the financing needed to advance the necessary funds to import or export valuable goods on their own. These include documentary credits, forfaiting, demand guarantees, bank payment obligation and dispute resolution that help ensure access the to finance and level the playing field.
In providing this common framework, ICC allows companies and governments around the world to speak the same regulatory language without burdening banks with red tape that could keep them from financing valuable trade opportunities.
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What is the role of global rules in trade?
Banking plays an indispensable role in making trade work for all. It is especially essential for small businesses enable them to take risks in expanding to international markets. Banks need common rules and guidelines for clarity and to avoid confusion that comes with varying national rules.
Having the same guidelines levels the playing field for companies and encourage inclusive trade by making opportunities accessible to small- and medium-sized enterprises to integrate foreign markets and global value chains.
ICC’s global rules for documentary credits were established in the 1930s—a time of growing nationalism and protectionism – and has since become the most successful privately drafted rules for trade ever developed. It has remained adaptable over time to reflect the changing nature of banking in trade.
In addition, ICC also develops guidelines for fields, such as forfaiting, demand guarantees and supply chain finance—all ways that banks work with companies to mitigate the risks involved in trade.
Furthermore, ICC’s expertise helps parties resolve disputes around trade finance documents without going to court, concluding in a rapid, fair and cost-effective manner. In this spirit, ICC has developed rules for documentary dispute resolution (DOCDEX), where parties are provided with a specially appointed panel of experts that deliver a decision within 30 days of receiving the necessary documents.
How does access to trade finance contribute to world trade?
Trade finance has been a catalyst of international trade in the past century by mitigating risks for businesses that paves the way for a predictable and secure flow of world trade. Small- and medium-sized enterprises (SMEs), as the backbone of the global economy, depend on access to banking services in order to expand to new markets, further promoting inclusive economic growth.
Robust regulation is crucial for banks but it is equally essential that rules do not hamper banks’ ability to help businesses get financing. Towards this end, ICC publishes an annual Global Survey on Trade Finance which provides an in-depth analysis on trends and the impact of policies that helps determine where the rules could further improve.
The 2020 ICC Global Survey report was based on exclusive information from nearly 350 respondents in more than 80 countries with nuanced contributions from the Asian Development Bank (ADB), AUSTRAC, Boston Consulting Group (BCG), Coriolis Technologies, HSBC, Kountable, SWIFT and TXF. It reflects the evolution and greater receptiveness to innovation in the financing of international trade, whether through traditional techniques or emerging mechanisms in Supply Chain Finance (SCF), which, along with digital trade are key growth priorities for banks, with 86% and 84% of respective respondents calling them an ‘immediate or near-future priority’.
Furthermore, ICC’s Customer Due Diligence Guidelines provides a suggested template that aims to promote sustainability in trade finance by identifying high environmental, social or governance (ESG) risks associated with commodities or other goods and services produced by a bank customer or within its supply chain, and available mitigants.
ICC Academy
The ICC Academy is the educational arm of the International Chamber of Commerce (ICC). We offer dynamic e-courses and specialised programmes on trade finance and cross border transactions designed by leading industry experts to meet the educational needs of banks, corporates and other organisations at the forefront of international trade.
How do anti-money laundering and compliance protect world trade?
Financial crimes activities including money laundering, the financing of terrorism, financial fraud and other financial crimes severely undermine the integrity and stability of financial institutions and systems, discourage investment into productive sectors, distort international capital flows. It impedes the capacity of financial institutions at country level to conduct normal business activities, significantly impacting SMEs in the less developed and emerging markets where there is perception of financial crime risk is higher.
ICC has made the fight against money laundering and terrorist financing a major priority, leveraging our position as the leading global rules writer for international trade finance to develop guidance for banks and industry. We also lead industry dialogue with national and international regulators on all topics related to financial crime risk issues
ICC Banking eUCP directory
As part of the Banking Commission’s digitalisation efforts we are releasing the ICC Banking Commission eUCP directory.
The aim of the directory is for any ICC member bank to put the relevant information on their current capacity in handlingcreditssubject toeUCP.We believe the directory will be of immense value to ICC members, banks andcorporatesalike, allowing them to showcase their capabilities with regard to the use of eUCP and removing known barriers to the usage of the rules by giving clear, free of charge visibility of eUCP requirements to all users in addition to ourICC user guide to the eUCP.
The directory will feature the relevant information of banks and corporates on the capacities to issue eUCPcredits, its ability to advise and confirm eUCP credits, the parameters used by the given bank as well as the platform or technology it currently uses
Rules of use of the directory
- Any ICC member bank can submit their information to their ICC National Committee which will transmit it to ICC Global Banking Commission for upload.
- Information can be provided country by country and provide the level of details it wishes to release
- The data refresh will be assessed on a periodic basis, making sure it is still updated. A yearly review will be put forward
Relevant documents
- Banking & finance
How does global trade and receivables finance mitigate against proliferation financing?
- Banking & finance
Financial crime risk controls – Price checking of goods and services in trade transactions
Latest news & publications
- Banking & finance
EU Directive on combatting late payment and its unintended consequences on the real economy
- 11 December 2023
- Banking & finance
ICC Digital Standards Initiative launches expanded recommendations for trade documents
- 8 November 2023
- Banking & finance
ICC Trade Register report: Global risks in trade finance
- 2 November 2023
- Banking & finance
ICC and Swift unveil first API standards for guarantees and standby letters of credit
- 13 August 2023
- Banking & finance
How does global trade and receivables finance mitigate against proliferation financing?
- 12 July 2023
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Introduction
As an expert in global trade and supply chain finance, I can provide you with valuable insights and information on this topic. My expertise is based on extensive knowledge and experience in the field. Let's dive into the concepts mentioned in the article you provided.
Role of Global Rules in Trade
Global rules and guidelines are essential for banks and financial institutions to facilitate world trade. These rules provide clarity and consistency, enabling companies to engage in international trade with confidence. By adhering to universally accepted rules, such as those developed by the International Chamber of Commerce (ICC), banks can mitigate risks and ensure a level playing field for businesses of all sizes.
The ICC produces widely recognized rules and guidelines that help businesses access the financing needed for international trade. These include documentary credits, forfaiting, demand guarantees, bank payment obligations, and dispute resolution mechanisms. These rules and guidelines ensure that companies have access to the necessary funds to import or export valuable goods, promoting secure and predictable trade.
Access to Trade Finance
Access to trade finance is crucial for world trade as it enables businesses, especially small and medium-sized enterprises (SMEs), to expand into international markets. Banks and financial institutions play a vital role in providing the necessary financing to support trade activities. Common rules and guidelines are essential to ensure clarity and avoid confusion caused by varying national regulations.
By having the same guidelines, companies can compete on a level playing field and take advantage of trade opportunities. The ICC's global rules for documentary credits, established in the 1930s, have been instrumental in facilitating trade by providing a framework that adapts to the changing nature of banking. Additionally, the ICC develops guidelines for other trade finance activities, such as forfaiting, demand guarantees, and supply chain finance, which help mitigate risks involved in trade .
Contribution of Trade Finance to World Trade
Trade finance acts as a catalyst for international trade by mitigating risks and enabling a predictable and secure flow of goods and services. SMEs, as the backbone of the global economy, heavily rely on access to banking services to expand into new markets and drive inclusive economic growth.
Robust regulation is crucial for banks to combat financial crimes, but it is equally important that rules do not hinder banks' ability to provide financing. The ICC publishes an annual Global Survey on Trade Finance, which analyzes trends and the impact of policies to identify areas for improvement. This survey reflects the evolving nature of trade finance, including the growing importance of digital trade and supply chain finance.
Anti-Money Laundering and Compliance Protection
Financial crimes, such as money laundering, financing of terrorism, and financial fraud, pose significant threats to the integrity and stability of financial institutions and systems. These crimes discourage investment, distort international capital flows, and impact the capacity of financial institutions to conduct normal business activities.
The ICC recognizes the importance of combating money laundering and terrorist financing and has made it a major priority. Leveraging its position as a global rules writer for international trade finance, the ICC develops guidance for banks and industry to address financial crime risks. The ICC also engages in dialogue with national and international regulators to address these issues effectively.
Conclusion
Global trade and supply chain finance rely on rules and guidelines to ensure smooth and secure transactions. These rules provide clarity, mitigate risks, and level the playing field for businesses of all sizes. Access to trade finance is crucial for SMEs to expand into international markets and drive inclusive economic growth. However, it is equally important to combat financial crimes and ensure compliance with regulations. The ICC plays a vital role in developing rules, guidelines, and initiatives to support and enhance global trade and finance.
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