The International Chamber of Commerce (ICC) has issued its new Uniform Rules for Forfaiting (URF 800) which became effective on 1 January 2013.
Forfaiting is a form of trade finance which originally simply involved the purchase of negotiable instruments on a non-recourse basis. It was primarily used to finance trade with the USSR. It is now used more widely throughout the world and the underlying payment obligations are documented in a variety of ways.
These new rules were developed as a joint project by the ICC’s Banking Commission and the International Forfaiting Association. They provide a standardised set of terms and conditions for the primary market (in which forfaiting transactions are originated from exporters and other sellers of goods and services) and for the secondary market (in which these transactions are traded on).
As with all ICC rules, they are not laws. They are rules that parties can agree to include in a contract and URF 800 sets out in its annexes a set of model agreements which can be used to do this.
It is comparatively rare for the ICC to issue new rules and each set of its rules are revised from time to time to reflect changes in market practice. For example its rules on the issuance and use of letters of credit (UCP) were first issued in 1933 and their latest revision (UCP 600) came into effect on 1 July 2007.
It will be interesting to see to what extent URF 800 is adopted by the forfaiting market and how it will be revised over the years.