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Part 2. UNCID - Chapter 1. Introductory Note

Part 2. Uniform Rules of conduct for interchange of trade data by teletransmission (UNCID)


CHAPTER 1 - Introductory note

I. The international trade transaction

The UNCID rules are meant to provide a background for users of EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport) and other systems of Electronic Trade Data Interchange, hereafter for short EDI. 
Users will have detailed knowledge of the cumbersome procedures involved in an international trade transaction, and the decisive advantages of electronic interchange. For illustration please see figure 1 which shows data flows and message functions.

II. The computer age - towards paperless trading

It is widely expected that the impact of computerization will be as great as that of industrial revolution. Computers are already providing all sorts of services at rising speed and diminishing cost. International trade data communication, however, seems to be a missing link. Yet the need is great. Not only do paper documentation and procedures represent as much as 10 per cent of goods value; they are slow, insecure, complicated and growing. The possibilities of cost reduction are in the order of 50 per cent to the benefit of not only the main parties, but everyone involved, not least the authorities. 
This is why a major activity of the Working Party on Facilitation of International Trade Procedures of the United Nations Economic Commission for Europe (ECE), over the last decade and a half has been the creation of the tools that would make electronic interchange of data in international trade a secure, effective and cheap alternative. 
EDI is the direct transfer of structured business data between computers by electronic means, i.e. the paperless transfer of business "documentation". (An illustration of this development is given in figure 2.) 
The past years have seen an explosion of interest in EDI between national and international trade participants. The technology is available and the momentum is growing. It is estimated that within five years EDI will be commonplace between majors in international trade transactions. 
But EDI cannot operate to any great extent without a common international standard, and progress has been made in drawing together different standards. Three building blocks are required: common data elements equivalent to the vocabulary; a syntax, which equates to the grammar in a normal language; and standard messages which combine data elements and syntax into a structured business message similar in concept to the paper document. These instruments are being created in the work coordinated by the ECE. 
Alongside these technical developments thought and attention has also been given to what may be described as the "legal" aspects of EDI.

III. The legal background

Because of its physical characteristics, the traditional paper document is accepted as evidence. It is durable, and changes or additions will normally be clearly visible. The electronic document is quite different. It takes the form of a magnetic medium whose data content can be changed at any time. Changes or additions will not appear as such. 
The paper and the data communication links are only media for carrying information, however, and it is possible to establish techniques which give electronic data interchange characteristics that make it equal or superior to paper not only as carrier of information, but also as regards the evidential functions. 
Firstly EDI in itself presupposes procedures that make this form of communication more secure. In addition to identification this technique can also provide for error detection and correction. Authentication in the sense that the data content is correct can also be established, and privacy can be secured by several means built into the system. Finally, authentication, in the sense that the correct authorized person has issued the message, can also be secured. 
That is why the ECE, the United Nations Commission on International Trade Law (UNCITRAL) and the Customs Co-operation Council (CCC) have recommended to governments and organizations responsible for determining documentary requirements, that they undertake an update and overhaul of these requirements to allow for EDI. This will, however, take time. It is also dependent upon a general acceptance of a high level of security in data interchange. 
That is why it has been felt desirable to develop a set of internationally accepted rules - UNCID. The first draft was based on the idea of creating a standard for communication agreements. It was found, however, that due to the differing requirements of various user groups this was impracticable. There was on the other hand general agreement on proposals for uniform rules as a code of conduct.


The International Chamber of Commerce (ICC) agreed to establish a Joint Special Committee with participation from other interested organizations and user groups to evaluate and formulate such a set of rules. UNCITRAL, ECE, CCC, the UNCTAD Special Programme on Trade Facilitation (FALPRO), the Organization for Economic Co-operation and Development (OECD), the International Organization for Standardization (ISO), the Commission of the European Communities, the European Insurance Committee and the Organization for Data Exchange by Teletransmission in Europe (ODETTE) were all represented in this committee in addition to various commissions of the ICC. 
In developing the rules the Committee based its work on certain vital concepts, inter alia, that the rules should: 
  1. aim at facilitating the use of EDI through the establishment of an agreed code of conduct between parties engaged in such electronic interchange; 
  2. apply only to the interchange of data and not to the substance of trade data messages transmitted; 
  3. incorporate the use of ISO and other internationally accepted standards--to avoid confusion; 
  4. deal with questions of security, verification and confirmation, authentication of the communicating parties, logging and storage of data; 
  5. establish a focal point for interpretation that might enhance a harmonized international understanding and therefore use of the code. 

Acknowledgement and confirmation illustrate some of the problems found in developing useful rules. In some systems acknowledgement is a mandatory requirement. In others it is taken as good conduct. In others again the sender has to ask for it. UNCID opts for this last solution. In certain cases the sender will also want to know that the content of the transfer has been received in apparent good order and has been understood. The sender may then ask for confirmation. This of course touches on the material content--but only marginally. It should not be confused with the concept of legal acceptance--that is another (third) layer which is wholly outside the UNCID rules. 
It was also foreseen that the rules could form part of or be referred to, in any Trade Data Interchange Application Protocol (TDI-AP) or other specific communication agreement.

V. Need for specific communication agreements

User groups may be organized in several ways. But they all need some form of communication agreement, although requirements differ according to the groups in question and to what has been included in their "users manual" or "application level protocol" which is an agreement, but of a more technical nature. 
Apparently there is a strong need for communication agreements where EDI is used between defined organizations. It is suggested that this need may be even more important in direct open communication. 
Several user groups have stressed that the UNCID rules make a useful basis for their communication agreements. UNCID, agreed rules of conduct, give more than a mere starting point. Defining an accepted level of professional behavior they also secure a common approach. 
The details and form of communication agreements differ according to the size and type of the user groups. The agreement may be included in a protocol or form a separate document. It may contain additional rules, e.g., bearing on the substantive elements of the data exchanged, on the underlying agreement and on the professional approach. It is therefore not practical to formulate a standard model.
 It may be useful, however, to outline certain elements that should be considered in addition to UNCID, when formulating an agreement.
  1. There is always a risk that something may go wrong - who should carry that risk? Should each party carry its own or would it seem possible to link risk to insurance or to the network operator?
  2. If damage is caused by a party failing to observe the rules, what should be the consequences? This is partly a question of limitation of liability. It also has a bearing on the situation of third parties.
  3. Should the rules on risk and liability be covered by rules on insurance?
  4. Should there be rules on timing, e.g. the time within which the receivers should process the data, etc?
  5. Should there be rules on secrecy or other rules regarding the substance of the data exchanged?
  6. Should there be rules of a professional nature - such as the banking rules contained in SWIFT?
  7. Should there be rules on encryption or other security measures?
  8. Should there be rules on "signature"? It would also seem important to have rules on applicable law and dispute resolution.
|                                                                 |
|   EXPORT                                                IMPORT  |
|                             A                                   |
|  +-------+                                             +-------+|
|  | Seller|---------------------------------------------| Buyer ||
|  +-------+                                             +-------+|
|      |  E   +-----------+              +------------+  F   |    |
|      |------|Public     |              |Public      |------|    |
|      |      |Authorities|              |Authorities |      |    |
|      |      +-----------+              +------------+      |    |
|      |  D   +-----------+              +------------+  D   |    |
|      |------|Insurer    |              |Insurer     |------|    |
|      |      +-----------+              +------------+      |    |
|      |  B   +-----------+              +------------+  B   |    |
|      |------|Bank       |..............|Bank        |------|    |
|  C.E.|      +-----------+              +-------------      |C.F.|
|      |                                                     |    |
|  +---------+                 C.F.                   +----------+|
|  |Forwarder|----------------------------------------|Forwarder ||
|  +---------+                                        +----------+|
|      |  C   +-----------+              +------------+  C   |    |
|      |------|Inland     |              |Inland      |------|    |
|      |      |Transport  |              |Transport   |      |    |
|      |      +-----------+              +------------+      |    |
|      |  C   +-----------+              +------------+  C   |    |
|      |------|Main Trp.  |--------------|Main Trp.   |------|    |
|      |      +-----------+              +------------+      |    |
|      |  C   +-----------+              +------------+  C   |    |
|      |------|Terminal   |              |Terminal    |------|    |
|      |      +-----------+              +------------+      |    |
|      |  E   +-----------+              +------------+  F   |    |
|      +------|Customs    |              |Customs     |------+    |
|             +-----------+              +------------+           |
|                                                                 |
|  Main functions:                          Data flows:           |
|  A Establishment of commercial agreement  Commercial            |
|  B Arrangement of payment                 Financial             |
|  C Arrangement of transport               Transport Intermediary|
|  D Arrangement of insurance               Insurance             |
|  E Clearance of export                    Official              |
|  F Clearance of import                    Official              |
|                                                                 |
|  Figure 1.                                                      |

|                                                                 |
| SYSTEM A                                             SYSTEM B   |
|                                                                 |
|                                                                 |
| +---------+ +----------+                                        |
| |ADM. PROC| |ORDER PROC|                                        |
| +---------+ +----------+                                        |
| +----|-----------|                                              |
| |                            point to                           |
| |  +---------------------+..... point +---------------------+   |
| |  |memory         |i |e |    ........|e |i |memory         |   |
| |  |---------------|n |x |   +---+    |x |n |---------------|   |
| +--|processing     |t |t |---|   |----|t |t |processing     |-+ |
|    |---------------|e |e |   +---+    |e |e |---------------| | |
|    | prog. | prog. |r |r |   mail     |r |r |prog.  | prog. | | |
|    +---------------------+   box      +---------------------+ | |
|                |                                              | |
|          +-----------+                                        | |
|          | Trade     |                                        | |
|          | Documents |                                        | |
|          +-----------+                                        | |
|                |             +--------+                       | |
|                +-------------| POST   |-----------------------+ |
|                              +--------+                         |
|                                                                 |
| Figure 2.                                                       |
|                                                                 |