[Senate Executive Report 115-7]
[From the U.S. Government Publishing Office]


115th Congress      }                               {       Exec. Rept.
                                 SENATE
 2d Session         }                               {           115-7

======================================================================



 
     UNITED NATIONS CONVENTION ON THE ASSIGNMENT OF RECEIVABLES IN 
INTERNATIONAL TRADE, DONE AT NEW YORK ON DECEMBER 12, 2001, AND SIGNED 
               BY THE UNITED STATES ON DECEMBER 30, 2003

                                _______
                                

               September 12, 2018.--Ordered to be printed

                                _______
                                

          Mr. Corker, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                    [To accompany Treaty Doc. 114-7]

    The Committee on Foreign Relations, to which was referred 
the United Nations Convention on the Assignment of Receivables 
in International Trade, done at New York on December 12, 2001, 
and signed by the United States on December 30, 2003 (Treaty 
Doc. 114-7), having considered the same, reports favorably 
thereon with six declarations and five understandings, as 
indicated in the resolution of advice and consent, and 
recommends that the Senate give its advice and consent to 
ratification thereof.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Background.......................................................2
III. Major Provisions.................................................4
 IV. Entry Into Force and Denunciation................................6
  V. Implementing Legislation.........................................6
 VI. Committee Action.................................................6
VII. Committee Recommendation and Comments............................6
VIII.Text of Resolution of Advice and Consent to Ratification........14


                               I. Purpose

    The United Nations Convention on the Assignment of 
Receivables in International Trade (the ``Convention'') 
provides uniform rules to facilitate cross-border receivables 
financing. Receivables financing is an important tool in 
helping U.S. companies secure working capital financing. Within 
the United States, lenders and buyers of receivables are 
familiar with providing financing based upon the use of 
receivables from debtors located within the United States as 
working capital collateral. Uniform Commercial Code Article 9, 
as adopted by all 50 states, the District of Columbia, and the 
territories of Puerto Rico and the Virgin Islands, provides 
extensive rules on the use of receivables as to finance 
operations or use as collateral and how to resolve potential 
conflicts of law. However, U.S. based lenders may be less 
willing to make loans secured by receivables owed by debtors 
located outside the United States because such cross-border 
transactions may involve countries whose laws are not 
consistent with modern financial practices.
    The Convention, if widely adopted, will establish clear 
rules for resolving conflicts of law with respect to 
receivables financing. A key element of the Convention includes 
providing clear rules on establishing location under the 
treaty, allowing commercial parties to structure deals and 
effectively choose the forum that suits their needs in many 
transactions. Further, the Convention requires Parties to 
establish certain modern commercial finance rules consistent 
with U.S. Uniform Commercial Code Article 9 practices.

                             II. Background

    In the United States, U.S. companies often rely on 
receivables financing to secure access to working capital for 
their business operations. An assignment of receivables occurs 
when one party (the assignor) transfers to another party (the 
assignee) the right to receive the contractual amount owed by 
its customers or other third parties (the debtors). Small and 
medium size businesses in particular use these rights to 
payments from their customers as working capital or operational 
funding collateral with their local lenders to secure needed 
cash to finance purchases of raw materials and other resources. 
If the assignor, the assignee, and the debtor are U.S. 
companies, the applicable laws are well understood.
    Receivables financing is governed by the principles found 
in the Uniform Commercial Code (UCC), Article 9 as adopted by 
the 50 states, the District of Columbia, and the territories of 
Puerto Rico and the Virgin Islands (referred to herein as ``the 
states''). UCC Article 9 is the foundation for U.S. laws on 
secured finance. For example, the UCC establishes rules on 
assignee priority rights and secured lending. The UCC also 
provides a framework for U.S. courts on resolving conflicts of 
law between assignors or debtors and assignees located in 
different states. The U.S. modern commercial finance laws, as 
represented by the UCC, are considered among the most advanced 
in the world.
    Modern receivables financing principles in the UCC, such as 
rules that allow interests in future receivables, receivables 
in bulk financing, and rules on proceeds and other mechanisms 
protect the assignee's rights. These rules reduce receivables 
financing risk and cost and make receivables financing an 
attractive option that has provided U.S. companies, especially 
small and medium size enterprises with business finance options 
that have led to significant economic growth and job creation 
in the United States over the past several decades.
    Many countries, however, do not have the kinds of modern 
commercial finance laws on the assignment of receivables found 
in UCC Article 9. Because of the risk, cost and uncertainty 
created by receivables financing laws in other countries that 
vary greatly or that can be vague or unpredictable, the ability 
of small and medium sized U.S. enterprises to access financing 
with lenders using their international accounts receivables 
derived from exports or other cross-border transactions is 
severely limited.
    The U.N. Convention on the Assignment of Receivables in 
International Trade (``the Convention'') solves many of these 
problems. First, the Convention would establish more uniformity 
with respect to receivables financing in cross border 
transactions.
    Second, the Convention provides a unique benefit to the 
United States in that it closely reflects UCC Article 9 
principles. Many U.S. commercial, finance and business sectors 
were participants in the development of the Convention and will 
be familiar with its terms. In addition, the Convention was 
developed in close coordination with the National Conference of 
Commissioners on Uniform State Laws (``Uniform Law Commission'' 
or ``ULC'') and representatives of the American Law Institute 
(ALI). The Uniform Law Commission, which is composed of 
representatives of the states, together with the ALI, drafted 
the Uniform Commercial Code which has been adopted by all the 
states and jurisdictions of the United States.
    Importantly, because the Convention closely reflects UCC 
Article 9, the administration has assured the committee the 
Convention will have minimal effect on current financing 
practice. The Convention would help U.S. businesses who rely on 
receivables financing to extend their operations across borders 
because foreign businesses will also be complying with an 
agreed upon international version of Article 9 of the UCC once 
their home government has ratified the Convention.
    The administration has indicated that the treaty would be 
self-executing. According to the testimony of the State 
Department's Acting Legal Advisor in testimony given to the 
committee on December 13, 2017:


        The treaty would be self-executing, which is consistent 
        with the recommendation of the ULC Committee. There is 
        no need for federal or state implementing legislation. 
        Ratification of the Convention would not change U.S. 
        practice in this area in any material respect. The 
        Convention's rules are largely based on U.S. law and 
        will produce substantially the same results as those 
        under the UCC Article 9.


    The Convention is limited to transactions that are 
international in nature. In addition, the Convention does not 
create any new legal bodies. As with Article 9, the Convention 
establishes rules that would facilitate private transactions 
that are governed by private contract, enforceable through 
contract remedies. The Convention does not create any appeal 
mechanism to a foreign government or international body.
    While the Convention requires countries party to the 
Convention to establish minimum standards in some areas such as 
rules on proceeds or priority assignment (rules already highly 
developed within the United States beyond the standards 
required under the Convention), the Convention generally adopts 
an approach that allows private parties maximum flexibility to 
develop and adopt their own contractual relationships as will 
be determined by their own specific business needs.
    Finally, the Convention, in Articles 35, 40, 41, and 42, 
provides additional flexibility for countries party to the 
Convention to make future declarations with respect to 
exemption of businesses, public purpose entities, other 
government entities, or specific transactions from application 
under the Convention, should the need arise. Given that the 
goal is to establish more uniformity with respect to these 
international transactions involving receivables financing 
across borders, the committee does not anticipate the United 
States making such a future declaration at this time.
    The Convention is supported by the Uniform Law Commission, 
the U.S. Chamber of Commerce, the Financial Services 
Roundtable, the Commercial Finance Association, BAFT (Bankers 
Association for Trade and Finance), Equipment Leasing and 
Finance Association, the International Swaps and Derivatives 
Association, Inc., the National Foreign Trade Council, the 
National Law Center for Inter-American Free Trade, the Small 
Business & Entrepreneurship Council, the U.S. Council for 
International Business, Southwestern/Great American, Inc., and 
the American Bar Association.
    A detailed paragraph-by-paragraph analysis of this treaty 
may be found in the Letter of Submittal from the Secretary of 
State to the President on this instrument, which is reprinted 
in full in Treaty Document 114-7. What follows is a brief 
summary of some key provisions.

                         III. Major Provisions

    As noted above, the Convention focuses generally on secured 
finance rules and is largely consistent with U.S. law, 
specifically Article 9 of the Uniform Commercial Code, which 
the Convention is largely based on. Therefore, according to 
administration testimony before the Foreign Relations 
Committee, not only would the Convention require little change 
in current practices within the United States with respect to 
receivables financing, the Convention would help promote U.S. 
UCC rules on receivables financing to the benefit of both U.S. 
and foreign exporters as well as businesses using foreign 
receivables for financing or collateral.
    It is the considered opinion of the committee that 
ratification of the Convention is in the interest of the United 
States. The Convention will support U.S. exports and related 
cross-border transactions and job growth by facilitating cross-
border trade. In particular, among countries ratifying the 
Convention, the Convention establishes a framework for 
reconciling conflicts of laws with respect to cross-border 
receivables financing. Among countries that ratify the 
Convention, the Convention will also establish new baseline 
standards, modeled on U.S. modern commercial finance rules, 
regarding proceeds, priorities, and future and bulk 
receivables.

   III.A. ESTABLISHING RULES FOR RECONCILIATION OF CONFLICTS BETWEEN 
          COUNTRIES ON CROSS-BORDER RECEIVABLES TRADE FINANCE

    Establishing clear rules on what law governs competing 
priority claims over a receivable is one of the key benefits of 
the Convention. With respect to an assignment of a receivable 
in international transactions, competing claimants to the 
receivable could include the other assignees of the same 
receivable, bankruptcy trustees in an insolvency proceeding, or 
creditors of the assignor who intend to make claims on the 
receivable assigned to an unrelated assignee. With high degrees 
of uncertainty and without a clear pathway as to how to resolve 
potential competing claims, a potential assignee, concerned 
with the status of the priority of their claim to the 
assignment, may be inclined to avoid an otherwise favorable 
transaction due to the risks and costs associated with the 
assignment.
    Convention Article 22 provides clear rules for determining 
which country's substantive law may apply with respect to the 
priority of an assignee's rights over other claimants to the 
receivable. The Convention applies to cross-border or 
international receivables or assignment of receivables. The 
laws governing receivables may vary greatly from country to 
country. Further, the laws governing questions as to which 
nation's substantive law should apply may also vary greatly. 
The Convention would provide a clear path for determining which 
countries' laws should apply and for determining what that law 
is and how it might apply to the particular receivables 
transaction.

                III.B. ADOPTION OF MODERN PRIORITY RULES

    Convention Article 42 allows countries to declare that they 
intend to be bound by one of three sets of priority rules as 
set out in the Annex of the Convention. The first option 
parallels the system in the United States, and the committee 
recognizes that the United States is already in compliance with 
these provisions in the Annex. In fact, the U.S., in several 
areas, is including understandings and declarations to ensure 
that the Convention works seamlessly with the Uniform 
Commercial Code and that U.S. law can continue to lead the 
world in the development of modern finance rules.
    Because the Convention provides conflict-of-law rules to 
determine which country's law applies to priority conflicts 
rather than providing substantive rules of priority itself, the 
substantive rules for resolving priority are generally 
determined by the domestic law of individual States. The 
committee notes that the State Department and the Uniform Law 
Commission have taken the position that current U.S. law 
reflected in state enactments of the Uniform Commercial Code is 
consistent with the priority system in sections 1 and 2 of the 
Annex.
    Convention Article 8 (consistent with U.S. UCC Article 9) 
provides clear, modern finance rules on the assignment of 
existing and future receivables to secure current and future 
advances, the bulk assignment of receivables, and allows for 
the assignment of partial and undivided interests in 
receivables. For some countries, adoption of the Convention may 
require changes to current law, but the State Department has 
informed the committee that current U.S. law and practice is 
wholly consistent with these provisions of the Convention, a 
position also supported by the Uniform Law Commission.
    Convention Article 24 provides for the adoption of rules on 
proceeds. As discussed below, the United States has advanced 
rules on proceeds and intends to offer an understanding that 
U.S. laws will go beyond the basic standards offered in the 
Convention. The committee believes that establishing a firm 
foundation of law with respect to the rights of assignees, as 
they relate to proceeds, is an important part of developing 
modern commercial finance laws and practices. The committee is 
encouraged to believe that other nations that adopt the 
Convention will establish these important principles in their 
laws.
    Finally, it is the hope of the committee that other nations 
seriously consider adoption of the Convention. The committee 
believes that developing countries in particular could benefit 
from the anticipated better credit availability and rates that 
adoption of the modern commercial finance rules of the 
Convention would generate.

                 IV. Entry into Force and Denunciation

    Convention Article 45 provides that the treaty will enter 
into force on the first day of the month following the 
expiration of six months from the date of the deposit of the 
fifth instrument of ratification, acceptance, approval or 
accession with the depository. Currently, the Republic of 
Liberia has acceded to the treaty. Because it is widely 
recognized that the Convention reflects uniform state laws of 
the United States, the State Department has informed the 
committee that it expects other countries to consider the 
Convention once the United States ratifies the treaty. With 
deposit of its instrument of ratification, the United States 
would be the second State to join the Convention. Under Article 
46, a Contracting State may denounce the Convention at any time 
by written notification addressed to the depositary. Such 
denunciation would take effect on the first day of the month 
following the expiration of one year after the notification is 
received by the depositary. The Convention would continue to 
apply to certain assignments concluded before the date of 
denunciation.

                      V. Implementing Legislation

    The executive branch has indicated its view that the treaty 
is self-executing. Accordingly, federal or state implementing 
legislation is not necessary. The Resolution of Advice and 
Consent to Ratification includes a declaration stating that the 
Convention is self-executing.

                         VI.  Committee Action

    The committee held a hearing to consider the treaty on 
December 13, 2017. Senator Risch chaired the hearing. The 
committee considered the treaty on March 20, 2018, and ordered 
the treaty favorably reported by voice vote, with a quorum 
present and without objection, with the recommendation that the 
Senate give advice and consent to its ratification, as set 
forth in this report and the accompanying resolution of advice 
and consent to ratification.

              VII. Committee Recommendations and Comments

    The committee believes the Convention would provide 
significant benefits for U.S. companies, particularly small and 
medium sized enterprises that rely on receivables financing to 
generate working capital and, therefore, recommends the Senate 
give its advice and consent to ratification. The Convention 
closely follows UCC Article 9 and is, therefore, consistent 
with U.S. laws and common practices. In fact, the committee 
believes that, because the Convention is based so closely on 
the United States Uniform Commercial Code, widespread adoption 
will extend U.S. commercial financing practices globally.
    The committee believes that the Convention will reduce 
legal risks and costs associated with cross-border receivables 
financing, as other countries become party to the Convention. 
With such risk and cost reduction, U.S. lenders will be more 
willing to provide financing to exporters and businesses using 
foreign receivables for financing or collateral, thereby 
facilitating growth in exports and related cross-border 
transactions, improving U.S. global competitiveness, and 
creating U.S. jobs.
    The committee also notes the testimony of the State 
Department that ratification by the United States will have a 
beneficial effect with respect to ongoing efforts to modernize 
commercial finance rules in other countries:


        U.S. ratification could have a particularly important 
        leadership impact [in encouraging other countries to 
        ratify the Convention.] There are currently a number of 
        regional initiatives underway focused on reforming the 
        law of secured transactions, including in Latin 
        America, Africa, and the Asia-Pacific region. Expanded 
        ratification of the Convention in the near term has the 
        potential to influence these initiatives and to expand 
        the acceptance and use of the Convention's framework 
        for receivables financing in these regions. In 
        addition, the European Union (EU) is currently involved 
        in an effort to develop an internal legal framework 
        concerning the law applicable to third party effects of 
        the assignment of receivables. While there is 
        significant support in the EU for the approach taken in 
        the Convention (and thus under U.S. law), there is also 
        some support for alternative choice of law rules in 
        some cases that would be inconsistent with the 
        Convention and would thus introduce uncertainty into 
        receivables financing governed by the alternative 
        rules. U.S. ratification could helpfully influence the 
        EU process to ensure that the framework adopted is 
        consistent with the Convention.


    The committee has included five understandings and six 
declarations in the resolution of advice and consent.

                 VII.A. UNDERSTANDINGS INCLUDED IN THE 
                    RESOLUTION OF ADVICE AND CONSENT

Section 2, Understanding (1)

        It is the understanding of the United States that 
        paragraph (2)(e) of Article 4 excludes from the scope 
        of the Convention the assignment of (i) receivables 
        that are securities, regardless of whether such 
        securities are held with an intermediary, and (ii) 
        receivables that are not securities but are financial 
        assets or instruments, if such financial assets or 
        instruments are held with an intermediary.


    The committee believes this technical understanding is 
necessary to clarify the scope of paragraph (2)(e) of Article 
4. Article 4 deals with the limitations and exclusions from the 
scope of the receivables covered by the Convention.
    This understanding is intended to clarify that with respect 
to the Article 4(2)(e) exclusion, the phrase ``held with an 
intermediary'' modifies only the phrase ``other financial 
assets'' and does not modify the term ``securities.'' As a 
result, the assignment of securities is excluded from the scope 
of the Convention regardless of whether the assigned 
receivables are held with an intermediary. The assignment of 
other financial assets is excluded from the Convention when the 
assigned financial assets are held with an intermediary. The 
administration has informed the committee that a possible 
alternative reading--that assignments of securities are not 
excluded from the Convention if the securities are not held 
with an intermediary--was not the intention of the Convention's 
negotiators. Nor was the provision intended to refer to 
``repurchase securities'' as if this were a limited class of 
financial assets being addressed specifically and separately 
from other securities.

Section 2, Understanding (2)

        It is the understanding of the United States that the 
        phrase ``that place where the central administration of 
        the assignor or the assignee is exercised'' as used in 
        Articles 5(h) and 36 of the Convention has a meaning 
        equivalent to the phrase ``that place where the chief 
        executive office of the assignor or assignee is 
        located.''


    Article 5 of the Convention is the main provision that 
provides definitions of terms used in the Convention, including 
the definition of determining location for the assignor and 
assignee. Because of the important role of location of parties 
in determining both the scope of the Convention and the 
applicable laws, the State Department and the Uniform Law 
Commission recommended further clarification to ensure the 
definition is clear under U.S. law.
    Under the Uniform Commercial Code, as adopted by the 
states, location is determined by reference to the place where 
the ``chief executive office'' of the assignor is located. 
Under the Convention, the phrase ``central administration 
office'' is used for determining location. Understanding (2) 
further makes clear that the United States will treat the two 
phrases as equivalent.

Section 2, Understanding (3)

        It is the understanding of the United States that the 
        reference in the definition of ``financial contract'' 
        in Article 5(k) to ``any other transaction similar to 
        any transaction referred to above entered into in 
        financial markets'' is intended to include transactions 
        that are or become the subject of recurrent dealings in 
        financial markets and under which payment rights are 
        determined by reference to (a) underlying asset classes 
        or (b) quantitative measures of economic or financial 
        risk or value associated with an occurrence or 
        contingency. Examples are transactions under which 
        payment rights are determined by reference to weather 
        statistics, freight rates, emissions allowances, or 
        economic statistics.


    Article 5(k) sets out the definition of a ``financial 
contract.'' As drafted, Article 5(k) is intended to cover both 
current and future developments in market usage.
    Under the Convention, the Article 5(k) definition of 
financial contracts covers a wide range of financial 
instruments, including ``any other transaction similar to any 
transaction referred to above.'' With respect to ``other 
transactions similar to any transaction referred to above,'' 
the committee understands that the Convention's drafters 
recognized that the industry is continually developing new 
instruments in response to industry needs and circumstances.
    This understanding is intended to provide greater clarity 
regarding the application of this provision to evolving usages. 
This understanding notes that ``financial contracts'' could 
include a variety of transactions that involve recurrent 
dealings whereby payment rights may be influenced or determined 
by reference to particular asset class valuations or contingent 
events that may affect the underlying contract. For further 
guidance, a non-exclusive list of examples is given in the 
understanding.

Section 2, Understanding (4)

        It is the understanding of the United States that 
        because the Convention applies only to ``receivables,'' 
        which are defined in Article 2(a) as contractual rights 
        to payment of a monetary sum, the Convention does not 
        apply to other rights of a party to a license of 
        intellectual property or an assignment or other 
        transfer of an interest in intellectual property or 
        other types of interests that are not a contractual 
        right to payment of a monetary sum.


    This understanding clarifies the application of the 
Convention to assignments of receivables involving intellectual 
property. It clarifies that the Convention's coverage of an 
assigned right to payment extends only to the right to the 
payment and does not extend to rights in the underlying 
intellectual property that is generating the revenue that is 
the subject of the right to payment.

Section 2, Understanding (5)

        The United States understands that, with respect to 
        Article 24 of the Convention, the Article requires a 
        Contracting State to provide a certain minimum level of 
        rights to an assignee with respect to proceeds but that 
        it does not prohibit Contracting States from providing 
        additional rights in such proceeds to such an assignee.


    Article 24 of the Convention ``Special Rules on Proceeds'' 
requires Convention countries provide a minimum level of rights 
to an assignee with respect to proceeds. U.S. law, including 
that adopted by the states, is highly developed.
    In the United States, assignees have rights under 
``proceeds'' provisions of U.S. law to collect money due to the 
assignee and that should have been paid to the assignee, but 
which have been diverted to other uses, such as a purchase by 
the assignor or debtor of other assets. Proceeds provisions 
under U.S. law allow for the unwinding of such transactions 
intended to defeat the claims of the assignee. Unlike the 
United States, many countries do not have modern commercial 
finance laws governing the rights of an assignee to 
``proceeds.'' U.S. proceeds laws provide an assignee entitled 
to payment with the ability to attach liens or other claims to 
property subsequently purchased with proceeds funds that 
otherwise should have been paid to the assignee.
    This understanding clarifies that with respect to Article 
24, the United States and the states retain the right to adopt 
laws that may go beyond the minimum level of rights an assignee 
can claim with respect to proceeds as required under the 
Convention. The understanding makes clear the United States may 
act to provide additional rights in such proceeds to an 
assignee.

                  VII.B. DECLARATIONS INCLUDED IN THE 
                    RESOLUTION OF ADVICE AND CONSENT

Section 3, Declaration (1)

        Pursuant to Article 23(3), the United States declares 
        that, in an insolvency proceeding of the assignor, the 
        insolvency laws of the United States or its territorial 
        units may under some circumstances (a) result in 
        priority over the rights of an assignee being given to 
        a lender extending credit to the insolvency estate, or 
        to an insolvency administrator that expends funds of 
        the insolvency estate for the preservation of the 
        assigned receivables (see, for example, Title 11 of the 
        United States Code, Sections 364(d) and 506(c)); or (b) 
        subject the assignment of receivables to avoidance 
        rules, such as those dealing with preferences, 
        undervalued transactions and transactions intended to 
        defeat, delay or hinder creditors of the assignor.


    Article 23(3) provides an exception to the general rule in 
Article 23(2) limiting the ability of the forum state to refuse 
application of the law of the State in which the assignor is 
located. Article 23(3) allows a State by declaration to 
identify preferential rights arising by operation of the law in 
the forum country in an insolvency preceding that would take 
precedence over the rights of an assignee. This declaration 
provides, consistent with Article 23(3), that in insolvency 
proceedings of the assignor, certain parts of U.S. bankruptcy 
law providing preferential rights will continue to apply within 
the United States, regardless of the priority rights of the 
assignee. The declaration is intended to provide notice of the 
application of such preferential rights under U.S. bankruptcy 
laws.
    U.S. bankruptcy laws favor efforts to reorganize and 
preserve the insolvent party if such efforts are reasonably 
expected to be successful. For example, Chapters 11 and 13 of 
the United States Bankruptcy Code allow for the readjustment of 
debts and for corporations or individuals to continue to hold 
property and pay debts over time to bring the bankrupt party 
out of insolvency.
    U.S. bankruptcy laws are considered among the most 
advanced. For example, the bankruptcy code contains 
``avoidance'' rules whereby the bankruptcy judge can reach back 
up to 90 days and invalidate a transaction intended to defraud 
or otherwise avoid payments to legitimate creditors. Further, 
as noted above, U.S. bankruptcy laws favor efforts to 
rehabilitate insolvent businesses if possible (as opposed to 
proceeding directly to liquidation.) In such cases, the court 
may appoint a ``debtor in possession'' to manage the company's 
affairs, including invalidating certain contracts to keep the 
business afloat. Under U.S. law, because the debtor in 
possession is taking certain risks to keep the company going, 
they may be afforded certain rights to priority of payment as 
the manager of the insolvent company.
    With this declaration, for bankruptcy proceedings commenced 
in the U.S. courts, these preferential rights arising under 
U.S. bankruptcy law would take precedence over the rights of an 
assignee.

Section 3, Declaration (2)

        Pursuant to Article 36 of the Convention, the United 
        States declares that, with respect to an assignment of 
        receivables governed by enactments of Article 9 of the 
        Uniform Commercial Code, as adopted in one of its 
        territorial units, if an assignor's location pursuant 
        to Article 5(h) of the Convention is the United States 
        and, under the location rules contained in Section 9-
        307 of the Uniform Commercial Code, as adopted in that 
        territorial unit, the assignor is located in a 
        territorial unit of the United States, that territorial 
        unit is the location of the assignor for purposes of 
        this Convention.


    Article 36 provides that a State with two or more 
territorial units may specify by declaration at any time other 
rules for determining the location of a person within that 
State. This ``federalism'' declaration supplements the 
Convention's Article 5(h) and Article 36 rules on location. The 
declaration is intended to ensure that the location rules of 
Uniform Commercial Code 9-307, as adopted by the states, are 
upheld. The declaration simply clarifies that if the assignor's 
location under Article 5(h) is determined to be the United 
States, then further determination of the assignor's location 
within a territorial unit of the United States will be 
determined by reference to the laws of the United States. 
Specifically, the location rules of UCC 9-307, as adopted by 
the states, shall apply.

Section 3, Declaration (3)

        Pursuant to Article 37 of the Convention, the United 
        States declares that any reference in the Convention to 
        the law of the United States means the law in force in 
        the territorial unit thereof determined in accordance 
        with Article 36 and the Article 5(h) definition of 
        location. However, to the extent under the conflict-of-
        laws rules in force in that territorial unit a 
        particular matter would be governed by the law in force 
        in a different territorial unit of the United States, 
        the reference to ``law of the United States'' with 
        respect to that matter is to the law in force in the 
        different territorial unit. The conflict-of-laws rules 
        referred to in the preceding sentence refer primarily 
        to the conflict-of-laws rules in Section 9-301 of the 
        Uniform Commercial Code as enacted in each state of the 
        United States.


    Article 37 of the Convention addresses the issue of which 
law is to be applied within the ``territorial units'' of a 
State. Article 37 further provides that a State may specify by 
declaration other rules for determining the applicable law, 
which may be the law of another territorial unit of the State. 
For the purpose of determining conflict of laws rules within 
the United States and for determining which particular state's 
law may apply within the United States, this declaration 
preserves the existing location rules, state by state, of the 
UCC as adopted by the states.
    UCC Article 9 contains detailed rules that determine which 
U.S. state's laws may govern a particular transaction 
determined under the Convention to be subject to U.S. law. This 
declaration affirms that, once location is determined to be the 
United States under the Article 5(h) definition, to determine 
applicable law, one must then look to state laws, as adopted, 
to make the final determination as to which law may apply. The 
committee notes that among the U.S. states and territories 
adopting the provisions of UCC Article 9, there is a high 
degree of uniformity, creating an essentially uniform law 
within the United States.

Section 3, Declaration (4)

        Pursuant to Article 39 of the Convention, the United 
        States declares that it will not be bound by Chapter V 
        of the Convention.


    Chapter V (Articles 26-32) of the Convention is optional. 
Under Article 39 a State may declare that it will not be bound 
by the Rules in Chapter V. The committee understands that 
Chapter V is intended to fill gaps with respect to conflict of 
laws rules.
    The United States has very advanced rules in this area and 
while the rules among the United States produce essentially the 
same results, the executive branch and Uniform Law Commission 
recommended that U.S. adoption of Chapter V, given the wording 
differences with U.S. law, would overly complicate 
interpretation of the law with little corresponding benefit. 
The executive branch hopes, however, to promote the adoption of 
Chapter V among countries party to the Convention that have 
underdeveloped laws on receivables financing.

Section 3, Declaration (5)

        Pursuant to Article 40, the United States declares that 
        the Convention does not affect contractual anti-
        assignment provisions where the debtor is a 
        governmental entity or an entity constituted for a 
        public purpose in the United States.


    Article 40 allows a State to exempt certain government 
entities, subdivisions thereof, and entities constituted for a 
public purpose from the scope of Convention Articles 9 and 10 
that covers limitations on assignments and transfer of security 
rights. It is the understanding of the committee that the State 
Department recommends a carve-out for these government entities 
and entities constituted for a public purpose.
    The committee notes that the President, with the advice and 
consent of the Senate, could modify the scope of this 
declaration in the future. (See VII.C. Future Declaration under 
the Convention, below.)

Section 4, Self-Execution Declaration

        The Senate's advice and consent under section 1 is 
        subject to the following declaration: This Convention 
        is self-executing.


    The Senate's sixth declaration declares that the advice and 
consent under Section 1 is subject to the declaration that the 
Convention is self-executing.\1\ This declaration is consistent 
with statements made in the Letter of Submittal from the 
Secretary of State to the President on this instrument. The 
Senate continues to include statements regarding the self-
executing nature of treaties in resolutions of advice and 
consent, in light of the Supreme Court decision, Medellin v. 
Texas, 128 S. Ct. 1346 (2008). The committee continues to 
believe that a clear statement in the resolution is warranted. 
A further discussion of the committee's views on this matter 
can be found in Section VIII of Executive Report 110-12.
---------------------------------------------------------------------------
    \1\Treaty-Doc. 114-7 at p. VI (stating that ``The Convention would 
be self-executing and there would not be a need for the enactment of 
implementing legislation.'')
---------------------------------------------------------------------------

            VII.C. FUTURE DECLARATIONS UNDER THE CONVENTION

    The committee notes that the Convention provides some 
flexibility to adjust to changed circumstances and allows 
certain additional declarations to be made in the future should 
the need arise. In particular, the following Articles allow for 
a party to the treaty to make a declaration ``at any time:''


 1. Article 35 allows a State to exclude from application under 
        the Convention, certain territorial units within a 
        State in which different systems of law are applicable. 
        The Convention allows for the State to declare the 
        extent to which the Convention shall apply to those 
        territorial units.

 2. Article 40 of the Convention allows a State to exempt 
        government entities, central or local, any subdivision 
        thereof, or entities constituted for a public purpose.

 3. Article 41 of the Convention allows a State to declare at 
        any time that it will not apply the Convention to 
        specific types of assignment or to the assignment of 
        specific categories of receivables clearly described in 
        a declaration.

 4. Article 42 of the Convention allows a State to declare at 
        any time that it will be bound by the priority rules 
        set forth in the Annex to the Convention.


    The committee reminds the President that, should it be 
necessary to consider, in the United States interest, making a 
declaration with respect to Articles 35, 40, 41 or 42, the 
committee must be notified in advance with a reasonable period 
for consideration and with a description giving the reasons for 
the proposed change.
    While, historically, the United States has rarely sought to 
modify a condition to consent to ratification included by the 
Senate, precedent nevertheless exists for cooperation between 
the two branches to effectuate a modification to a condition to 
ratification. The committee recalls the example whereby in 
1984, then President Reagan sought the Senate's advice and 
consent for the withdrawal of a reservation that had previously 
been included with the U.S. ratification of the Patent 
Cooperation Treaty. See Letter of Transmittal from President 
Ronald Reagan, July 27, 1984, in Treaty Doc. 98-20. The Senate 
gave its advice and consent to the withdrawal two years later.
    To the extent any future modification of any understanding 
or declaration allowed under the Convention goes beyond a tacit 
change and constitutes a substantive change to the terms of the 
Convention, the committee expects any such substantive change 
to follow a similar Constitutional process of the President 
seeking the advice and consent of the Senate to the 
modification.
    At times, circumstances may require that minor, technical 
adjustments be made to treaties to which the Senate has given 
its advice and consent. There may be times when such an 
adjustment may not rise to the level of a substantive amendment 
requiring the advice and consent of the full Senate. The 
committee has previously indicated its willingness to consider 
tacit amendments proposed by the executive branch on a case-by-
case basis and has provided an incomplete list of illustrative 
factors to be considered when determining if a change is tacit 
in nature or a substantive change:


 1. The significance and character of the amendment;

 2. Whether it is technical or administrative;

 3. Whether it is consistent with the object and purpose of the 
        treaty and simply implements objectives already 
        identified in the treaty;

 4. Whether the proposed amendment can be given effect without 
        Congressional action;

 5. Whether the committee has indicated (in its report on the 
        treaty or otherwise) that such amendments are to be 
        submitted to the Senate for advice and consent.

                VIII. Text of the Resolution of Advice 
                      and Consent to Ratification


  TEXT OF THE RESOLUTION OF ADVICE AND CONSENT TO RATIFICATION OF THE 
     UNITED NATIONS CONVENTION ON THE ASSIGNMENT OF RECEIVABLES IN 
INTERNATIONAL TRADE, DONE AT NEW YORK ON DECEMBER 12, 2001, AND SIGNED 
               BY THE UNITED STATES ON DECEMBER 30, 2003

    Resolved, (two-thirds of the Senators present concurring 
therein),

SECTION 1. SENATE ADVICE AND CONSENT SUBJECT TO UNDERSTANDINGS AND 
                    DECLARATIONS.

    The Senate advises and consents to the ratification of the 
United Nations Convention on the Assignment of Receivables in 
International Trade, done at New York on December 12, 2001, and 
signed by the United States on December 30, 2003 (the 
``Convention'') (Treaty Doc. 114-7), subject to the 
understandings of section 2 and the declarations of sections 3 
and 4.

SEC. 2. UNDERSTANDINGS.

    The Senate's advice and consent under section 1 is subject 
to the following understandings, which shall be included in the 
instrument of ratification:
          (1) It is the understanding of the United States that 
        paragraph (2)(e) of Article 4 excludes from the scope 
        of the Convention the assignment of--
                  (A) receivables that are securities, 
                regardless of whether such securities are held 
                with an intermediary; and
                  (B) receivables that are not securities, but 
                are financial assets or instruments, if such 
                financial assets or instruments are held with 
                an intermediary.
          (2) It is the understanding of the United States that 
        the phrase ``that place where the central 
        administration of the assignor or the assignee is 
        exercised,'' as used in Articles 5(h) and 36 of the 
        Convention, has a meaning equivalent to the phrase, 
        ``that place where the chief executive office of the 
        assignor or assignee is located.''
          (3) It is the understanding of the United States that 
        the reference, in the definition of ``financial 
        contract'' in Article 5(k), to ``any other transaction 
        similar to any transaction referred to above entered 
        into in financial markets'' is intended to include 
        transactions that are or become the subject of 
        recurrent dealings in financial markets and under which 
        payment rights are determined by reference to--
                  (A) underlying asset classes; or
                  (B) quantitative measures of economic or 
                financial risk or value associated with an 
                occurrence or contingency. Examples are 
                transactions under which payment rights are 
                determined by reference to weather statistics, 
                freight rates, emissions allowances, or 
                economic statistics.
          (4) It is the understanding of the United States that 
        because the Convention applies only to ``receivables,'' 
        which are defined in Article 2(a) as contractual rights 
        to payment of a monetary sum, the Convention does not 
        apply to other rights of a party to a license of 
        intellectual property or an assignment or other 
        transfer of an interest in intellectual property or 
        other types of interests that are not a contractual 
        right to payment of a monetary sum.
          (5) The United States understands that, with respect 
        to Article 24 of the Convention, the Article requires a 
        Contracting State to provide a certain minimum level of 
        rights to an assignee with respect to proceeds, but 
        that it does not prohibit Contracting States from 
        providing additional rights in such proceeds to such an 
        assignee.

SEC. 3. DECLARATIONS TO BE INCLUDED IN THE INSTRUMENT OF RATIFICATION.

    The Senate's advice and consent under section 1 is subject 
to the following declarations, which shall be included in the 
instrument of ratification:
          (1) Pursuant to Article 23(3), the United States 
        declares that, in an insolvency proceeding of the 
        assignor, the insolvency laws of the United States or 
        its territorial units may under some circumstances--
                  (A) result in priority over the rights of an 
                assignee being given to a lender extending 
                credit to the insolvency estate, or to an 
                insolvency administrator that expends funds of 
                the insolvency estate for the preservation of 
                the assigned receivables (see, for example, 
                title 11 of the United States Code, sections 
                364(d) and 506(c)); or
                  (B) subject the assignment of receivables to 
                avoidance rules, such as those dealing with 
                preferences, undervalued transactions and 
                transactions intended to defeat, delay, or 
                hinder creditors of the assignor.
          (2) Pursuant to Article 36 of the Convention, the 
        United States declares that, with respect to an 
        assignment of receivables governed by enactments of 
        Article 9 of the Uniform Commercial Code, as adopted in 
        one of its territorial units, if an assignor's location 
        pursuant to Article 5(h) of the Convention is the 
        United States and, under the location rules contained 
        in section 9-307 of the Uniform Commercial Code, as 
        adopted in that territorial unit, the assignor is 
        located in a territorial unit of the United States, 
        that territorial unit is the location of the assignor 
        for purposes of this Convention.
          (3) Pursuant to Article 37 of the Convention, the 
        United States declares that any reference in the 
        Convention to the law of the United States means the 
        law in force in the territorial unit thereof determined 
        in accordance with Article 36 and the Article 5(h) 
        definition of location. However, to the extent under 
        the conflict-of-laws rules in force in that territorial 
        unit, a particular matter would be governed by the law 
        in force in a different territorial unit of the United 
        States, the reference to ``law of the United States'' 
        with respect to that matter is to the law in force in 
        the different territorial unit. The conflict-of-laws 
        rules referred to in the preceding sentence refer 
        primarily to the conflict-of-laws rules in section 9-
        301 of the Uniform Commercial Code as enacted in each 
        State of the United States.
          (4) Pursuant to Article 39 of the Convention, the 
        United States declares that it will not be bound by 
        chapter V of the Convention.
          (5) Pursuant to Article 40, the United States 
        declares that the Convention does not affect 
        contractual anti-assignment provisions where the debtor 
        is a governmental entity or an entity constituted for a 
        public purpose in the United States.

SEC. 4. SELF-EXECUTION DECLARATION.

    The Senate's advice and consent under section 1 is subject 
to the following declaration: This Convention is self-
executing.

                                  [all]