TRADE FINANCE ASSOCIATION OF BANKERS SHAPING THE SKILLS OF PROFESSIONALS FOR AN FDI/EXPORT DRIVEN GROWTH CASE STUDIES ON DOCUMENTARY CREDITS & UCP600

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1 TRADE FINANCE ASSOCIATION OF BANKERS SHAPING THE SKILLS OF PROFESSIONALS FOR AN FDI/EXPORT DRIVEN GROWTH CASE 1 CASE STUDIES ON DOCUMENTARY CREDITS & UCP600 SUGGESTED ANSWERS UCP 600 sub-article 20 (a) (i) requires a Bill of Lading to indicate the name of the carrier and be signed by: - the carrier or a named agent for or on behalf of the carrier, or - the master or a named agent for or on behalf of the master. UCP 600 sub-article 20 (a) (iv) also states: be the sole original bill of lading or, if issued in more than one original, be the full set as indicated on the bill of lading. Requirements in UCP 600 article 20 only apply when a credit requires presentation of at least one original Bill of Lading. A requirement for presentation of a copy of a Bill of Lading would fall under UCP 600 sub-article 14 (f), which states: "If a credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the document as presented if its content appears to fulfill the function of the required document and otherwise complies with sub-article 14 (d)." This is clarified in ISBP Para A (6) (a) which states: When a credit requires the presentation of a copy of a transport document covered by UCP 600 articles 19-25, the relevant article is not applicable, as these articles only apply to original transport documents. A copy of a transport document is to be examined only to the extent expressly stated in the credit, otherwise according to UCP 600 sub-article 14 (f). Unlike an original Bill of Lading, a copy Bill of Lading does not serve the function of a negotiable document which has to be surrendered in exchange for the goods. The function of a copy Bill of Lading is to provide information on the shipment. Therefore unless a credit which calls for a copy of Bill of lading also specifies the manner in which the copy has to be signed, the signature on a copy of a Bill of Lading need not comply with the requirements of UCP article 20 (a) (i). A signature need not even appear at all on a copy bill of lading. A copy of a bill of lading is not considered a transport document for the purposes of examination of documents under UCP. Therefore requirements of UCP articles 26 a. (loading of goods on deck) and 27 (clean transport document) do not apply to a copy of Bill of Lading. 1

2 A copy of Bill of Lading signed by a freight forwarder in their capacity as forwarder without acting on behalf of the carrier is not discrepant CASE 2 Given that both the applicant and the beneficiary are interested in settlement and processing of original documents in a timely manner; documentary credits usually include requirements as to a maximum period of time for presentation of documents. UCP 600 sub-article 14 (c) provides a default regulation for presentations including an original transport document: 21 days after shipment with further restriction in time being the expiry date. Depending on the underlying transaction it may be in the interest of the applicant to dictate an earliest date for presentation of documents. The documentary credit described in the query included such a clause. The clause aimed at allowing presentation at the earliest 21 days after shipment, the restriction as to the expiry date still being applicable. Thus this credit included an earliest and a latest date for presentation. The discrepancy stated by the issuing bank illustrates that they would not have expected presentation of documents within the period from shipment date to the 21 st day after shipment date. The query implies that the documentary credit was made available at sight with the issuing bank. At time of presentation the documents were not in compliance with the requirement as to earliest presentation, thus the issuing bank correctly refused to honour. According to UCP 600 sub-article 16 (c), an issuing bank must give notice in case they refuse to honour. The notice of refusal is not in dispute and we assume it has been sent in accordance with the abovementioned article. Considering the fact that such a presentation becomes compliant by passage of time it would be unreasonable for the issuing bank to return documents in accordance with UCP 600 sub-article 16 (c) (iii) (c). In case documents are nevertheless returned to the presenting bank, a re-presentation of documents would once again fall under the principle of UCP 600 sub-articles 14 (b) and 15 (a) as to the maximum days for examination of documents and honour respectively. In case documents are not returned to the presenting bank but held at its counters, the issuing bank must honour when documents become compliant by passage of time i.e. the 21 st day after shipment date. 2

3 1. Issuing bank was entitled to refuse to honour. 2. Issuing bank has the right to return documents but would have to honour representation between the 21 st day after shipment and the expiry date. In case they choose not to return documents, the issuing bank must honour at the day the documents become compliant. CASE 3 In reply to the reminder sent by Bank B due to non-payment on date of maturity, the issuing bank claimed to have made the payment with value 31 October 2015 via an MT103 to the beneficiary s account held with Bank B, without any advice or notification and reasons for their action in remitting a direct payment to the beneficiary. Bank B is not liable and responsible to follow-up, relate, apply or lay claim on any direct credits into a client s account. While Bank B that had prepaid the proceeds of the presentation to beneficiary based on the deferred payment undertaking incurred by them was still awaiting payment from the issuing bank with an overdue liability, the incorrect direct payment effected by the issuing bank to the beneficiary had been withdrawn from the account by the beneficiary. Bank B advised the entire situation to the issuing bank and claimed an immediate payment. Issuing bank did not respond nor has paid the amount despite several messages and telephonic reminders from the nominated bank. By not effecting payment on the date of maturity to Bank B as per their received instructions, the issuing bank has failed in their responsibility as per UCP 600 subarticle 7 (c). Any payment effected by the issuing bank directly to the beneficiary even with reference to the credit is outside the credit. In terms of the provisions under UCP 600 sub-article 7 (c), the issuing bank has failed in their responsibility to reimburse Bank B. Therefore the issuing bank s obligations under the credit continue and it is liable to reimburse Bank B, along with interest for the delayed period if any. 3

4 Any payment effected by the issuing bank directly to the beneficiary is outside the credit. The issuing bank s obligations under the credit would continue and they are liable to reimburse Bank B, along with interest for the delayed period. CASE 4 FCL stands for Full Container Load and relates to the usage of space in a container and that the container has been loaded by the shipper. CY/CY stands for Container Yard / Container Yard and relates to the receipt of a full container at the location of the shipper s premises and delivery by the carrier to the consignee s premises. UCP 600 sub-article 14 (d) specifically relates to international standard banking practice. Common knowledge of abovementioned terms would not generally be considered as an element of such practice. The credit required explicit reference to FCL container, as such the bill of lading should provide specific reference to FCL rather than other terms such as CY/CY. 1. The document is discrepant. 2. The stated marking does not fulfill the requirement. CASE 5 Using a 3 RD bank in a 3 RD country, like Bank P in this query for the purpose of adding their confirmation to the credit, is a common and established banking practice. In such a case, the 3rd country bank normally makes their confirmation subject to presentation of complying documents at their counters. SWIFT MT 710 is Advice of a Third Bank's or a Non-Bank's Documentary Credit. It falls under the provisions of UCP 600 sub-article 9 (b) which provides that an advice must accurately reflect the terms and conditions of the credit received. Place of expiry is Country U, availability is with Bank U. It should be noted that UCP envisages documentary credits with more than one nominated bank. The documentary credit stated that documents presented to Bank U are to be sent to Bank P. There is no indication that Bank P made honouring of their obligation as a confirming bank subject to presentation of documents at their counters. 4

5 1. Bank P may choose to advise the documentary credit in which case it has to adhere with UCP 600 article 9 and it has the right to claim reimbursement from the issuing bank (upon honouring a complying presentation of either Bank U or the beneficiary) as per UCP 600 article 7 thus being protected in its function as nominated bank.. Upon presentation of complying documents to Bank P, Bank U has the right to claim reimbursement from Bank P under its confirmation. In case Bank P does not honour the claim, Bank U has the right to claim reimbursement under UCP 600 article 7 from the issuing bank. In case Bank U presents documents directly to the issuing bank it may still claim payment from Bank P in case the issuing bank fails to honour: Bank P did not restrict their confirmation to documents being presented at their counter. 2. By instructing Bank U to add their confirmation on their own, Bank P would have violated UCP 600 article 9: such instruction would not accurately reflect the terms and conditions of the documentary credit received by Bank P from the issuing bank. 3. Each of the banks would examine documents presented; banks acting in either capacity (as nominated bank or as confirming bank) can only act upon a complying presentation. Each bank has to decide autonomously whether or not a presentation is compliant. 4. In case the documents are lost in transit, both Bank P and Bank U will be protected by the provisions of UCP 600 article 35, according to which the individual commitments of issuing and confirming bank will prevail. CASE 6 The amendment was dated 19 th December, 2014 and the nominated bank, vide their Swift MT 730 dated 23 rd December, 2014 confirmed that the amendment had been advised to the beneficiary. The nominated bank did not receive beneficiary s acceptance or rejection to the amendment until 21 st January, In the meantime, the beneficiary made a presentation on 07 th January, 2015 without accounting for, nor complying to the amendment terms. The nominated bank accepted the presentation as compliant under the credit and claimed reimbursement as per credit terms. Since neither the beneficiary s acceptance nor rejection of the amendment dated 19 th December, 2014 had been received by the nominated bank at the time of presentation, neither the nominated bank nor the issuing bank know if the amendment has been accepted or rejected. A presentation that is not impacted by an as yet unaccepted amendment does not constitute acceptance of the amendment by the beneficiary. 5

6 The subsequent information from nominated bank regarding the beneficiary s acceptance of the amendment on 21 st January, 2015 would evidence the beneficiary s due compliance to the amended terms of the credit for any future presentation(s) under the credit. 1. When a beneficiary makes a presentation without having communicated either acceptance or rejection of an amendment, and such presentation complies with the original credit terms (not taking into account the amendment issued), the amendment will be deemed to have not yet been accepted or rejected by the beneficiary. 2. Yes if otherwise in order and complying to the original credit terms and any other accepted amendments till that time. 3. Yes as per UCP 600 sub-article 10 (f), no time limit can be set for rejection or acceptance of an amendment by the beneficiary. The beneficiary can provide acceptance of an amendment at any time during the lifetime of the credit. 4. Such practice is not advisable since it may result in avoidable misunderstandings or complications in respect of further presentations. A separate communication would be preferable. However, it is feasible. 5. No as stated in UCP 600 sub-article 10 (e), partial acceptance of an amendment is not permitted. The entire presentation and every single document within such presentation must evidence and ensure either due compliance with the terms of amendment, or rejection of the entire amendment, irrespective of when the documents have been issued. CASE 7 This is a badly issued self-contradicting credit for which, the issuing bank will have to face the consequences. A nominated bank acting on its nomination and an issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. As requested by the credit, a certificate of final shipment was presented stating that there would be no further shipments. Accordingly the drawing for USD 50,000 is to be the only one under the credit. 6

7 The credit permits partial shipments, and there always exists the possibility of only a partial utilisation of the Credit for very many reasons. This may result in a breach of contract between the applicant and the beneficiary due to the full contracted quantity not being shipped but such matters and the resulting action would be outside the purview of the credit and UCP 600. The presentation of documents for USD 50,000 covering shipment of 360 bags of dried grain is not discrepant. The discrepancy of short shipment and short-drawing notified by the issuing bank is incorrect. CASE 8 1. Field 32B of a SWIFT MT700 contains the currency code and amount of the credit, and as per SWIFT network validation rules, it must be a valid ISO 4217 currency code. It appears that the credit was issued with the currency code USD. The currency was stated in the first beneficiary s invoice as $. Both UCP 600 and ISBP 745 specify that an invoice must be in the same currency as the credit. This presupposes that the currency code utilised in the invoice can be recognised and can be directly related to that stated in the credit. The $ sign is used to indicate the dollar unit of a currency, but can be applied to the currency of any country that utilises the dollar as a currency. Unless the issuer of the invoice is in a country that uses the dollar as a unit of currency or one which uses the dollar sign as a generic symbol for its currency the use of the sign $ instead of the ISO code USD does not indicate noncompliance with sub-article 18 a. iii. UCP600. The refusal notice stated that the currency is not specified. This would have been correct in as much as $ is indicating a currency but may not specific enough to identify it as USD. 2. The credit required that the bill of lading be blank endorsed. Such a requirement means that to order will appear in the box for consignee information and that there is no named consignee. A blank endorsement requires the shipper to provide his endorsement. A bill of lading that is straight consigned to the applicant cannot be endorsed. The requirement blank endorsed is a clear indication that the bill of lading must be to order of a party and endorsed in blank by that party. 1 The query does not specify whether the issuer of the invoice is in a country which uses the dollar described above or not. In case of the former the discrepancy is not valid; in case of the latter the discrepancy would be valid. 2. The discrepancy mentioned by the issuing bank is valid. 7

8 CASE 9 The credit was available for negotiation with the nominated bank and expired at their counters. UCP 600 sub-article 6 (d) (ii) states: The place of the bank with which the credit is available is the place for presentation. The place for presentation under a credit available with any bank is that of any bank. A place for presentation other than that of the issuing bank is in addition to the place of the issuing bank. UCP 600 article 6 (e) states: Except as provided in sub-article 29 (a), a presentation by or on behalf of the beneficiary must be made on or before the expiry date. In accordance with UCP 600 sub-article 7 (c) an issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank. The issuing bank did not receive all the required documents and subsequently issued a refusal notice. The nominated bank, after an exchange of correspondence with the issuing bank, forwarded the missing copy document to the issuing bank certifying that it had been presented within the time limits required by the credit The initial cited discrepancy is valid. However, upon receipt by the issuing bank of the missing copy document, and on the basis that it also received a certification from the negotiating bank that the document was presented within the time limits required by the credit, the issuing bank must reimburse the confirming bank. CASE 10 1) The wording of the credit did not require the presentation of the original credit as part of the claim. Unless the credit was issued by mail or in paper format, it is doubtful how the originality of the document could be determined. Accordingly, unless otherwise specifically required within the terms and conditions of a credit, there is no requirement for the original credit to be included in the presentation. 2) UCP 600 sub-article 16 (c) states that when a bank decides to refuse or negotiate, it must give a single notice to that effect to the presenter. UCP 600 clearly does not allow for further discrepancies to be raised that were apparent at the time of the initial presentation, as is referred to within former ICC Opinions R196, R328, R271 and TA764rev. 1) The discrepancy is not valid. 2) Additional discrepancies are not to be considered, as banks only have one opportunity to raise discrepancies for each presentation. 8

9 CASE 11 The credit called for shipment from ANY NORTH EUROPEAN PORT and the transport document required in field 46a was: FULL SET OF CLEAN ON BOARD BILL OF LADING. The bill of lading evidenced shipment from Antwerp. The nominated bank believed the documents to comply as the geographical area of North Europe was not defined in the credit. The issuing bank refused the documents arguing that Antwerp is not within the geographical area or range stated in the credit. UCP 600 sub-article 14 (a) states that a bank must examine a presentation on the basis of the documents alone. It is not a matter for the ICC Banking Commission to define or determine geographical areas or ranges. The requirement in the credit is vague and clearly ambiguous. In accordance with ISBP 745 Preliminary Considerations paragraph (v), the applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. Furthermore, an issuing bank should ensure that any credit or amendment it issues is not ambiguous or conflicting in its terms and conditions. It should not be necessary to refer to external resources in order to determine relevant facts. The applicant and issuing bank must bear the risk of ambiguity for failing to express specifically how Any North European Port is to be defined. In this case, the document is not discrepant. 9

10 CASE 12 UCP 600 sub-article 22 (a) (i) states that a CPBL must appear to be signed by: the master or a named agent for or on behalf of the master, or the owner or a named agent for or on behalf of the owner, or the charterer or a named agent for or on behalf of the charterer. Furthermore, it states: Any signature by the master, owner, charterer or agent must be identified as that of the master, owner, charterer or agent. ISBP 745 paragraph G4 (b) states: When the master (captain), owner or charterer signs a charter party bill of lading, the signature of the master (captain), owner or charterer is to be identified as master ( captain ), owner or charterer. ICC Opinion 470/TA.775rev does not apply as it relates to a CPBL issued and signed by a carrier or its agent. The signature on the CPBL is identified as that of the master (captain). The master is signing for and on behalf of the owner. The document is acceptable. CASE 13 ISBP 745 Paragraph K5 states When an insurance document requires a countersignature by the issuer, the assured or a named entity, it must be countersigned. There is nothing in UCP 600 or ISBP 745 to require that a space for countersignature be present on an insurance document or that any specific wording (e.g. Only valid if countersigned by the insured ) be included in such space when present. In this specific query, the countersignature was only required as a prerequisite for transferability and such wording is not in conflict with UCP 600. Such wording is a matter of practice for the insurance industry or the individual insurance company concerned and is not governed by UCP 600 or ISBP 745. The only exception would be if such wording contravened UCP 600 or ISBP 745, which is not the case in this circumstance. There is no discrepancy 10

11 CASE 14 UCP 600 sub-article 14(d) states: Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit. ISBP Paragraph G24 states: A statement appearing on a charter party bill of lading indicating the payment of freight need not be identical to that stated in the credit but is not to conflict with data in that document, any other stipulated document or the credit. For example, when a credit requires a charter party bill of lading to be marked "freight payable at destination", it may be marked "freight collect". The credit called for a Bill of Lading indicating the value of freight prepaid, the Bill of Lading presented stated Freight Payable as per Charter Party on the front side and showed the amount of Freight Paid on the reverse. The statement Freight Payable as per Charter Party indicates that the freight is to be settled as per the charter party agreement but does not relate to actual payment or non-payment of freight, i.e. freight prepaid or freight collect. There is no conflict in the Bill of Lading regarding payment of freight. The Credit required all documents to state the LC number. LC number and amount of freight paid have been handwritten on the reverse side of the Bill of Lading. UCP 600 sub-article 14(a) states: A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. ISBP Paragraph A9 states: The use of multiple type styles, font sizes or handwriting within the same document does not, by itself, signify a correction. Requirement in the credit for amount of freight paid to be shown in the Bill of Lading will be expected to be completed by the issuer of the Bill of Lading. Insertion of this information by hand on the reverse of the Bill of Lading brings into question the integrity of such information. Therefore it would be expected that the issuer of the Bill of Lading authenticates this information as stated in ISBP Para A7 b (i). In absence of such authentication the Bill of Lading would be considered discrepant. Regarding the question of the handwritten L/C number, it has been the previous opinion of the ICC that the request for insertion of L/C numbers is usually at the instigation of the issuing bank to facilitate the collation of documents when one or more go astray. The insertion of the LC number by handwriting does not detract the purpose of the Bill of Lading and would not be considered a correction or alteration of information requiring authentication by the issuer of the Bill of Lading. 11

12 The Bill of Lading presented was discrepant. CASE 15 The credit required a marine bill of lading marked freight payable as per charter party. In this respect, the credit was badly worded. The presented bill of lading was marked freight payable as per charter party. ISBP 745 paragraph G2 (b) states: A transport document, however named, indicating expressions such as freight payable as per charter party dated (with or without mentioning a date), or freight payable as per charter party, will be an indication that it is subject to a charter party. ISBP 745 paragraph G1 states: When there is a requirement in a credit for the presentation of a charter party bill of lading, or when a credit allows presentation of a charter party bill of lading and a charter party bill of lading is presented, UCP 600 article 22 is to be applied in the examination of that document. Subsequently, the bill of lading presented under this credit is to be considered as a CPBL and checked under UCP 600 Article 22. Where a credit simply allows for or requires the presentation of a CPBL, a CPBL issued and signed by a carrier or its agent is discrepant under UCP 600 sub-article 22 (a) (i). Where a credit simply allows for or requires the presentation of a charter party bill of lading (CPBL), a CPBL signed by a carrier or its agent is discrepant under UCP 600 subarticle 22 (a) (i). The reason for excluding such CPBLs from this sub-article was to avoid document examiners having to determine who, of a possible number of different entities ranging from the owner to charterers and sub-charterers, might be the contractual carrier under the contract of carriage as evidenced by or contained in the CPBL. The reasoning underlying the current terms of the sub-article is consistent with the principle that document examiners must examine a presentation to determine, on the basis of the documents alone, whether or not the documents (in this case a CPBL) appear on their face to constitute a complying presentation, without examining the terms of the contract of carriage for that CPBL. Where, however, a credit expressly allows for or requires the presentation of a CPBL signed by the carrier or its agent, then the CPBL referenced in the query would not be discrepant; the express terms of the credit prevailing over the default position set out in UCP 600 sub-article 22 (a) (i). In this situation, a document examiner need only determine, in this regard, whether the CPBL presented appears on its face to be signed by or on behalf of an entity described as the carrier. 12

13 The discrepancy raised by the issuing bank, Charter Party BL signatory s capacity not as master, owner, charterer or agent for any of the aforesaid, is correct. CASE 16 The credit included a condition that a Charter Party Bill of Lading (CPBL) marked freight prepaid or freight payable as per charter party was acceptable. The presented bill of lading included a code name congenbill. Such code name is not, by itself, an indication of, or reference to, a charter party. However, in the absence of any other indication in the query, it is assumed that the bill of lading was marked freight prepaid as per charter party or freight payable as per charter party. A bill of lading including the codename congenbill usually bears the heading Bill of Lading to be used with Charter Parties. The presentation of this form of document without amendment to the stated terminology would be considered to be an indication that the bill of lading is subject to a charter party. Accordingly, the bill of lading presented under this credit is to be considered as a CPBL and checked under UCP 600 Article 22. The CPBL is signed by an agent for the master. The fact that a carrier name is also included elsewhere on a CPBL is not of relevance provided the signing requirements of UCP 600 sub-article 22 (a) (i) are met. The bill of lading is correctly signed and acceptable. CASE 17 As stated in the query the copy of the courier receipt provided by the remitting bank evidenced that the envelope was addressed to the operating department of presenting bank. This is the only logical interpretation since, if it had been addressed to the drawee, it would not have been delivered to the presenting bank. The question whether or not there was another envelope (addressed to the drawee) inside the one addressed to the presenting bank cannot be resolved under URC 522. The collection instruction clearly stated that it was subject to URC 522. As stated in URC 522 sub-article 5 (d) the remitting bank will either utilise the services of the bank nominated by the principal as the collecting bank or, if no nomination is 13

14 provided, will utilise the services of a bank of its own choice. In the circumstances outlined above, the collecting bank is the presenting bank. Regardless of whether or not the branch of the nominated bank is the head office or an operating department, it must comply with the terms and conditions of URC 522. URC sub-article 1 (b) emphasises that a bank shall have no obligation to handle any collection instruction that it receives. However, if it elects not to handle the collection instruction, it must inform the sending party without delay. This is made clear in URC sub-article 1 (c). It is not at liberty to ignore the collection instruction and handover / dispose of the documents direct to the drawee. 1. The presenting bank is liable under the terms and conditions of the collection instruction if the collection was sent subject to URC 522. In the event of nonpayment, the presenting bank must return the unused original documents as presented. 2. Yes the remitting bank has a right to insist on payment by the presenting / collecting bank since it had released the original documents to the drawee due to which it had also failed to return the unpaid original documents. 3. In view of the fact that it released the original documents to the drawee without payment and was therefore unable to return the documents to the remitting bank as per the provisions of URC 522, the presenting / collecting bank is liable to make payment / settlement to the remitting bank in accordance with the collection instruction. URC does not impose any payment obligation on banks, remedy would be outside URC. CASE 18 Remitting bank sent a documentary collection, subject to URC 522, to the collecting bank with instructions to release documents against payment of EUR ,00. On Friday October 5 the remitting bank sent a SWIFT MT799 (a Free Format message) reducing the amount to EUR ,00. On Tuesday October 9 the collecting bank remitted the amount in the initial collection instruction, not the reduced amount in the MT799. The query states that this payment has been made erroneously and without any instruction by drawee. The remitting bank received payment for the original amount of the collection and credited the payment to the drawer. Two days later, the collecting bank requested return of overpayment made in error. Remitting bank states they must have an authorization from the drawer to refund. URC 522 does not regulate amendments of collection instructions. In the absence of rules in the URC the remitting bank may have assumed that their amendment reached the collecting bank too late for consideration. In this case this could easily have been the case (amendment sent on Friday payment made on the following Tuesday). However, it would have been prudent to seek clarification prior to crediting the principal. 14

15 URC 522 sub-article 4 (a) (i) states: All documents sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules. Both the remitting and collecting bank followed the original collection instructions, not the amended collection instructions. Both banks made errors. While the return of an overpayment is not addressed in the URC522, standard banking practice is for banks to work together to resolve such errors. Ultimately this is a legal question, outside the scope of URC 522. In consequence, if the matter cannot be resolved voluntarily between the parties, it will need to be addressed in accordance with the applicable law. CASE 19 The remitting bank Bank R sent a number of collections to the presenting bank Bank P with similar instructions. All of the collections included a set of 3/3 original plus 3 copy bills of lading. In accordance with URC 522 sub-article 4 (b) (vi) Bank R stated the number of original bills of lading in their collection instructions. Bank R did not receive any information from Bank P as to the fate of the collections. After being informed that the goods were already released by virtue of presenting one original bill of lading Bank R contacted Bank P to get assurance that the originals sent as part of the collection instructions were still held by Bank P. About a month after the last of the collection instructions a verbal confirmation was given in a telephone conversation between the two banks. Ultimately two months after the last collection instruction Bank P informed Bank R that the collection instructions were only accompanied by two original bills of lading which are being held by Bank P. According to URC sub-article 1 (b) a bank is not obligated to act on any collection instruction received by them. URC 522 sub-article 1 (c) stipulates that such bank must inform the remitting bank accordingly without delay. No such information was given by Bank P. URC 522 further require in sub-article 12 (a) that a presenting bank must inform the bank from which a collection instruction has been received in case one of the stipulated documents is missing. This information has to be given without delay. URC 522 also provide for such information to be given by telecommunication which also encompasses telephone. 15

16 There is no universal standard which time limit may be seen as without delay. The case described in the query gives the time elapsed between receipt of the allegedly incomplete documents for collection and the respective message to Bank R as two months. This is clearly outside of without delay Bank P confirmed by telecommunication (telephone) that three original bills of lading are still held at their counters. It should be noted that URC 522 does not impose payment obligations on the banks involved. 1. Bank P is in breach of URC 522 sub-article 12 (a) and is therefore precluded from claiming that any document was missing. 2. The instruction given was to release documents against payment at sight. In case drawee refuses the collection Bank P has to hold the documents for Bank R. When instructed to do so it must return the full set of documents in the same condition as received. In the case described in the query this would include three original bills of lading. When Bank P is unable to return the complete set of documents they must pay the collection. URC does not impose any payment obligation on banks, remedy would be outside URC.. 16

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