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T.T.REIMBURSEMENT ALLOWED

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QUESTION

Dear Mr. Old Man!

Our company is going to open an LC but the exporter requires the LC to allow T.T.R. Though we have done some business with this exporter at FOB terms, we fear that with this clause the negotiating bank may collude with the exporter to claim reimbursement by swift message before shipment is made.

Though the LC will require presentation of beneficiary’s certificate certifying that one set of photocopied documents has been sent to us within 02 days after shipment date, we would like the negotiating bank to send us one set of photocopied documents when they claim reimbursement.

Can we do this? If not, what should we do to avoid the risk of T.T.R clause?

Looking forward to your early reply.

Thank you.

PM

————

ANSWER

Hi,

T.T.R or telegraphic transfer reimbursement allowed is a clause in the LC that allows the nominated bank to claim reimbursement from the issuing bank, the confirming bank or the reimbursing bank by sending to this bank a swift message certifying that the documents presented comply with the LC terms and conditions. It is common that where the LC is confirmed, the confirming bank would insist on T.T reimbursement clause.

Importers do not want to open LCs that allow T.T reimbursement because of the following reasons:

(i) payment/reimbursement under this LC would be made some days earlier than payment/reimbursement under LC that does not allow T.T. reimbursement. From economic viewpoint, the importer may bear additional costs resulting from earlier payment.

(ii) where the payment has been made but the documents are found to contain discrepancies  and eventually rejected, the nominated bank may not be willing to return the reimbursement it received from the issuing bank, especially when the discrepancies are not clear.

Notwithstanding the above analysis, I don’t think T.T. reimbursement is too risky for the importer.

Firstly, there is no bank that risks their reputation and money to collude with the beneficiary to claim reimbursement before any shipment is made. Please note that if the negotiating bank must return the payment to the issuing bank if the documents later forwarded to the issuing bank do not comply with the LC terms and conditions, let alone no required documents are presented or no shipment is made.

Secondly, as your company imports on FOB basis, it is responsible to contract at its own expense for the carriage of goods. So, you may contact the carrier, the master (captain) or the owner or its agent to know if the goods have been shipped on board or the transport document has been issued.

Thirdly, it is unreasonable to require the negotiating bank to present a set of photocopied documents to the issuing bank when claiming reimbursement by swift message. It makes no difference from ordinary LCs where the issuing bank undertakes to reimburse upon receipt of complied documents from the negotiating bank.

Fourthly, the issuing bank will help your company to construe a T.T.R clause in a manner that is safe for the bank and your company. For example, the LC may stipulate that reimbursement will be made within 3 banking days after receipt of swift message from the negotiating bank certifying that the documents comply with the LC terms and conditions; or in case an reimbursing bank is involved,  the LC may state the issuing bank will authorize the negotiating bank to claim reimbursement from the reimbursing bank within 3 banking days after receipt of  swift message from the negotiating bank certifying that the documents comply with the LC terms and conditions.

Last but not least, if your company does not feel comfortable with T.T.R, it may negotiate with the exporter/the beneficiary to remove such a clause.

Kind regards,

Mr. Old Man

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9 Comments

  1. Subhash

    July 31, 2016 at 12:02 pm

    Mr. Old Man,

    Assuming that we go for your fourth option whereby the Issuing bank commits to reimburse within 3 working days or asks to claim reimbursement within 3 working days but then the Bank do not pay. The Bank takes few weeks to pay.

    Is there any action we can take other than legal course of action to sue the Bank.

    Regards, Subhash

    Reply

    • mroldman

      July 31, 2016 at 3:47 pm

      Measures can be taken:
      1. Send continuous messages to that bank requesting for delay payment penalty.
      2. If it does not pay, send letters to CEO of that bank (don’t forget to cc the LC Department of the bank) asking him/her to solve the issue.
      3. If it still does not pay, threaten to bring the case to ICC and L/C community
      4. Say goodbye that bank or ask for confirmed LC
      etc

      Reply

  2. do do

    August 2, 2016 at 7:17 pm

    Dear Mr Old Man,
    Pls kindly help us for two cases:
    1. Invoice issued by beneficiary A and shows the invoice no. HANB dated 11/06/2016
    C/O issued Commerce Chamber, shows the shipper/consignor B and invoice no. HANP dated 11/06/2016.

    2. Invoice issued by beneficiary A and shows the invoice no. HANB dated 11/06/2016
    C/O which issued Commerce Chamber does not show any invoice no and date. ( the column invoice no and date is none of data)

    Refer to ISBP 745 L8, the case 1 will be acceptable. However, the C/O in this case is clearly wrongly indicated and our customer also
    say that the C/O with incorrect invoice no. can not be used. For many previous cases, we raised discrepancies and no any claims from nego bank. Therefore, please kindly help us for this case.

    And the second case, is there any requirements for C/O showing invoice no.?

    Thank you so much for your help.

    Thanks & Best regards

    Reply

    • mroldman

      August 3, 2016 at 9:57 am

      Hi,

      1. I agree that the invoice in Case 1 is acceptable. The invoice may indicate the consignor/shipper other than the beneficiary. The fact that the certificate of origin indicates invoice no. HANP dated 11/06/2016 instead of invoice no. HANB dated 11/06/2016 should be treated as a typing error.

      2. ISBP para. L8 just states a certificate of origin may indicate a different invoice number, invoice date and shipment routing to that indicated on one or more other stipulated documents provided the exporter or consignor shown on the certificate of origin is not the beneficiary. It does not say clearly that a certificate of origin must indicate invoice number and date.

      What’s more? ISBP para. L4 also just sates a certificate of origin is to appear to relate to the invoiced goods, for example, by: (a) a goods description that corresponds to that in the credit or a description shown in general terms not in conflict with the goods description in the credit; or (b) referring to a goods description appearing in another stipulated document or in a document that is attached to, and forming an integral part of, the certificate of origin.

      Based on the above, I may say that provided the certificate of origin appears to relate to the invoiced goods in a manner described in ISBP para. L4, there is no requirement that invoice number must be indicated on the certificate of origin. So, you cannot raise the discrepancy “C/O not indicating invoice number”.

      I wonder if some countries’ customs authorities would accept certificates of origin without indicating invoice number and date in the pre-printed box. Actually, I also come across certificates of origin without a box or space for invoice number and date.

      Kind regards,
      Mr. Old Man

      Reply

      • do do

        August 4, 2016 at 11:48 pm

        Thank you so much for your reply. It is very useful for whom are practising L/C, thank you so much.

        Back to the case of C/O, i met another case:
        invoice issued by ben A no. COSCO119 dated 160802
        B/L shows shipper as Ben A
        C/O shows column 1: exporter: “XYZ company, 123 street, China on behalf of Ben A”
        and indicate invoice no. 012345667 dated 160731

        My opinion is that we can raise discrepancies due to: 1. Conflict exporter or 2. Incorrect invoice. Do you agree with that?

        Another totally different case is that:
        I see many B/Ls showing freight prepaid, but they also have another box for write down freight collected at loading and destination port, for ex:
        Loading port: usa
        Destination: vn
        Freight prepaid
        Freight collect at US and VN
        Is is acceptable?

        L/C stipulated B/L showing the agent at destination. While the destination is ho chi minh port, vietnam, B/L shows the agent’s adress in ha noi, vietnam.
        I did’nt raise discrepany due to being the same country. However, if b/L shows the agent in Malaysia, is its accepted? Because some shipping companies have one agent in one area, not in each countries.

        I am so sorry to ask you many questions, but being a short experienced staff, it is very confused as applying the rules in practices. One again, thank you so much!

        Reply

        • mroldman

          August 5, 2016 at 2:33 pm

          Don’t ask a lot of questions at one time. I do not have time to read and answer all. One time one question is ok. Thank you!

          Reply

      • do do

        August 5, 2016 at 2:43 pm

        Dear Mr Old Man,
        Thank you so much for your help! For next time, each question is sent as your instruction. One again, your useful reply is greatly appreciated. Thank you and have a nice weekend!

        Reply

  3. Shawcelaw

    January 30, 2017 at 6:32 pm

    Hi mr.old man
    the export bank ask us (IB) to endorse the draft for them as they omitted to do so, is that a common practice?
    Thank you!

    Reply

    • mroldman

      February 2, 2017 at 4:39 pm

      It’s not a common practice but you can do that on behalf of the export bank or just accept the draft without endorsement!

      Reply

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