Articles Payment Q&A T.T.REIMBURSEMENT ALLOWED By Mr Old Man Posted on July 29, 2016 7 min read 9 0 19,312 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr 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
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?