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TYPES OF COLLECTIONS

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QUESTION

Dear Mr. Old Man,

I am confusing about some matters concerning to URC522. Would you pls explain me about the matter as follows:

1. As Article 14(b) URC522 stated: ‘’Banks will not be aliable or responsible for any delays resulting from the need to obtain clarification of any instructions received’’
Because the collecting bank/presenting bank is large knowledge about international terms, which causes to the delay in payment. Which party will be aliable or responsible for any delays resulting from the need to obtain clarification of any instructions received?

Examle: Collection letter stated: ‘’Deliver docs against acceptance of the bill of exchange payable at 60 days from shipment date, hold for collection at maturity and advise us of the due date’’.
The bill of exchange was accepted and the goods released. However, the collecting has not clearly understood the collection instructions. Hence, there is a delay in making payment.

R499 ICC opionions explain the words ‘’hold for collection at maturity’’ that the bill of exchange be retained within the portfolio of thecollecting bank and for it to seek payment on the due date’’.
Must the collecting bank bear the responsibility for the delay in making payment?

2. Why is art7 URC522 only mention bill of lading while art 2(a)(iii) indicate ‘’deliver docs on other terms and conditons’’?

3. Case 1: collection docs not contain bill of exhange
Collection schedule (not mention any tenor) states as follows:
+ maturity date: 30 OCT 2012
+ delivery documents against the drawee’s letter of undertaking/promissory note
(not stating that docs are to be released to the drawee against acceptance/ payment as art 7)
This collection instruction means that:
a. Delivery docs against the drawee’s letter of undertaking, and the payment is effected at maturity date 30 OCT 2012?
As the request’s drawee, can the collecting effect payment before 30 OCT 2012 without advice their action to the remitting bank?

b. Delivery docs against payment and the drawee’s letter of undertaking?

4. Case 2: collection docs contain bill of exhange stated maturity date: 30 OCT2012
Collection schedule (not mention any tenor) states as follows:
+ maturity date: 30 OCT 2012
+ delivery documents against acceptance

This collection instruction means that: Delivery docs against acceptance, and the payment is effected at maturity date 30 OCT 2012 (equivalent to D/A)?

As the request’s drawee, can the collecting effect payment before 30 OCT 2012 without advice their action to the remitting bank?

Must bill of exchange be accepted by drawee?

5. Case 3: collection docs contain bill of exhange stated maturity date: 30 OCT2012
Collection schedule (not mention any tenor) states as follows:
+ maturity date: 30 OCT 2012
+ delivery documents against payment

This collection instruction means that: Delivery docs against payment, and the payment is effected at maturity date 30 OCT 2012?

As the request’s drawee, can the collecting effect payment before 30 OCT 2012 without advice their action to the remitting bank?

Must bill of exchange be accepted by drawee?

6. Case 3: Is 7(c)URC522 request that bill of exchange is accepted by drawee?

I hope the reply at yr earliest convenience.

Thank you so much!!!
Wish you all best in your life!
Warm regards,
HML
———–
ANSWER

Dear HML,

1. Collecting bank’s liability in D/A collection:

Banks in sub-article 14(b) URC 522 may imply the remitting bank or the collecting bank/presenting bank. If the instructions given by the principal (exporter) to the remitting bank are not clear, the remitting bank is not responsible for any delays resulting from the need to obtain clarification of any instructions received by the remitting bank. Similarly, if the instructions given by the remitting bank to the collecting bank/presenting bank are not clear, the collecting bank/presenting bank is not responsible for any delays resulting from the need to obtain clarification of any instructions received by the collecting bank/presenting bank. I would like to note you the phrase “any delays resulting from the need to obtain clarification of any instructions received” which is quite different from the delays in making payment.

I think the instructions given by the remitting bank are clear enough, i.e., the collecting bank is instructed to deliver the documents against acceptance of the draft and hold it for collecion at maturity. Sub-article 14(b) URC 522 has nothing to do with your case.

Like in L/C transaction, in collection transactions, unless otherwise instructed, the drafts accepted by the drawee (importer) would be retained in the collecting bank’s porfolio until the payment is made. However, this does not mean that the collecting bank must be responsible for any delay in payment or non- payment. If no payment is made or if the payment is delayed, the accepted draft would serve as an evidence for the principal to insist on late payment interest or to sue the importer.

2. Deliver of documents on other terms and conditions:

Delivery of documents against payment or acceptance are common instructions. In reality there are types of collections other than D/P and DA which means delivery of documents on other terms and conditions. These types may include:

(i) Delivery of documents against promissory notes.
(ii) Delivery of documents against a letter of undertaking to pay.
(iii) Delivery of documents against a trust receipt
(iv) Delivery of documents against partial payments

3. Case 1 is one of the types mentioned in my answer to Question no. 2. Some countries may levy stamp duties on financial instruments like drafts, so buyers and sellers may agree to use letters of undertaking to pay or promissory notes. The maturity in this case is pre-determined. Upon delivery of the documents against a letter of undertaking to pay or promissory note, the collecting bank should advise the principal/remitting bank of the same effect.

4. Case 2 is is much the same as D/A collection where the maturity date is pre-determined. Upon delivery of the documents against acceptance, the collecting bank should advise the principal/remitting bank of the same effect.

5. Case 3: Correct. Documents are delivered against payment, and the payment is effected at pre-determined maturity date 30 OCT 2012. It depends. The collecting bank may advise the principal/remitting bank of the same effect.

6. Yes.

Best regards,
Mr. Old Man

P/s: Mr. Old Man is very very very busy these days. Only one question at a time is encouraged.

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2 Comments

  1. anonymous

    October 23, 2012 at 2:10 pm

    Anonymous writes:ART 24 URC522Dear Mr. Old Man,Nhờ Anh giải thích dùm em ý nghĩa của PROTEST trong điều khoản này.Cám ơn Anh nhiềuPTrang

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  2. mroldmanvcb

    October 24, 2012 at 6:10 am

    Please refer to the following Q&A:PROTEST FOR NON – PAYMENT/NON – ACCEPTANCESaturday, 20. August, 22:34Protest for non-payment/non-acceptance QUERY FROM H.NEm chào anh,Hôm nay, em lại có vấn đề cần xin ý kiến của anh.Liên quan đến việc xử lý nhờ thu nhập khẩu có điều khoản "Protest for non-payment/non-acceptance", em muốn hỏi anh thêm ạh.1. Ngân hàng nhờ thu chỉ cần thông báo cho ngân hàng nước ngoài là ko thực hiện protest và vẫn cứ tiến hành thực hiện nhờ thu bình thường mà ko cần chờ reply từ phía Ngân hàng nước ngoài có được không?2. Trường hợp phải hỏi ý kiến của ngân hàng nước ngoài (về việc bỏ điều khoản "Protest for non-payment/non-acceptance") mà chưa có trả lời nhưng khách hàng muốn lấy hàng thì ngân hàng có được trả chứng từ cho khách hàng không?3. Theo em chỉ cần xác nhận với ngân hàng về việc bỏ Điều khoản "Protest for non-payment/nonacceptance" đối với nhờ thu D/A thôi, vì với D/P thì việc drawee không thanh toán cũng không có rủi ro gì. Em hiểu thế có đúng không anh?Nhân tiện, anh cho em hỏi bài báo liên quan đến điện thông báo bất đồng bằng MT999 (liên quan đến 1 ngân hàng VN và 1 ngân hàng ở Bangladesh) đã được published chưa ạh? Nếu published rồi, em rất mong được đọc bài phân tích đó của anh ạh.Em cảm ơn anh nhiều,Em, Hương Ngọc——————-ANSWERChào bạn,Protest được thực hiện khi nhà nhập khẩu (người trả tiền) từ chối trả tiền. Do vậy, Presenting Bank có thể vừa thông báo cho Remitting Bank biết về không đồng ý thực hiện protest, đồng thời cũng có thể thông báo chứng từ nhờ thu cho nhà nhập khẩu. Nếu nhà nhập khẩu từ chối thanh toán chứng từ D/P hoặc từ chối chấp nhận chứng từ D/A thì Presenting Bank không phải giao chứng từ cho nhà nhập khẩu. Trong cả hai trường hợp, Presenting Bank đều chưa giao chứng từ cho nhà nhập khẩu nên không rủi ro. Điều 24 URC không có quy định rõ về việc khi thông báo không chấp nhận thực hiện protest, Presenting bank phải giữ chứng từ chờ sự định đoạt của Remitting Bank hay vẫn có thể thực hiện giao chứng từ D/A nếu như nhà nhập khẩu chấp nhận. Một số Presenting Bank cẩn trọng có thể không thực hiện giao chứng từ cho dù nhà nhập khẩu chấp nhận hối phiếu D/A mà sẽ chờ ý kiến định đoạt/chỉ thị tiếp theo của Remitting Bank, trong khi một số khác có thể vẫn thực hiện theo chỉ thị D/A mà không chờ đợi sự trả lời của Remitting Bank. Giả định giao dịch nhờ thu D/A được xử lý bởi Mr. Old Man, Mr. Old Man sẽ thông báo cho Remitting Bank về việc không chấp nhận thực hiện protest và đồng thời vẫn cứ giao chứng từ cho nhà nhập khẩu nếu nhà nhập khẩu chấp nhận hối phiếu. Tuy nhiên, trong thông báo từ chối protest, Mr. Old Man sẽ thoòng một câu đại loại như thế này “… However, if the drawee accepts the draft prior to our receipt of your further instructions, we shall deliver the documents to the drawee against his acceptance in accordance with your delivery instructions”. Liên quan đến Protest for non-payment/acceptance, bạn có thể tham khảo thêm phần trả lời dưới đây của Mr. Old Man.QUOTENOTING AND PROTESTINGby Old Man on Saturday, June 25, 2011 at 6:14pmSaturday, 25. June, 09:37Noting and protestingQUERY FROM Ratha NhemHow are you doing?I currently face with an issue that I honestly need to seek for your assist in clarification.We are a collecting bank of documentary collection against acceptance. On maturity date of the DA, the drawee is unable to pay the bill due to bankruptcy. Meanwhile, we have received message from remitting bank requested to protest. Quoted their message “please arrange to return the drafts marking the same ‘protested’” unquoted.We need you helped to clarify our matter below.1. What are the protest and its process?2. The presenting bank message quoted “please arrange to return the drafts marking the same ‘protested’” unquoted, what does remitting bank want us to do? Is this related to note or not?3. The drawee’s company was closed due to bankruptcy, what should we do with remitting bank request?We appreciate your opinion on our queries and look forward to hearing from you.Kindest regards—————ANSWERDear Ratha Nhem,Re: Noting and protestingNoting under UK Bill Of Exchange Act 1882 is the the procedure whereby a public notary presents BoE to the drawee on the same day it was refused or on the next business day. If the drawee refuses to honour the BoE, the public notary will “note” on the BoE the amount of his charges, the date and his initial. The BoE may be noted on the day of dishonour and must be noted not later than the next succeeding business day. The reason for refusal will be shown on a note attached to the BoE. The BoE can be then “protested”Protesting is the procedure following the noting of the BoE and requires the public notary to issue a formal certificate certifying that the BoE has been dishonoured.Please note that the legal procedures for noting and protesting a dishonoured BoE may not be the same in different countries. It depends on the local law. So, please refer to your legal consultant.Regarding protest, please also refer to URC 522 Article 24, which says:“The collection instruction should give specific instructions regarding protest (or other legal process in lieu thereof), in the event of non- payment or non-acceptance.In the absence of such specific instructions, the banks concerned with the collection have no obligation to have the document(s) protested (or subjected to other legal process in lieu thereof) for non-payment or non-acceptance.Any charges and/or expenses incurred by banks in connection with such protest, or other legal process, will be for the account of the party from whom the collection instruction was received”.So, please check the covering schedule to be sure if the remitting bank gives any specific instructions regarding protest. If not, you have no obligation to have the documents protested for non-payment but just return the BoE accepted by the drawee to the remitting bank/principal.Last but not least, under documentary collections you sometimes find the remitting bank’s colletion instructions “Protest for non-payment”. If you are unable or unwilling to comply with the instruction, i.e., undertaking the services of noting and protesting, please advise the remitting bank of the same.Hope it is helpful.Best regards,Mr. Old Man————–From Ratha NhemHI MR. OLD MANTHAT IS HELPFUL INFORMATION. I REALLY APPRECIATE YOUR KNOWLEDGE. I HAVE ONE MORE QUESTIONS REGARDING TO THIS TOPIC.+ ARE THERE ANY LEGAL LAWS THAT STATE ABOUT THE HANDLING OF BILL OF EXCHANGE BY BANK?+ IN PRACTICE OF DOCUMENTARY COLLECTION, THE PRESENTING BANK SHOULD KEEP BILL OF EXCHANGE OR RELEASE IT TO THE DRAWEE?+ THE BANK SHOULD ENDORSE BILL OF EXCHANGE TO THE DRAWEE OR NOT ?YOUR COMMENT IS HIGHLY APPRECIATE?REGARDS—————–ANSWERDear Ratha Nhem,In the case of a BoE at sight, the collecting bank surrenders the BoE to the drawee only when full payment has been received.Similarly, in the case of a BoE drawn and accepted payable at a future date, the collecting bank surrenders such a BoE to the drawee only when full payment has been received at or before maturity.When the payment is received, the collecting bank should discharge the BoE by indicating, either on the face or the reverse of the B
    oE, that full payment has been received, and should send the BoE to the drawee.Regards,Mr. Old ManUNQUOTEThân chàoMr. Old Man

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