UCP 600 OR URC 522

QUESTION

Dear Mr. Old Man,

I have a question needing your help.

We issued L/C No. xxx 123 in favour of Beneficiary B. The L/C was subject to UCP 600, but the documents were sent to us for collection. The covering schedule showed the following information:

QUOTE

We enclose the following documents for collection subject to the Uniform Rules for Collection ICC publication No. 522

L/C No. xxx 123

Tenor: Sight

Drawer: B (Beneficiary/Seller)

Drawee: A (Applicant/Buyer)

Documents to be delivered against payment

…..

This collection is subject to the Uniform Rules for Collection ICC publication No. 522.

UNQUOTE

There is an opinion that as the covering schedule indicates the L/C number, the presentation is deemed to be made under the L/C and subject to UCP 600. So, when effecting payment we will deduct discrepancy fee and other banking charges from the proceeds in accordance with the L/C terms and conditions.

However, there is another opinion that the documents are presented for collection subject to URC 522. So, we should handle the documents as a collection.

Which opinion is correct?

Thank you and best regards,

NQN

——

ANSWER

Hi,

If the presentation subject to UCP 600 is discrepant and the issuing bank decides to refuse, it must give a notice of refusal in accordance with sub-article 16 (c). If the discrepancy is waived and the payment is made, the issuing bank can deduct the discrepancy fee from the proceeds.

However, notwithstanding that the covering schedule indicatesthe L/C number, the presentation in question is not subject to UCP 600 but URC 522. So, you should handle the documents as a collection in accordance with the remitting bank’s instructions and URC 522.

Kind regards,

Mr. Old Man