QUERY

Documents for USD172,081.20 were sent by the remitting bank to the collect-ing bank on 2 March 2023 on D/P basis through courier. The remitting bank’s collection instruction clearly stipulated:

Quote:

Please deliver documents strictly against payment only. Remit proceed to …………………. under SWIFT intimation to us.

This collection is subject to ICC Publication URC522

Unquote.

The documents also included all original bills of lading, which were endorsed by the remitting bank in favour of the collecting bank.

On 20 March, the remitting bank sent a SWIFT message to the collecting bank pointing out the following:

Quote:

Attention: Manager Trade Services Import Section. Drawer: ABC, Drawee: BCA, Amount: USD 172,081/20. Our cited bill was forwarded on DP basis; till date we have not received proceeds. Please immediately settle our bill and or share current status. Regards.

Unquote

On 22 March, the collecting bank responded via SWIFT message pointing out

the following:

Quote:

Please be informed that [name of collecting bank] does not perform documentary credit services (Cash against Documents) please inform ASAP your customer that documen-tary collection is not in our possession; we consider this file as closed.

Unquote

On 24 March, the remitting bank replied via SWIFT message as follows:

Quote:

With reference to your SWIFT dated March 22, 2023, please note we have dispatched document on DP basis on March 02, 2023 on the following bank address under DHL, which was delivered on March 09, 2023 to you. We request you to kindly check and trace the said document and confirm the status of funds via swift message. Your prompt response in this regard will be appreciated. Please always quote our above mentioned ref number.

Unquote

On 29 March, the remitting bank sent the following SWIFT message:

Quote:

With reference to our MTXXX and your response dated March 24 2023, wherein your office confirmed not dealing in documentary credit service (cash against documents) related transactions and have closed file at your end. Kindly confirm return of docu-ments to our office, along with courier details. Your prompt response in this regard will be highly appreciated. Please always quote our above mentioned ref number. Regards, export trade service

Unquote

DHL Documents Delivery Report states:

Documents booked on 02-03-2023 and arrived on March 06, 2023.

Handed Over to Local Courier for Delivery to [name of collecting bank] on March 09, 2023 and the same was delivered to [name of collecting bank] at 12:13PM on the same date.

Remitting bank has checked with the shipping company for the fate of the goods and it was informed that the goods were released against the presentation of all original bills of lading, duly endorsed by the collecting bank in favour of the drawee.

On 4 April 2023, the remitting bank sent another SWIFT message to the collecting bank:

Quote:

This is with reference to our swift message wherein we enquired about the status of documents sent to your bank with our above reference. We have been informed by our client that applicant is in possession of goods and this is only possible once your bank has handed over the documents to applicant, we understand value of the documents must have been paid as mentioned on our bank documents covering schedule, deliver documents strictly against payment only, we therefore advice you to kindly remit pro-ceeds without any further delay, in case if we do not hear from you we reserve the right to file legal suit towards your bank.

Unquote

The collecting bank replied via SWIFT messages dated 27 and 30 March and 6 April, containing the same text as quoted below, in response to the remitting bank’s SWIFT messages of 24 and 29 March and 4 April.

Quote:

Please be informed that Bank B does not perform documentary credit services (Cash against Documents) we consider this file as closed.

Unquote

Despite the remitting bank’s repeated reminders, the collecting bank has nei-ther remitted the proceeds nor returned the original documents.

We, the remitting bank, would like to request ICC Paris to provide their opinion on the following:

A documentary collection, was sent by the remitting bank to the collecting bank and was accompanied by a collection instruction indicating that the collection is subject to URC 522, giving complete and precise instructions to deliver documents against payment. The collecting bank did not follow the instructions of the remitting bank and delivered the documents to the drawee (along with all the original bills of lading which were also duly endorsed by the collecting bank in favour of the drawee) without obtain-ing payment. As such, the collecting bank is liable to compensate and pay the full amount to the remitting bank along with delay payment interest.

ANALYSIS

A documentary collection subject to URC 522 was sent by the remitting bank to the collecting bank on 2 March 2023. The collection was forwarded via courier (DHL).

The collection instructions stated, “Please deliver documents strictly against payment only”.

The documents in the collection included a full set of original bills of lading, which were endorsed by the remitting bank in favour of the collecting bank. Such endorsement is not in line with URC 522 sub-article 10 (a), without the agreement of the collecting bank.

On 20 March, the remitting bank sent a tracer to the collecting bank, which triggered the exchange of messages reflected in the query. From the exchange of messages, it appears that the collecting bank has released the documents to the drawee without receiving payment. It appears that the collecting bank endorsed the original bills of lading in favour of the drawee effectively allowing the drawee access to the goods covered by the collection.

The messages also reveal that the collecting bank is unfamiliar with documentary collections.

The issue of unpaid collections has been addressed in different ICC Opinions in the past. This includes Opinion R605 (TA542), Opinion R497 and Opinion R383.

However, most important for the query at hand is Opinion R863 (TA821) which includes the wording, “[r]egardless of whether or not the branch of the nominated bank [sic collecting bank] is the head office or an operating department, it must comply with the terms and conditions of URC 522.

URC 522 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 a collection instruction, it must inform the sending party without delay. This is made clear in URC 522 sub-article 1 (c). It is not at liberty to ignore the collection instruction and hand over/dispose of the documents direct to the drawee.”

Likewise, the content of sub-articles 1 (b) and 1 (c) would equally apply here. By delivering the documents covered by the collection to the drawee (and endorsing the bills of lading to the drawee), the collecting bank has, in effect, handled the collection. Furthermore, sub-article 4 (a) highlights that banks are only permitted to act upon the instructions given in the collection instruction.

For that reason, the collecting bank is responsible under the terms and conditions of the collection instruction if it is unable to return the original documents as presented.

CONCLUSION

The collecting bank acted contrary to the content of the collection instructions and the applicable provisions of URC 522 and, as such, is responsible for breach of its obligations as a collecting bank and/or for failing to return the documents it received.

URC 522 does not impose any payment obligation on banks; any remedy would be a matter of applicable law and outside the URC 522.

Any interest claim is outside the scope of the URC 522.