Bank A received a documents on collection (under URC 522) from Bank B covering shipment of X by Air. At the same time Bank A received another documents (covering shipment of X by Air) from the same Bank under their import L/C for the same drawee. Documents under import L/C was accepted and paid to remitting bank. However, the Collection documents was refused by the drawee and asked Bank A to return back the documents to the remitting bank.
Bank B is saying that documents under import L/C covering the goods of Collection documents. Since Bank A delivered the documents to drawee under import L/C, they are oblidged to pay the value of Collection documents.
What is your opinion?
Shahed
Toronto
Collection documents
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SandraBoxley
- Posts: 3
- Joined: Fri Apr 05, 2019 5:26 pm
Collection documents
I presume that a) the LC was subject to UCP, b) the data content of whatever documents (invoices, bills of lading, packing list, etc.) comprised the presentation under UCP522 was identical to that in the corresponding documents presented under the letter of credit, and c) the beneficiary of the LC and the principal of the collection were one and the same.
It appears that the issuer either waived noted discrepancies or found the documents presented under the LC to be compliant and took them up [as per UCP500] or honoured them [as per UCP600]. In doing so the issuer discharged – either fully or partially depending on the amount of the drawing – its undertaking to the beneficiary under the letter of credit as per UCP.
The documents presented by Bank B under URC522 – though they related to the same shipment – were independent of the drawing presented to Bank A under the letter of credit. The drawee, presumably the applicant of the LC, was fully within its rights under URC522 to refuse payment and to request Bank A to return the documents to the remitting bank. The extent of Bank A’s responsibility to Bank B when the drawee refused payment was to comply with the remitting bank’s “instructions in case of non-payment, non-acceptance and/or non-compliance with other instructions”. URC522, Article 4 (b) (11). Bank A had no obligation to pay the collection.
It appears that the issuer either waived noted discrepancies or found the documents presented under the LC to be compliant and took them up [as per UCP500] or honoured them [as per UCP600]. In doing so the issuer discharged – either fully or partially depending on the amount of the drawing – its undertaking to the beneficiary under the letter of credit as per UCP.
The documents presented by Bank B under URC522 – though they related to the same shipment – were independent of the drawing presented to Bank A under the letter of credit. The drawee, presumably the applicant of the LC, was fully within its rights under URC522 to refuse payment and to request Bank A to return the documents to the remitting bank. The extent of Bank A’s responsibility to Bank B when the drawee refused payment was to comply with the remitting bank’s “instructions in case of non-payment, non-acceptance and/or non-compliance with other instructions”. URC522, Article 4 (b) (11). Bank A had no obligation to pay the collection.