Docs Received fr Presenting Bank subject to URC 522

[yenfongmoo]

Docs were sent to us,the issuing bank, fr the bene's bank in Japan. Their instructions were very clear that as per bene's request, the docs are to be processed on a collection basis s.t. URC 522. Doc are usually in order. How should we treat it when

a)docs are in full compliance i.e should we still process as under our LC or treat it strictly as a collection item & charge likewise,

b)certain docs are discrepant i.e should we observe Art 14 on rejection/notice of discrepancies & if so, could we charge discrepancy fee as stated in our LC?

What are the reasons why the bene/presenting bank would insist on it being processed on a collection basis when they could have a better & more secured means of payment under the credit we issued?

Thank you for yr comments

[PGauntlett]

The bank has presumably used the wrong form or they just don't know what they're doing (more likely). The safest thing to do is to treat it as a presentation under the l/c and abide by UCP 500. Alternatively you can contact the Presenting Bank for clarification of their instructions.

[AbdulkaderBazara]

I don't see any logical reason why the exporter would have requested documents to be treated under URC 522. He / she could have simply requested to have documents presented as is to the issuing bank under the protection of UCP 500. There is greater protection for the exporter to have the documents treated under UCP500 specially if payment has to be made at later stage e.g. acceptance or deferred payment LC. Even if the documents were discrepant, once the importer accepts the documents and the issuing bank agrees to payment, it would be binding on the bank to effect the payment on the maturity date even if the applicant went bankrupt, deceased etc.

To avoid any confusion or misinterpretation, at later stage, the issuing bank should, I believe, treat the documents under UCP 500. The importer who has paid for the LC issuing bank charges would like to have the bank check the documents as well.

[laukinpongdave]

generally speaking, a bank sent documents as presented subject to uniform rules for collection, no.522, it is assumed that the bank is willingless to process under L/C basis.
however, it is some time that the presenting bank make an error on collection order, in this case, if the collection order also indicate a L/C number, I will suggest you to send a telex to presenting bank for clarify whether the documents as presented subject to urc 522 or presented under L/C for approval and payment.

however, presenting bank is sometime wish to send the document under collection basis (urc 522) instead of presenting as per L/C's term and conditions. it is because the documents may have most of discrepancies shown.

therefore, since you had sent a telex for clarification about clear and complete collection instructions, we will have a enough protection at your side

[larryBacon]

Mr. Gauntlett's explanation is the most likely. Standard preprinted covering letters for L/C's and collections can be similar, leading to this type of mistake.
Best course of action is to confirm docs in order & ask for clarification from issuing bank.

Laurence A. J. Bacon

[T.O.Lee]

We agree with Mr. Gauntlett.

As the sanction under sub Article 14 (e) of the UCP 500 is very serious and the duty for the issuing bank to advise the discrepancies within three banking days safe habour, we would suggest the issuing bank to confirm from the presenting bank without delay by SWIFT whether the presentation is based on URC 522 or UCP 500.

Most banks, particularly for those banks in USA, there is a tendency to replace the expensive LC experts with a computerised system so that an inexpensive bills clerk can run the LC operation independently. This is a cost saving exercise since LC operation is not a profitable business for the banks.

However, a computer can never replace an experienced LC practitioner because LC involves banking, law, transport, cargo insurance, Incoterms and other technologies, making it difficult to replace an experienced LC expert with a computerised system.

With more and more LC experts being laid off, such as in USA (many of them are my friends and top LC experts, forced to retire early and joining the consultancy business), it is not strange to see that an LC presentation is being processed as a collection due to wrong form being used, lack of training and other reasons, such as one form for both LC and collection purposes.

As a consultant and trainer in LC operations, our experience has taught us that anything may happen. Murphy's Law also applies to LC operations.

We are from www.tolee.com

[edited 2/26/02 8:07:32 PM]