ICC Digital Library Forum

Among other things Article 10 of Uniform Rules for Collections covers the storage and insurance of goods.

I understand most banks these days refuse to insure or store goods, even if asked to do so, as a matter of general policy. (This is my own bank’s approach.) Reasons for this I believe include the risk of not being able to recover the -quite possibly substantial- costs incurred in arranging insurance/storage and the administrative burden undertaking such activities can impose.

Grateful if other subscribers would confirm:
1. If this is their own experience with other banks;
2. What their own bank’s general policy is regarding storage and insurance (on ‘inward/import’ collections);
3. If they still give drawers the express option -on the collection instruction form the drawer must complete for an ‘outward/export’ collection- of specifying that goods are to be stored/insured if documents are not taken up.

Whilst the collection process adds a measure of commercial safety to the seller’s dealings, problems may arise due to the fact that has been pointed out by J. Smith. Generally speaking, the banks feel that they are not inclined to exert pressure on the drawee to obtain quick payment and therefore they abstain from dealing with two clauses stated on the collection instruction:

1. The Store And Insure Clause

The banks feel that above clause add to their burden. If the importer does not pay or accept the B/E, the bank is expected to chase him for payment, as he cannot obtain the goods. However, the goods will be at the docks or airport, or container depot, in the overseas country. If this clause is adopted, the overseas bank will be instructed to warehouse and insure the goods if documents are not taken up. If the goods are warehoused and insured, then they are protected, giving the exporter time to find an alternative buyer or to ship the goods back to where they came from.

2. The Protest Clause

As there might be specific instructions required on whether or not to protest in the event of dishonour by either non-payment or non-acceptance, most of the banks refrain from complying with this process due to the reason that If a bill of exchange is protested, a lawyer in the overseas country will undertake formal procedures whereby he asks the drawee the reason for dishonour and makes appropriate notes. Again, it will be the overseas bank, which instructs the lawyer to protest. The overseas bank will have to be reimbursed by the exporter’s bank that will then debit their customer. This process will enter than with a legal process that needs a more reasonable care as in some countries, the law requires a dishonoured bill of exchange to be protested within one working day, otherwise the drawer cannot sue on the bill.

From my experience we used not to accept those clauses under collection leaving the principal almost naked.

I’d very much appreciate further contributions. Perhaps those to whose queries I have responded in the past might be kind enough to reciprocate, even if it means consulting their collection departments?

Thanks in advance.

When we receive Import Collections with instructions to bond/store/insure goods our Bank will automatically include in our acknowledgement that this instruction will not be followed.
In general our policy is not to get involved with arranging for the goods to be bonded etc. However, if we encountered a situation where the seller genuinely needed some assistance we may attempt to help provided that we did not expose ourselves to financial loss through non-payment of charges.
On our Export Collections application forms we do give our clients the option of asking that the goods be warehoused (in cool store if perishable) and insure goods pending instructions but also we note on the form that Banks have no obligations to take any action in respect of the goods to which the Collection relates to.
In my opinion most Banks we deal with will either ignore or decline this instruction.

Many thanks, this is most helpful. Further contributions gratefully received.

BANKERS SHOULD NOT DEAL WTIH THINGS THAT THEY ARE NOT FIMILIARISED WITH

In risk managament workshops, we advise bankers not to handle the goods on behalf of the seller unless the seller is a VIP customer of their head office.

Some goods need import licence for clearance and some goods need special handling proceudres which bankers are not familiar with. This is the job for a "case-of-need" (representative or agent of the seller in the buyer's country).

AN ORDINARY INSECT SPRAY MAY KILL A BANKER FIRST BEFORE IT KILLS THE INSECTS

For example, many years ago we dealt with a branded household inspect killing sprays packaged in aerosol cans that contain hydrocarbon contents. We need to apply for an import licence for this controlled goods. Before we hired a truck to deliver from the wharf warehosue to the buyer's warehosue, we need to ask the police department to issue a road permit for carriage by city roads and the a special unit in the police department would not issue and sign this road permit until the fire services department had counter-signed on the same permit. We did a merry-go-round game before the truck driver agreed to take the goods on board.

We also had to arrange special insurance coverage for the road carriage as this was not covered by the ordinary "All Risks" policy.

Hence a can of branded household insect spray which one can easily find in the supermarket shelves may appear on its face to be very simple task and yet if a banker tries to handle it, it may be very complicated and risky, well beyond the banker's imagination.

So an insect spray may kill the banker first before it kills the insects.

INCONSISTENT ACTS UNDER URC 522 WITH UCP 500

In examination of documents under the UCP 500 or dealing with documents under URC 522, bankers need not be bordered with non-banking things, such as transport, warehousing and cargo insurance. Then why should they be dealing with the goods themselves that may need specific experience and knowledge on certain handling procedures? This is not a consistent act.

http://www.tolee.com

[edited 11/19/01 5:35:03 PM]

T.O.,

Thank you for this most illuminating contribution.

Jeremy

Jeremy,
I know of no US bank which would undertake to store and insure goods on an import collection without having prior special arrangements with the importer, exporter or correspondent bank - for all the reasons T.O. Lee listed - as well as banks in general no longer have standing arrangements with warehouses or insurers for this type of activity.

This is most useful information. Many thanks.

Further contributions from around the world would be appreciated.
[edited 11/16/01 3:08:07 PM]

Hi Don,

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If the problem persists, why not try a Chinese doctor? My good friend Mr. Kenneth Y. M. Lee of Bank of China Manhattan should be able to help you to find alternative medication treatments in USA. However, there are two Kenneth Lees in BOC NY and make sure the one you contact is Kenneth Yuet Man Lee.

Mr. Toronto Ontario (T. O.)

[edited 11/17/01 5:35:16 PM]