Clause 13(a):
Clause: “If a credit states that reimbursement is to be obtained by a nominated bank (“claiming bank”) claiming on another party (“reimbursing bank”), the credit must state if the reimbursement is subject to the ICC rules for bank-to-bank reimbursements in effect on the date of issuance of the credit.”
Explanation: This clause mandates that if a letter of credit specifies that a nominated bank will claim reimbursement from a reimbursing bank, it must also specify whether this reimbursement follows the ICC rules for bank-to-bank reimbursements effective at the time of the credit issuance.
Example: A letter of credit issued on January 1, 2024, instructs Bank A (nominated bank) to claim reimbursement from Bank B (reimbursing bank). The credit must state that reimbursement is subject to ICC rules for bank-to-bank reimbursements effective on January 1, 2024.
Clause 13(b)(i):
Clause: “If a credit does not state that reimbursement is subject to the ICC rules for bank-to-bank reimbursements, the following apply: i. An issuing bank must provide a reimbursing bank with a reimbursement authorization that conforms with the availability stated in the credit. The reimbursement authorization should not be subject to an expiry date.”
Explanation: If the credit does not refer that the reimbursement is subject to ICC rules, then mentioned rules will be applicable like- the issuing bank must issue a reimbursement authorization to the reimbursing bank that matches the terms of the credit’s availability. This authorization should not expire.
Example: If a credit is available by sight payment and does not mention ICC rules for reimbursement, the issuing bank must provide a reimbursement authorization to the reimbursing bank that allows sight payment and does not have an expiry date.
Clause 13(b)(ii):
Clause: “A claiming bank shall not be required to supply a reimbursing bank with a certificate of compliance with the terms and conditions of the credit.”
Explanation: The claiming bank is not obliged to provide the reimbursing bank with a certificate proving compliance with the credit’s terms and conditions.
Example: Bank A, the claiming bank, does not need to submit a certificate to Bank B, the reimbursing bank, verifying that all terms and conditions of the letter of credit have been met.
Clause 13(b)(iii):
Clause: “An issuing bank will be responsible for any loss of interest, together with any expenses incurred, if reimbursement is not provided on first demand by a reimbursing bank in accordance with the terms and conditions of the credit.”
Explanation: If the reimbursing bank fails to reimburse on the first demand as per the credit’s terms, the issuing bank is liable for any resulting loss of interest and expenses.
Example: If Bank B fails to reimburse Bank A on the first demand, and Bank A incurs additional interest and expenses, the issuing bank must cover these costs.
Clause 13(b)(iv):
Clause: “A reimbursing bank’s charges are for the account of the issuing bank. However, if the charges are for the account of the beneficiary, it is the responsibility of an issuing bank to so indicate in the credit and in the reimbursement authorization. If a reimbursing bank’s charges are for the account of the beneficiary, they shall be deducted from the amount due to a claiming bank when reimbursement is made. If no reimbursement is made, the reimbursing bank’s charges remain the obligation of the issuing bank.”
Explanation: The issuing bank generally bears the reimbursing bank’s charges unless the credit specifies they are for the beneficiary’s account. If the beneficiary is responsible, this must be stated in the credit and reimbursement authorization, and charges will be deducted from the claiming bank’s reimbursement. If reimbursement is not made, the issuing bank must still cover the charges.
Example: If Bank A’s charges are to be borne by the beneficiary, this must be indicated in the credit. When Bank B reimburses Bank A, it deducts its charges from the amount. If Bank B does not reimburse, the issuing bank must pay Bank B’s charges.
Clause 13(c):
Clause: “An issuing bank is not relieved of any of its obligations to provide reimbursement if reimbursement is not made by a reimbursing bank on first demand.”
Explanation: The issuing bank remains responsible for reimbursement even if the reimbursing bank fails to reimburse on the first demand.
Example: If Bank B fails to reimburse Bank A on first demand, the issuing bank will be responsible to make reimbursement to Bank A .