Explanation of URR 725 Article 2 : Definitions
For the purpose of these rules, the following terms shall have the meaning specified in this article and may be used in the singular or plural as appropriate:
a. “Issuing bank” means the bank that has issued a credit and the reimbursement authorization under that credit.
Explanation: The issuing bank is the financial institution that initiates a letter of credit (LC) and provides a reimbursement authorization under that credit. This bank is responsible for ensuring that the terms of the LC are met and that the funds are available for the reimbursement to the bank that honors the credit.
Example: If Bank A issues a letter of credit for a buyer in Country X, Bank A is the issuing bank. Bank A also provides a reimbursement authorization to Bank B (the reimbursing bank) to pay the bank (the claiming bank) that presents a valid claim under the letter of credit.
b. “Reimbursing bank” means the bank instructed or authorized to provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank.
Explanation: The reimbursing bank is the bank that receives instructions from the issuing bank to pay the claiming bank upon receipt of a valid reimbursement claim. The reimbursing bank acts as an intermediary between the issuing bank and the claiming bank.
Example: If Bank A (the issuing bank) instructs Bank B to pay Bank C upon the presentation of a valid reimbursement claim, Bank B is the reimbursing bank.
c. “Reimbursement authorization” means an instruction or authorization, independent of the credit, issued by an issuing bank to a reimbursing bank to reimburse a claiming bank or, if so requested by the issuing bank, to accept and pay a time draft drawn on the reimbursing bank.
Explanation: A reimbursement authorization is a separate instruction from the issuing bank to the reimbursing bank, directing the latter to reimburse the claiming bank. This authorization is independent of the letter of credit and can also involve accepting and paying a time draft drawn on the reimbursing bank.
Example: Bank A issues a letter of credit and separately authorizes Bank B (the reimbursing bank) to pay Bank C (the claiming bank) upon the presentation of the required documents. This instruction from Bank A to Bank B is the reimbursement authorization.
d. “Reimbursement Amendment” means an advice from the issuing bank to a reimbursing bank stating changes to a reimbursement authorization.
Explanation: A reimbursement amendment is a notice from the issuing bank to the reimbursing bank that modifies the original reimbursement authorization. This amendment may involve changes in terms, conditions, or instructions provided earlier.
Example: If Bank A initially authorized Bank B to reimburse Bank C upon presentation of specific documents, but later needs to change the amount or conditions, Bank A will issue a reimbursement amendment to Bank B.
e. “Claiming Bank” means a bank that honours or negotiates a credit and presents a reimbursement claim to the reimbursing bank. “Claiming Bank” includes a bank authorized to present a reimbursement claim to the reimbursing bank on behalf of the bank that honours or negotiates.
Explanation: The claiming bank is the financial institution that pays or negotiates under the letter of credit and then seeks reimbursement from the reimbursing bank. This term also applies to any bank authorized to claim reimbursement on behalf of the bank that made the payment.
Example: Bank C negotiates a letter of credit and subsequently presents a reimbursement claim to Bank B (the reimbursing bank) for payment. Bank C is the claiming bank.
f. “Reimbursement Claim” means a request for reimbursement from the claiming bank to the reimbursing bank.
Explanation: A reimbursement claim is a formal request made by the claiming bank to the reimbursing bank, asking for the payment of funds as per the reimbursement authorization.
Example: After Bank C honors a letter of credit, it sends a reimbursement claim to Bank B (the reimbursing bank) to receive payment for the amount disbursed under the credit.
g. “Reimbursement undertaking” means a separate irrevocable undertaking of the reimbursing bank, issued upon the authorization or request of the issuing bank, to the claiming bank named in the reimbursement authorization, to honour that bank’s reimbursement claim, provided the terms and conditions of the reimbursement undertaking have been complied with.
Explanation: A reimbursement undertaking is an irrevocable commitment made by the reimbursing bank, at the request of the issuing bank, to honor the claiming bank’s reimbursement claim. This undertaking is independent and ensures that the claiming bank will be paid if the conditions are met.
Example: Bank B, acting as the reimbursing bank, issues a reimbursement undertaking to Bank C, promising to pay the claim made by Bank C under the letter of credit, provided all terms and conditions are fulfilled.
h. “Reimbursement undertaking amendment” means an advice from the reimbursing bank to the claiming bank named in the reimbursement authorization stating changes to a reimbursement undertaking.
Explanation: A reimbursement undertaking amendment is a notification from the reimbursing bank to the claiming bank, informing it of any changes to the original reimbursement undertaking.
Example: If Bank B (the reimbursing bank) needs to alter the terms of the reimbursement undertaking issued to Bank C (the claiming bank), Bank B will send a reimbursement undertaking amendment to Bank C.
i. For the purpose of these rules, branches of a bank in different countries are considered to be separate banks.
Explanation: Under these rules, different branches of the same bank located in various countries are treated as separate legal entities or banks.
Example: If a bank with branches in both Country X and Country Y is involved in a transaction under URR725, the branch in Country X is considered a separate bank from the branch in Country Y.