Explanation of URC 522 Article 3
“ARTICLE 3 PARTIES TO A COLLECTION”
URC 522 Article 3 outlines the key parties involved in a documentary collection process under the Uniform Rules for Collections. This article is crucial as it defines the roles and responsibilities of each party involved, ensuring clarity and efficiency in the collection process.
Clause (a): “For the purposes of these Articles the ‘parties thereto’ are:”
Explanation:
This clause introduces the term “parties thereto,” referring to the main participants in the collection process. These participants include the principal, the remitting bank, the collecting bank, and the presenting bank. Each of these parties plays a distinct role in ensuring that the collection process is carried out smoothly and in accordance with the instructions provided.
Example:
Consider a scenario where an exporter in India sells goods to an importer in Germany. The exporter is the principal who initiates the collection process, and the various banks involved in handling the documents would be considered the remitting, collecting, and presenting banks.
Clause (a)(1): “the ‘principal’ who is the party entrusting the handling of a collection to a bank;”
Explanation:
The “principal” refers to the individual or entity, usually the exporter or seller, who instructs a bank (the remitting bank) to handle the collection process. The principal is responsible for providing the necessary documents and instructions to the bank for the collection to be processed.
Example:
In our earlier scenario, the exporter in India would be the principal who provides the shipping documents and collection instructions to their bank to initiate the process.
Clause (a)(2): “the ‘remitting bank’ which is the bank to which the principal has entrusted the handling of a collection;”
Explanation:
The “remitting bank” is the bank that the principal entrusts with the responsibility of handling the collection. This bank acts on behalf of the principal to send the documents to the collecting bank in the importer’s country and to ensure that the terms of the collection are met.
Example:
The exporter’s bank in India would be the remitting bank, which forwards the collection documents to a bank in Germany for further processing.
Clause (a)(3): “the ‘collecting bank’ which is any bank, other than the remitting bank, involved in processing the collection;”
Explanation:
The “collecting bank” refers to any bank, other than the remitting bank, that is involved in processing the collection. This bank typically receives the documents from the remitting bank and then works to ensure that payment or acceptance is obtained from the drawee (the importer).
Example:
In the scenario, a bank in Germany that receives the collection documents from the remitting bank in India and processes them according to the instructions would be the collecting bank.
Clause (a)(4): “the ‘presenting bank’ which is the collecting bank making presentation to the drawee.”
Explanation:
The “presenting bank” is a specific type of collecting bank that presents the documents to the drawee for payment or acceptance. The presenting bank’s role is crucial in ensuring that the drawee (importer) complies with the terms outlined in the collection instruction.
Example:
If the collecting bank in Germany directly presents the documents to the importer for payment or acceptance, it is acting as the presenting bank.
Clause (b): “The ‘drawee’ is the one to whom presentation is to be made in accordance with the collection instruction.”
Explanation:
The “drawee” is the party, usually the importer or buyer, to whom the documents are presented by the presenting bank. The drawee is expected to either make payment or accept the draft as per the collection instruction provided by the principal.
Example:
In our scenario, the importer in Germany would be the drawee who receives the documents from the presenting bank and is required to make payment or accept the draft according to the terms specified by the exporter.