Document Handling

URC 522 Article 17: “Payment in Local Currency” Explained

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ARTICLE 17 PAYMENT IN LOCAL CURRENCY

Clause 1: “In the case of documents payable in the currency of the country of payment (local currency), the presenting bank must, unless otherwise instructed in the collection instruction, release the documents to the drawee against payment in local currency only if such currency is immediately available for disposal in the manner specified in the collection instruction.”

Explanation:

This clause mandates that when a collection involves payment in the local currency of the country where the payment is to be made, the presenting bank has a specific responsibility. The bank must ensure that the documents are only handed over to the drawee (the party responsible for making the payment) upon receiving the local currency payment. The crucial point here is that the currency must be “immediately available for disposal” according to the instructions given in the collection order. This means that the funds should be instantly usable in the manner specified by the remitting bank (the bank that initiated the collection process). If the payment is not immediately available in the required manner, the presenting bank should not release the documents unless explicitly instructed otherwise.

Example:

Imagine a situation where an exporter in the United States ships goods to a buyer in India under a documentary collection. The collection instruction from the U.S. bank specifies that payment must be made in Indian Rupees (INR). When the Indian bank (presenting bank) receives the documents, they are instructed to release these documents to the buyer only upon receiving payment in INR. However, the buyer offers to pay in a foreign currency, such as U.S. dollars, instead of INR.

In this scenario, unless the collection instruction specifically allows for payment in a currency other than INR, the presenting bank should refuse to release the documents. The bank must ensure that the payment in INR is immediately available and can be used as per the remitting bank’s instructions before handing over the documents to the buyer. If the buyer insists on paying in U.S. dollars, the presenting bank would need to seek clarification or further instructions from the remitting bank.

By breaking down this article into its key components and providing practical examples, the intention behind URC 522 Article 17 becomes clear. It ensures that local currency payments are handled in a manner that aligns with the instructions provided, thereby protecting the interests of all parties involved in the transaction.

URC 522 Article 12: “Disclaimer on Documents Received” – Explanation

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“ARTICLE 12 DISCLAIMER ON DOCUMENTS RECEIVED”

a Banks must determine that the documents received appear to be as listed in the collection instruction and must advise by telecommunication or, if that is not possible, by other expeditious means, without delay, the party from whom the collection instruction was received of any documents missing, or found to be other than listed. Banks have no further obligation in this respect.

Explanation: This clause mandates that banks must check whether the documents they receive match the list provided in the collection instruction. If there are any discrepancies, such as missing documents or documents that do not match the list, the bank must inform the party who issued the collection instruction immediately. This communication should be made as quickly as possible, using telecommunication methods if available, or otherwise through other prompt means. Once this notification is done, the bank has no further responsibility concerning these discrepancies.

Example: Suppose a bank receives a collection instruction stating that the documents should include an invoice, a bill of lading, and a certificate of origin. If the bank only receives an invoice and a bill of lading, it must promptly notify the party who issued the instruction about the missing certificate of origin. After this notification, the bank is not obligated to investigate or resolve the discrepancy further.

b If the documents do not appear to be listed, the remitting bank shall be precluded from disputing the type and number of documents received by the collecting bank.

Explanation: This clause means that if the documents provided to the collecting bank do not match the listed documents, the remitting bank (the bank that sent the documents) cannot later dispute or argue about the types or numbers of documents received by the collecting bank. Essentially, the remitting bank has to accept that the documents were received as listed and cannot challenge discrepancies after the fact.

Example: If the remitting bank sent a shipment of documents that were supposed to include an insurance certificate and a packing list, but the collecting bank received only a packing list, the remitting bank cannot later claim that the insurance certificate was included or that the collecting bank made an error in the number of documents received.

c Subject to sub-Article 5(c) and sub-Articles 12(a) and 12(b) above, banks will present documents as received without further examination.

Explanation: According to this clause, banks are required to present the documents they receive without additional scrutiny, following the stipulations outlined in sub-Article 5(c) and the provisions in sub-Articles 12(a) and 12(b). This means that after the initial check and notification of any discrepancies, banks are not responsible for further examination of the documents.

Example: If a bank receives documents and has notified the issuing party of any missing items as required by Article 12(a), and there are no disputes as per Article 12(b), the bank will present the documents exactly as received to the relevant parties, without performing any additional checks or modifications.