ARTICLE 4 COLLECTION INSTRUCTION
a 1 “All documents sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules.”
Explanation:
This clause mandates that any documents sent for collection must be accompanied by a clear collection instruction, explicitly stating that the collection is subject to URC 522. Banks are required to follow only the instructions provided in this collection instruction and must adhere strictly to the rules outlined in URC 522.
Example:
Imagine a company in India sends documents to a bank in the UK for collection. The collection instruction must clearly mention that the transaction is governed by URC 522. If the instruction specifies that payment should be made only upon acceptance, the bank in the UK must follow this instruction and cannot act otherwise.
a 2 “Banks will not examine documents in order to obtain instructions.”
Explanation:
Banks are not responsible for examining the documents to derive instructions. Their role is to execute the instructions provided in the collection instruction and not to infer any instructions from the accompanying documents.
Example:
If a bank in Germany receives a set of documents and the collection instruction is unclear, the bank is not obligated to look through the documents to understand what needs to be done. The bank will only follow the explicit instructions given in the collection instruction.
a 3 “Unless otherwise authorised in the collection instruction, banks will disregard any instructions from any party/bank other than the party/bank from whom they received the collection.”
Explanation:
Banks are instructed to follow only the collection instructions received from the party or bank that originally sent the collection. They will ignore any additional instructions from other parties unless the collection instruction explicitly authorizes them to do so.
Example:
If a bank in China receives a collection instruction from a bank in Japan, and later receives additional instructions from a different bank in Singapore, the Chinese bank will disregard the new instructions unless the original collection instruction from the Japanese bank authorized them to accept instructions from the Singaporean bank.
b “A collection instruction should contain the following items of information, as appropriate.”
Explanation:
This section outlines the specific details that must be included in a collection instruction to ensure clarity and precision in processing.
b 1 “Details of the bank from which the collection was received including full name, postal and SWIFT addresses, telex, telephone, facsimile numbers, and reference.”
Explanation:
The collection instruction must clearly identify the bank that sent the collection, including all relevant contact information. This ensures proper communication and processing of the collection.
Example:
A bank in Brazil sending a collection to a bank in Canada must include its full name, postal address, SWIFT address, and contact numbers in the collection instruction.
b 2 “Details of the principal including full name, postal address, and if applicable telex, telephone and facsimile numbers.”
Explanation:
The collection instruction must also include details of the principal (the party on whose behalf the collection is being made), ensuring that the bank handling the collection knows exactly who the principal is.
Example:
If an exporter in South Africa is the principal, the collection instruction should include their full name, postal address, and any applicable contact numbers.
b 3 “Details of the drawee including full name, postal address, or the domicile at which presentation is to be made and if applicable telex, telephone and facsimile numbers.”
Explanation:
The collection instruction must contain the complete details of the drawee (the party required to make the payment), including their address or the place where the documents will be presented.
Example:
If the drawee is a company in the United States, the collection instruction should provide the full name, postal address, and contact details of that company.
b 4 “Details of the presenting bank, if any, including full name, postal address, and if applicable telex, telephone and facsimile numbers.”
Explanation:
If there is a presenting bank involved (the bank making the presentation to the drawee), its details should be included in the collection instruction.
Example:
If a bank in Italy is responsible for presenting the documents to the drawee, its full name, postal address, and contact details should be listed.
b 5 “Amount(s) and currency(ies) to be collected.”
Explanation:
The collection instruction must specify the exact amounts and the currencies in which the collection is to be made.
Example:
If a payment of USD 50,000 is expected, the collection instruction should clearly state “USD 50,000” as the amount to be collected.
b 6 “List of documents enclosed and the numerical count of each document.”
Explanation:
A detailed list of all the documents enclosed, along with the quantity of each document, must be included in the collection instruction. This ensures transparency and accuracy in the handling of documents.
Example:
If the collection involves 3 invoices and 2 bills of lading, the collection instruction should list these documents and indicate the count as “3 invoices” and “2 bills of lading.”
b 7 a “Terms and conditions upon which payment and/or acceptance is to be obtained.”
Explanation:
The collection instruction should clearly state the terms and conditions under which the payment or acceptance is to be obtained from the drawee. This includes specifying whether documents should be released against payment, acceptance, or any other terms.
Example:
If the terms specify that documents should be released only against full payment, this must be clearly mentioned in the collection instruction.
b 7 b “Terms of delivery of documents against: 1) payment and/or acceptance 2) other terms and conditions”
Explanation:
The collection instruction should also specify the terms of delivery of documents, whether against payment, acceptance, or other conditions. The party preparing the collection instruction is responsible for clearly and unambiguously stating these terms.
Example:
If documents should be delivered against partial payment and acceptance, this should be explicitly stated in the collection instruction to avoid any confusion.
b 8 “Charges to be collected, indicating whether they may be waived or not.”
Explanation:
Any charges to be collected should be clearly mentioned in the collection instruction, along with an indication of whether these charges can be waived.
Example:
If there is a handling charge of USD 100, the collection instruction should specify this charge and whether it can be waived in case of non-payment.
b 9 “Interest to be collected, if applicable, indicating whether it may be waived or not, including: a. rate of interest b. interest period c. basis of calculation (for example 360 or 365 days in a year) as applicable.”
Explanation:
If interest is to be collected, the collection instruction should detail the rate of interest, the period over which it is calculated, and the method of calculation (e.g., 360 or 365 days in a year). It should also state whether the interest can be waived.
Example:
If 5% interest is to be charged on the amount from January 1, 2024, for a period of 30 days on a 360-day basis, these details should be explicitly mentioned.
b 10 “Method of payment and form of payment advice.”
Explanation:
The collection instruction must indicate the preferred method of payment (e.g., wire transfer, cheque) and the form in which payment advice should be provided (e.g., SWIFT message, email).
Example:
If payment is to be made via wire transfer and advice provided via SWIFT, the collection instruction should clearly state this.
b 11 “Instructions in case of non-payment, non-acceptance and/or non-compliance with other instructions.”
Explanation:
The collection instruction should provide clear instructions on what the bank should do if the drawee fails to pay, accept, or comply with other instructions.
Example:
If the drawee does not make payment within 10 days, the collection instruction might instruct the bank to return the documents to the sender.
c 1 “Collection instructions should bear the complete address of the drawee or of the domicile at which the presentation is to be made. If the address is incomplete or incorrect, the collecting bank may, without any liability and responsibility on its part, endeavour to ascertain the proper address.”
Explanation:
The collection instruction must include the complete address of the drawee or the location where the documents are to be presented. If the address is incomplete or incorrect, the collecting bank may attempt to find the correct address but will not be held responsible for any delays caused by the incorrect information.
Example:
If the drawee’s address is listed as “123 Main St., New York,” but the full address should include a suite number, the collecting bank may try to find the correct suite number but will not be liable for any delays this may cause.
c 2 “The collecting bank will not be liable or responsible for any ensuing delay as a result of an incomplete/incorrect address being provided.”
Explanation:
If the drawee’s address provided in the collection instruction is incomplete or incorrect, and this leads to a delay, the collecting bank will not be held responsible for the delay.
Example:
If the documents are delayed because the address provided was “456 Elm St.” instead of “456 Elm St., Apt 7B,” the collecting bank is not liable for this delay.