Dear All,
Appreciate your valuable feedback on the below scenario....
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Bank 'A' receives an LC to be advised to the beneficiary, wherein Bank 'A' has also been shown as the reimbursing bank in the field 53: of the LC. The LC is freely negotiable and the Issuing Bank has not sent out any separate reimbursement authorization.
Question # 1 : In case documents are received at the counters of Bank 'A', is it implied that they are authorized to debit the Issuing Bank's account in settlement of proceeds, against compliant documents?
Question # 2 : In case Bank 'A' receives a reimbursement claim from another bank, can they honor the claim subject to availability of funds, given the fact that they are aware that they have been nominated as the reimbursing bank in the LC?
Question # 3 : Does the situation change in any way, if the LC does not explicitly state that reimbursement under the LC is subject to URR?
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Thanks!!!
Quick answers
Case one and two:
Bank A should present the docs to uissuing bank for presentation and so could do all other banks.
Bank A could have asked for a RA in due time, but when docs have already been presented it's too late.
Without a RA - no authorisation.
Case three. Without stipulating any other rule for reimbursements, the reimbursement rule of the relevant UCPs does apply, for ex. art. 13 of UCP 600
Hope that helped.
-Each long journey starts with a small step-
Best regards
Frammi
Art 13 of UCP600 or URR
Hi !
Notwithstanding the reimbursement is subject to URR or not, the issuing bank must provide a reimbursing bank with a reimbursement authorization (RA). Without the RA, your questions can't be answer, since all the answers would depend on the contents of RA.
Bank A should immediately inform the issuing bank, if they find that they are requested to be reimbursing bank without RA.
Hope it may help.
V.V.
handling of reimbursement claim
Dear Fena,
as to
#1 I would assume that a debit authorisation was the intention of the issuing bank (always assuming that Bank A holds an account for the issuing bank)
#2 as some banks handle reimbursement claims in a department separate from the documentary credit department – it may even be part of their payment services – the issue in scenario 2 may very well be that the person handling the reimbursement claim at Bank A is not aware that the documentary credit under which the claim has been received was indeed advised by Bank A. Thus without knowledge about the reimbursement clause they may first refuse to honour the claim. Payment may only be effected after clarification of this matter (potentially involving the issuing bank as well). In case the person handling the reimbursement claim is aware of the reimbursement clause in the documentary credit – my guess is that most banks would treat this as a reimbursement authorisation and honour the claim.
#3 my comments given above are under the assumption that URR are not involved in this transaction. I am not overly familiar with the URR and will thus not offer any comments on a scenario involving the URR.
Kind regards
Currer